Social Enterprise Innovation and its Future Growth Markets

Social Enterprise Innovation and its Future Growth Markets Social Enterprise Innovation and its Future Growth Markets Researcher and co-author Pat C...
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Social Enterprise Innovation and its Future Growth Markets

Social Enterprise Innovation and its Future Growth Markets

Researcher and co-author Pat Conaty Research Associate, Co-operatives UK and Fellow, New Economics Foundation

www.walescooperative.org 1

Social Enterprise Innovation and its Future Growth Markets

CONTENTS

Page 3 1. Introduction

Page 4 2. Evolving innovation in the social enterprise sector in Wales and its markets

Page 14 3. Innovative finance for the social enterprise sector

Page 19 4. Foundational Economy and CREW Deep Place Study: Tredegar – theory and practice in action

Page 20 5. Innovative approaches in the European co-operative and social enterprise sector – The Solidarity Economy

Page 21 6. Conclusion

Page 22 Appendices

Wales Co-operative Centre. July 2015 Y Borth, 13 Beddau Way, Caerphilly, CF83 2AX T: 0300 111 5050

E: [email protected]

W: www.walescooperative.org

@WalesCoOpCentre

www.facebook.com/WalesCooperativeCentre

www.linkedin.com/wales-co-operative-centre

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Social Enterprise Innovation and its Future Growth Markets

Chapter 1 Introduction

Social Enterprise Support Project 2009-2015

Future growth markets and strategies

The Social Enterprise Support Project (SESP) launched in 2009 and was active through to early 2015. It provided a comprehensive business development service to a wide range of clients across Wales.

The purpose of this legacy report, Social enterprise innovation and its future growth markets, is to build on what has been achieved and to suggest the next steps on the journey for social enterprises seeking to progress from sustainability, onwards into business growth.

The project operated in a challenging macro-environment as the impact of the economic downturn continued, which dealt a shifting operational environment for social enterprises, particularly in the markets they traditionally operate. This was coupled with significant changes within public sector structures and resources. Overall, difficult trading conditions has made the past five years a tough period for the sector.

The focus for social enterprise management teams throughout the life of SESP has been the stability and sustainability of their businesses. When opportunities for business growth and job creation were secured, they were a much welcomed bonus.

However, the challenges presented by the global market did not deter the team delivering SESP, as it worked with clients to achieve a range of substantial targets drawn up at the outset of the project. Data gathering and evaluation show that the majority of the targets have been exceeded.

Since 2009, the Social Enterprise Support Project has recorded: 

583 social enterprises assisted with business planning



278 new enterprises created



393 jobs created.

Growth is defined either as an increase in turnover or profit, increase in number of employees, increase in business outputs, increase in social impact, or finally, an increase in percentage of trading income to grants. Growth can be achieved through a strategy focused on expansion, diversification, collaboration or transformation.

This report compiles good practice evidence that is presented here as a handbook of ideas and recipes for success for the social enterprise sector. Information is provided on innovative and often proven approaches to business growth, developed by social enterprise and co-operatives, in Wales or further afield. Social enterprises that wish to expand, diversify, collaborate or enter new markets can draw inspiration from the evidence presented in the following chapters.

For the purpose of this report no distinction is made between the terms social enterprise and co-operative as it uses them interchangeably throughout.

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Social Enterprise Innovation and its Future Growth Markets

Chapter 2 Evolving innovation in the social enterprise sector in Wales and its markets From evidence gathered, seven industrial sectors have been identified that offer real potential to social enterprises as growth markets. These are sectors where new services, products and job creation can be advanced. They are:

1.

Social co-operatives and social care consortia for a broad range of social and health care and related support services

2.

Public social partnerships – a strategic model of collaboration and co-service delivery with local and regional authorities and other parts of government

3.

Community Land Trusts – communitycontrolled land ownership and related asset management

4.

Co-operative and mutual housing solutions

5.

Community co-operatives – a focus for regeneration and local participation

6.

Renewable energy through co-operative ownership for the multiple benefit of the community

7.

Community recycling as generator of jobs for disadvantaged groups.

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Social Enterprise Innovation and its Future Growth Markets

Future growth markets - Social care co-operatives Social care co-operatives, or more commonly ‘social co-operatives’, are broadly defined as co-operatives that are active in the social care sector. A tight definition is not helpful as a diverse range of co-operative models are developing and expanding in response to a community’s needs, policy changes and reducing budgets. New dynamic forms are emerging that are inclusive and have multi-stakeholder community membership and ownership. One such co-operative is the Mid-Wales Social Co-operative Consortium formed by Cartrefi Cymru, a charity that was founded by parents and activists to provide people with disabilities with fulfilled lives. Since 2012, Cartrefi Cymru has played a leading role in promoting social co-operative innovation in Wales, adopting the strapline the ‘charity that loves co-operation’. The Mid-Wales Social Co-operative Consortium has grown from a network in Powys. The founding members, including social enterprises Cae Post and Foster Care Co-operative, have co-designed and formally established the new co-operative organisation. It aims to foster collaboration and mutual self-help activities, for the benefit of people with care and support needs across mid-Wales by developing new social co-operatives.

In Brecon, Cartrefi Cymru is a partner in a pilot project with the Powys Supporting People team, based within the housing department of Powys County Council. The pilot, now in its second year, is facilitating co-operative decision making for 35 people, with disabilities to help them live independently. In turn, it is providing the basis for re-organising the service along social co-operative lines, with multi-stakeholder control. A further notable outcome from the pilot project is proof of a collaborative co-production approach. Co-production has given clients and staff authority to use their judgement and creativity and not just to follow a contractual script. Through this approach, Cartrefi Cymru has doubled the number of people supported by the service, whilst simultaneously absorbing a 15% cut in funding. Disability Wales is an active member of the Wales Social Co-operatives Development Forum which includes Cartrefi Cymru. Disability Wales, in partnership with the Wales Co-operative Centre, is developing an innovative citizen-directed direct payment co-operative. The co-operative is designed to facilitate the demand side of direct payments by providing citizens greater control of their money and purchase of payments, through a collective approach to hiring personal assistants.

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Social Enterprise Innovation and its Future Growth Markets

Case study: Citizen Directed Co-operatives Cymru - social care / member owned co-operative Co-operatives for collective care payments have been pioneered in Sweden, beginning in Stockholm in 1996. These have been successful in Sweden and in the UK the idea is growing in Wales and Scotland. In Wales, there are about eight direct payment support networks with some 4200 members. The success in Sweden shows that co-operatively owned direct payment systems can build trust and aid expansion from otherwise very small networks. Disability Wales and the Wales Co-operative Centre have launched a project to test out a Citizen Directed Co-operatives system for managing direct payments in Wales. The aim of the project is to promote greater citizen voice, choice and control for disabled people through exploring a co-operative approach to the management of direct payments. An educational campaign and series of roadshow events will run from April to June 2015. Following these events, emerging co-operatives will be invited to apply to take part in the next stage of the project. The selected co-operative will be supported through practical and financial support with the aim of being ready to start supporting its members by March 2017. The project will aid the development of other direct payment co-operatives by sharing the learning gained and creating resources to support the replication of the Citizens Directed Co-operatives Cymru model across the UK.

Future growth markets - Social care consortia Community Lives Consortium (CLC) supports disabled people to live the lives they choose, while living in their own homes, in the communities of Swansea and Neath Port Talbot. CLC is currently supporting 282 disabled people, who collectively receive 17,200 hours of support every week delivered by 763 staff. CLC has ‘consortium’ in its name because it was created to co-ordinate the common interests of clients who require accommodation, social services and health care. Since 2010, as public funding cuts have deepened, CLC has increasingly involved the people they support in design of their own services, including personal care, help with finance, help with accessing transport, housing-related support and personal skills development. The result is that co-designed support is improving in quality, there is less waste in the system and people receiving support are working to change the way it is organised. The co-operative consortium method of working is spreading into other areas of social care. Caer Las Cymru, Shelter Cymru and Gisda all work with homeless people in the Swansea area. During a visit to Italy, Caer Las Cymru was impressed with how social co-operatives use consortia to improve their service co-ordination and provision for the homeless. The three organisations have co-founded a co-operative consortium called Places of Change Cymru for closer collaboration which will improve their provision of accommodation, skills development and employment opportunities for clients. The consortium will focus upon a joint expansion of a supported employment and training project operating in Swansea Bay.

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Social Enterprise Innovation and its Future Growth Markets

Future growth markets – Public services and public social partnerships Public social partnerships are described as the dynamic collaboration both between social enterprises and co-operatives, and most importantly, between the social economy and the public sector. They are alive and well in Europe and North America and have had a crucial role in the growth and prosperity of social enterprise and co-operative economy in these locations. Strategic models of public social partnerships in countries like Italy and Denmark, as well as in the Canadian province of Quebec, have raised the value and impact of social enterprises, while creating a growing and impressive level of new employment. The Evergreen Cooperatives provide another example of an effective public social partnership. Evergreen Cooperatives launched in 2007, in Cleveland, Ohio, which had lost its manufacturing base and as a consequence its economic and social vibrancy has faded over the decades of decline. An alliance of major anchor institutions came together including the city authority, universities, hospitals, and the Cleveland Foundation to support Evergreen Cooperatives and its vision of workerowned co-operatives established to address carbon reduction, fuel poverty and unemployment. Evergreen Cooperatives has created a new movement of green economy co-operatives in basic needs areas including ‘Green City Growers’ for locally grown food, ‘Evergreen Energy Solutions’ for solar power and renewable energy and ‘Evergreen Cooperative Laundry’, a state of the art green operation for the city’s hospitals.

The anchor institutions have used their procurement power to provide a demand for solar power installation and to co-develop a supply chain for green sustainable technology retrofit of city, university and hospital buildings. In Wales, public social partnerships are one strategy proposed by the Welsh Co-operative and Mutuals Commission to build a greater co-operative economy for the country. The Social Services and Well-being (Wales) Act 2014 encourages the future role of social enterprises and co-operatives in social care provision. The Commission views public social partnerships as a vehicle for transforming public services. It argues for day care, social care and ‘generative partnerships’ with social landlords to take over community hospitals and other facilities suitable for the provision of care services. It sees scope to build upon the success of community mutual housing and a real option for mutual business models for community and public transport. To prevent privatisation it recommends a public social partnership model that has an asset lock to secure a diversity of public services that could be owned by different stakeholders as a mutual business. A year on, the arguments of the Welsh Co-operative and Mutual Commission have been endorsed by the Welsh Government’s White Paper on the future of public services, “Reforming Local Government: Power to Local People”. The paper calls for a key role to be given to ‘mutualism, co-operation and shared ownership in the transformation of public services’.

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Social Enterprise Innovation and its Future Growth Markets

Case study: Emilia Romagna, Italy –

Future growth markets - Community Land Trusts

Public social partnerships In Italy, the successful transformation of its Emilia Romagna region is in part due to social enterprise innovation. The use of public social partnerships has enabled social co-operatives to develop close working partnerships with local authorities and other public services.

A Community Land Trust (CLT) is a not-for-profit, community-controlled organisation that owns, develops and manages local assets for the benefit of the local community. Its objective is to acquire land and property and hold it in trust for the benefit of an area or community. The development of the CLT movement was for the provision of permanently affordable housing.

This has involved a public sector organisation providing a facility for a service, such as a day centre or residential care home and the social co-operative providing the staffing. Similarly in the prison service, re-offending rates have been reduced through partnerships with social co-operatives that provide jobs for offenders within the prison and then work with local authorities and probation services, to ensure jobs are provided by the social enterprises upon their release.

What is exciting is the innovation in sector and the social enterprises growing out from the CLT movement in Wales. CLTs are a versatile tool for local and community economic development developing community energy schemes, local food production projects, community facilities, gardens and workspace. Larger scale regeneration projects are developing out of CLT strategies in strong partnerships with local authorities and housing associations, along the lines of a public social partnership model.

Pausa Cafe has become a nationwide chain of coffee bars operating under a Fair Trade label, where the ex-offender workers co-own the enterprise as a social co-operative with local customers and residents.

West Rhyl CLT was established in 2010, by community representatives, to provide good quality, affordable and energy efficient homes. Its development projects today include a partnership with North Wales Housing (NWH) to complete three refurbished homes for let to local families. Work is underway to create the ‘West Rhyl Housing Co-operative’, in partnership with NWH and to launch ‘Plas Y Foryd’ housing development. The co-operative has 96 members and growing, who are interested parties in its lettings policy, within the local authority’s housing allocation plan, to ensure local people benefit from improved accommodation in the area.

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Social Enterprise Innovation and its Future Growth Markets

Inspired by Cornwall CLT, Gwynedd Council plans to replicate the model and work on the early stage implementation of the Gwynedd CLT is now underway. A third CLT is emerging in Presteigne, led by housing co-operative Home Presteigne, seeking to follow the CLT development path. It intends to work with Cwm Harry Land Trust, an established social enterprise located in mid-Wales, on local food growing schemes, bio-cycle composting and renewable energy. With Cwm Harry’s expertise in commons land management for food and green energy, the CLT can offer developers their services for the management of commons space and collaboration in building affordable new homes. This approach is also inspired by the success of Cornwall CLT.

Case study: Cornwall CLT Network Public social partnership in action Housing in Cornwall is inordinately expensive due to the pressure from second homeowners and tourism. The Community Land Trust ideas have been strongly supported since 2005 by a newly established unitary county council and Cornwall Rural Housing Association. A public social partnership has been forged between three core partners: the local authority, the housing association and rural CLT action groups in different villages. Cornwall CLT has united the partners through an umbrella structure for the county that fosters and nurtures village and town level CLTs. The development model is lean with one full time development officer supporting and assisting the local CLTs to succeed. Most CLTs produce a mixture of affordable homes for sale and homes for rent. The rental units are managed by Cornwall Rural Housing and the ‘For Sale’ units are managed by either Cornwall CLT or its local CLT members. The homes for sale have been developed at 50% to 70% of open market value. This model has been so productive that by 2010 almost 50% of the 200 CLT homes developed as part of the national demonstration project were in fact developed in Cornwall. Additionally, the public social partnership has set up a Cornwall social financing system to fund low cost construction that has accessed low-cost capital through the Public Works loan board to set up a dedicated revolving loan fund.

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Social Enterprise Innovation and its Future Growth Markets

Future growth markets - Co-operative and mutual housing Wales is leading a unique UK project to develop diverse forms of co-operative and mutual housing. The remit, set by the former Housing Minister Huw Lewis, was for an alliance of organisations to collaborate to support the emergence of a new co-operative and mutual housing sector for Wales. Eight pioneer projects were identified, with potential sites representing a diversity of possible models including co-operative rental housing, shared ownership co-operatives, CLTs, co-housing, community self-build co-ops and co-operative live and work units. The first fruits of horizontal collaboration among public, social and community stakeholders have become evident in 2015. With financial support from Welsh Government, collaborative working has advanced into the construction phase for the first three co-operative housing pilot pioneers located in Newport, Cardiff and Carmarthen.

Future growth markets - Community co-operatives Across Wales, the growth of community co-operatives in both rural and urban areas is remarkable. Over 100 co-operatives now exist that are owned and controlled by local members. Community-owned co-operatives are shaping their local economies for the benefit of the communities. Their success can be attributed to: 

local member-owned businesses providing efficient and effective services for local communities, and



local economic development for the common good.

The scale and scope of owner-members of community co-operatives ranges widely, from businesses founded by 20 members to provide services to a rural village in west-Wales, to the 200 members of the Wrexham Supporters Trust, who own Wrexham Football Club. Community co-operatives provide commercial services to a specific geographical community and are active in many industrial sectors including: 

Retail shops



Childcare



Pubs, cafes and restaurants



Community centres



Football and sports clubs



Renewable energy



Community supported agriculture



Regeneration of buildings and sites



Training and education

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Social Enterprise Innovation and its Future Growth Markets

Future growth markets - Community-owned renewable energy Energy co-operatives across Wales are increasingly springing up. There about 25 to 50 at different stages of development, and so far, a handful either have or are currently raising capital from community shares. Co-operatives and community benefit societies can raise investment finance from their members through a ‘community share offer’. Withdrawable shares are typically sold from £200 to £20,000. (For more information see chapter 3). Llangtock Green Valleys launched a community share issue in 2013 and raised £273,000 to fund the construction of two hydro schemes. In Chepstow, using an investor club model, Gwent Energy CIC has raised capital from the public and facilitated three installations of solar photovoltaic power. Abergwyngregyn and Corwen energy co-operatives in north-Wales are each seeking to raise £300,000 for hydro schemes. In Germany, since 2005, there has been a growing scale of investment in upgrading the energy efficiency of the national building stock, including installation of renewable energy systems. The policy has created 350,000 jobs that will be sustained for several decades to complete the transition to a green economy and low carbon housing. In Wales, the Welsh Government has identified the potential to increase renewable energy by ten-fold or more before 2025. Community-owned co-operative renewable energy schemes have a significant role to play in a green economy.

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Social Enterprise Innovation and its Future Growth Markets

Case study: Egni Co-operative – communityowned renewable energy / community share offer

Dan McCallum, who has led the development of Egni, estimated the job impact for this one community energy co-operative:

Egni Co-operative launched its share issue in February 2014 and raised £171,000. Both Brixton and Bristol Energy Co-operatives have been an inspiration for Engi and likewise its focus is on installing solar PV on community buildings and schools in the South-Wales Valleys. In year one of trading, the capital raised has enabled Egni to install 99kW of solar panels on four sites: Dove Workshop, Awel Aman Tawe and Glyneath Training Centre in Neath Port Talbot plus Ysgol y Bedol in Carmarthenshire. Egni will install a further 30kW of power on a school in June 2015.

“There are about 15 different companies in the Egni supply chain. The total value of the contracts has been about £200k and this safeguarded about 33 jobs. In addition, the co-operative is saving a total of £6-8k/year in electricity costs for the sites which also indirectly safeguards jobs in the community centres and schools. Most of the jobs safeguarded are local and located in Communities First villages.”

The Egni share issue offered a financial return of 4% with an additional 3% return through the Enterprise Investment Scheme (EIS) that nearly all community investors have taken up. A second share issue is being prepared for launch later in 2015 with a target of £1 million. If successful, this will enable Egni to install solar panels on 50 sites that together will deliver about 1MW of renewable energy.

McCallum also pointed to the considerable benefit from keeping the SEIS tax relief within the Welsh economy. This is strategically important given a rising level of grassroots action and the scope to develop growing number of renewable energy co-operatives across Wales.

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Social Enterprise Innovation and its Future Growth Markets

Future growth markets - Recycling and re-use Cae Post, a social enterprise in Powys, is a good example of driving innovation in the recycling industry. Cae Post led the way in Wales by kick-starting kerb side community recycling and has provided employment since the 1980s for people with learning disabilities. It now employs 40 full-time equivalent staff and has an annual turnover of £1.2 million. Recently, Cae Post developed a waste collection service from retail stores, caravan parks and other local businesses. The new service has created additional jobs and is close to trading at a break-even level. A further area of development is its manufacturing of furniture from recycled plastics. Cae Post set up a factory for the operation investing capital from its reserves in a trading subsidiary. The new business has increased its number of employees particularly people drawn from identified disadvantaged groups into its workforce. With the launch of the trading arm, Cae Post is able to secure patient investment from social investors for further business development. Profits generated from the business will be retained by Cae Post to reinvest in its social objectives.

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Chapter 3 Innovative finance for the social enterprise sector

For social enterprises wanting to access identified growth markets, the social innovation demands a matching level of financial innovation. There are number of financiers and financial instruments that provide significant investment for social enterprises and the local economy.

Innovative finance – Community Development Finance Institutions (CDFIs) CDFIs are social enterprises that fill a key gap in the finance market, as they lend to businesses, social enterprises and households who are unable to access mainstream finance from banks. They provide social finance for what they regard as viable propositions that are nonetheless not bankable. There are about 60 CDFIs trading in the UK. Most provide enterprise loans to small businesses and social enterprises, but several also provide personal loans and home improvement loans. In 2014, CDFIs provided £173 million in investment to over 50,000 customers. Other highlights for the year included: 

Investment for the start-up of 11,500 new businesses



The creation or support of 20,000 jobs



Finance to help 42,000 people to avoid high cost credit



Lending to businesses that contributed £500 million to UK GDP.

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Social Enterprise Innovation and its Future Growth Markets

There are a number of CDFIs operating in Wales: 1. Robert Owen Community Banking (ROCB) has operated as a CDFI in mid-Wales since 2006. Over the past two years many of its loan services have been extended right across Wales. They provide loans for small businesses, social enterprises, co-operatives and for home improvements and green energy. Its most successful loan service has been a partnership with Powys County Council that co-delivers a Zero Interest Loan Fund to assist households and enterprises to install renewable energy or improve energy efficiency. It also operates a Low Interest Loan Fund in Flintshire in collaboration with Flintshire County Borough Council, Wales and West Housing and the North Wales Energy Advice Centre.

3. Wales Council for Voluntary Action (WCVA) has established a CDFI to provide loans to social enterprises, charities and third sector organisations. Its Community Investment Fund provides credit to help social enterprises acquire assets and to secure working capital for trading activities. In 2012, the WCVA launched a partnership with Unity Trust Bank to help Welsh social enterprises buy or refurbish premises. 4. Co-operative and Community Finance specialises in lending to co-operatives and social enterprises. It manages a £4 million fund of its own capital and additionally manages other funds in regional areas where local governments have provided the capital. With partners it has developed a Community Shares Fund that operates as a specialist financing mechanism to underwrite community share issues.

The latest service from the community bank is its Community Enterprise Finance scheme. This is a £1 million facilitation fund to assist renewable energy schemes that run into barriers at different stages of their development. 2. Purple Shoots is a micro-finance CDFI lending to small businesses. Its mission is to tackle unemployment by lending in many of the poorest communities in Wales. An innovation in their service is a method that develops self-reliant groups of businesses to help each other to develop viable enterprises.

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Innovative finance and home improvement partnerships to tackle fuel poverty and carbon emissions Since 2005, a handful of CDFIs have increasingly improved upon a public social partnership model for providing care and repair services aligned with low cost loan finance for low to moderate income homeowners. In the UK it is known as the Home Improvement Partnership. Wessex Resolutions, a CDFI and advice agency based in Somerset, is the leading developer of this system. The case study below highlights its effective regional success. Parity Trust, in the south-east of the UK, and Street UK, in the West Midlands, are two other CDFIs that have each developed successful Home Improvement Partnerships. Both have a similar number of local authority partners to Wessex Resolutions CIC. Street UK is now operating a relatively new partnership in north-Wales with Flintshire, Denbighshire and Gwynedd. Loans cover a variety of purposes including home improvements and deposit loans for first time buyers. Robert Owen Community Banking Fund has piloted housing improvement services in the Welsh counties of Powys and Flintshire. The roll-out of the pilots has demonstrated the potential for wider partnerships with other local authorities designed to create local jobs, while tackling fuel poverty and cutting carbon emissions.

Case study: Wessex Resolutions CIC – CDFI / Home Improvement Partnership Wessex Resolutions CIC is a CDFI and homeowner support service that since 2005 has been delivering care and repair services with a growing number of partners. This is a hub and spokes operation with now 20 local authorities involved as full partners along with a similar number of home improvement agencies. The regional Home Improvement Partnership between the CDFI and the public and social partners in the network co-deliver home improvement surveys, technical advice, financial appraisals, the provision of welfare advice and the matching of an appropriate low cost loan. The finance to fund the improvement packages is selected from three main loan options. Their MoneyWise advice partnership assists 2000 households a year and they have advanced almost £9 million in loans. 77% are standard home improvement loans for care and repair, and 15% are provided through local authorities to landlords for converting empty property into flats. Wessex Resolutions CIC has recently launched a green loan and another loan for preventing repossession of properties. Capital is provided by local authority partners at 0%, which is then offered to homeowners at a standard rate of 4%. The loans are secured but with no right of repossession. The loan arrears rate in 2014 stood at only 1.17%.

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Social Enterprise Innovation and its Future Growth Markets

Innovative finance – Community Shares A growing number of community co-operatives are securing members, support and ongoing local custom by launching themselves through a community share issue. Community shares are a unique form of withdrawable share capital that co-operatives and community benefit societies can offer to their members. The advantage of community shares is that the regulatory burden, due diligence, accounting requirements and overheads are far simpler, much less costly and lightly regulated compared to an initial public offering for a public limited company. Pengwern Cymunedol Cyf runs a co-operative pub that was rescued in 2010 through a community share issue, which raised £25,000 and was additionally matched with grants. Similarly, Canolfan Gymraeg Wrecsam established a co-operative in 2011 to revive a local pub, the Seven Stars, which had closed. The successful community share issue raised £150k to buy and refurbish the pub and reopen it as the Saith Seren, with additional facilities to operate as a Welsh language and cultural centre.

Case study: 4CG - Cymdeithas Cynnal a Cefnogi Cefn Gwlad – community shares / co-operative regeneration The 2008 banking collapse mothballed a major shopping centre development in Cardigan town centre. The development site increasingly became an eye-sore and tip and when the site was put up for sale, Shan Williams instigated a public meeting that attracted a hundred people. Alongside Cris Tomos and other co-operative activists, they went to work and launched 4CG, Cymdeithas Cynnal a Cefnogi Cefn Gwlad, known in English as Society to Sustain and Support the Rural Countryside. A community share issue was kicked off in 2010. £220,000 was raised by 4CG from 500 local investors to buy the site. With a further £160,000 bank loan, the group was able to acquire as part of the site four warehouses, two shops, a cottage and two car parks. The car parks have provided crucial revenue for the community co-operative. However, as local regeneration is the 4CG mission, they took a policy decision to lower the parking charges to attract more people into the town. The buildings have been let by 4CG to an Eco-shop, a local vet, a children’s centre, a local museum and a furniture recycling shop. The Victorian police station and court house closed in 2011. To rescue these iconic buildings in the heart of the town, a second community share issue in 2012 raised £90,000, and a further issue of co-operative loan stock secured a further £170,000 at a fixed interest rate of 4%. Now in community co-operative ownership, 4CG has been converting these buildings into offices to let and additionally has been installing solar power on a number of its buildings. The numbers of community investor members continued to expand with some Welsh members buying shares as far afield as Cyprus and Australia.

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Social Enterprise Innovation and its Future Growth Markets

Innovative finance – Credit unions

Innovative finance – Community Land Trust Fund

Credit unions are financial co-operatives, owned and controlled by their members. Any profit generated by the co-operative stays in their community and used to develop its services and provide a return to savers.

Any group in England or Wales can apply to the national Community Land Trust Fund for different types of financial support depending on the pre-development or development stage of the project. This revolving facilitation fund has been capitalised by Tudor Trust, Esmee Fairbairn Foundation, Charities Aid Foundation and the Nationwide Foundation. The fund is managed in partnership with the National CLT Network and Venturesome, a specialist CDFI linked to Charity Bank.

Social enterprises are able to join a credit union as a member and use the financial services it provides. This may mitigate any barriers faced opening an account with a retail bank while offering the added co-operative advantage that its money is kept in the community for the benefit of the community. Credit unions can also offer business lending. For social enterprises this provides an alternative source of finance for start-up and existing businesses.

Other partners working with the CLT Fund that can provide up to 70% of finance at the construction stage include Triodos Bank, Ecology Building Society, Unity Trust Bank and Charity Bank. Community Land and Finance CIC is a specialist CDFI that has set up a complementary Affordable Homes Rental Fund to operate as a medium term capital provider for CLT rental units that are currently very hard to finance.

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Chapter 4 Foundational Economy and CREW Deep Place Study: Tredegar – theory and practice in action The focus of the Foundational Economy is on meeting the everyday needs of a local community. Research by the Welsh-born and educated Professor Karel Williams, at the Manchester Business School found that the foundational economy employs 5% more people in Wales compared to England. The foundational economy offers a local economic development strategy that is tailored to meeting the needs of the community. This is an approach to economic growth and development that can make a difference as it is grounded in the fair and equitable provision of local services. In Wales, there is a strong overlap between the foundational economy and the social economy. According to the latest data, there are 1470 social economy organisations in Wales with a combined turnover of £1.7 billion annually. The sector currently supports 38,000 jobs. Many organisations provide more than one service. A recent survey has found the main areas of service provision that social enterprises are involved with: culture and leisure (32%), education (25%), the environment (19%), health care (16%) and social care (15%)1. It is these types of service on which in Professor Williams’ foundational economy is built.

In 2013, CREW, the Centre for Regeneration Excellence Wales, undertook a ‘Deep Place Study’ of the town of Tredegar in the borough of Blaenau Gwent, drawing on Transition Theory and the foundational economy model. Its study argues for a major strategic role for community-owned energy co-operatives and social care co-operatives that each focus on local solutions to community services to create increased local economic resilience. In addition, the research highlighted housing repair, low-carbon improvement measures and new construction as being a considerable opportunity to promote local economic development and to secure economic, social, cultural and environmental sustainability by 2030. As this report has set out, home improvement, renewable energy and energy efficiency addressing fuel poverty are markets that offer real growth for social enterprises businesses.

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Social Enterprise Innovation and its Future Growth Markets

Chapter 5 Innovative approaches in the European co-operative and social enterprise sector – The Solidarity Economy Research by the New Economics Foundation for the Welsh TUC, show how European Union countries have been successful in creating new employment by focusing on opportunity areas in the ‘foundational economy’ and on other parts of the economy that will need to expand, such as the care sector as a result of an increasingly older population2. In a number of European countries, the co-operative / social enterprise movement has secured a bigger share of GDP than in Wales. One innovative approach to developing new growth markets for the sector is known as the Solidarity Economy. The solidarity economy movement emerged in Italy from the 1970s, especially in the Emilia Romagna province and its capital of Bologna. Today, Emilia Romagna has become the new industrial heart of Italy and has had comparable success to the co-operative economy success of Mondragon in the Basque country of Spain. In Bologna, six in ten residents are members of one or more co-operatives, and ten per cent of citizens work in one. The provincial co-operative sector accounts for more than one third of regional GDP. In Imola, a city of 100,000, 60% of local economic output is accounted for by 115 co-operatives and 55% of local residents invest capital in the sector. Key to the success of Emilia Romagna’s transformation has been several forms of co-operative innovation: Co-operative consortia This is a secondary co-operative body that provides common and shared services to a group of co-operatives at an urban and/or provincial level. This enables small co-operatives to become powerful.

‘Strawberry Patch’ Principle Social co-operatives seek to remain human scale with a guiding principle that aims to remain below 100 paid worker members and to do this by either a spin out or by assisting other social co-operatives to set up. This solidarity principle is known as the ‘strawberry patch’, with each new social co-operative pledging to the movement to assist another new social co-operative to get established by ‘putting out a runner.’ Mutual Guarantee Societies National trade bodies for co-operatives also organise national consortia for services best provided at a nationwide level. A key service that falls into this category is mutual guarantee insurance, whereby co-operatives co-invest premiums that enable them to use these as credit insurance guarantees to secure lower cost loans from co-operative banks. Co-operative investment funds Co-operative capital in Italy is aggregated in funds for investment and development that each co-operative contributes to out of solidarity. Capital from co-operative banks, and other forms of quasi-equity capital that is non-voting have been developed to assist as risk capital to propel growth. Public social partnerships Social co-operatives have developed close working partnerships with local authorities and other public service providers. (See chapter 2 for more information). Co-operative innovations have spread throughout Italy and the social co-operative movement today comprises 14,000 co-operatives, which have created approximately 400,000 jobs.

The consortia can provide back office services to other co-operatives, including salary payment services, accounting services and bulk buying. It also delivers training services, assist with apprenticeships and provide research and joint tendering. 20

Social Enterprise Innovation and its Future Growth Markets

Chapter 6 Conclusion

The research and case studies have spotlighted markets inside and outside of Wales where social enterprises grow and jobs are created at a local and regional level. Often the markets are for services that meet the everyday needs of people and their communities, and include retail stores, childcare, social care, health, transport, energy, food, housing and recycling and reuse. The success of social enterprises and co-operatives in local markets is associated with their democratic membership-led model of business. The model offers the community a direct voice in running of the business. The growth markets identified in the report are linked to the increased involvement of people in the design and operation of services. As social enterprises and co-operatives are ‘people’ businesses, their inherent social objectives and values give a competitive advantage in markets that respond to local needs. This is evident in the social care co-operative market. Demand is for the type of high quality social care services that social enterprises design and deliver, which are intrinsically tied to a values-base of the social enterprise business model. In the growing community land trusts market, where the trust holds land in perpetuity for the benefit of a specified community, an array of services is developing to serve the community springing up around the land asset. The trusts are evolving to deepen their role as an integral partner to the prosperity of the community and local economy. Similarly, the growth of community-owned renewable energy market has a direct impact on the community and its economy. Energy generated locally reduces the costs for households and businesses, while generating new income to invest in the community, often in services that bring sustainability and wealth to the economy.

The consortium method of working has been highlighted as a collaborative approach to enter growth markets. When social enterprises and co-operatives work in consortia, the arrangement allows businesses to pool their expertise and effectively allocate their resources. Working in consortia enables businesses to achieve more than the sum of their constituent parts, by opening access to more business opportunities and, as a consequence, allows them to support more people with their services. What is common in all the identified future growth markets is that social enterprises are anchored in their communities. Investment in social enterprises and co-operatives stays in the local community and is recycled for wider economic and social benefits. Business growth has been achieved and significant employment created in local economies to combat market failure. It is hoped that this report will be a catalyst in the knowledge transfer required in the social enterprise sector for businesses to enter future growth markets. The report has described an emerging recognisable solidarity economy in Wales, driven by the social enterprise and co-operative sector. The spirit of sharing, the power of networking and joint endeavour is releasing a latent capacity to drive social, economic and environmental change. Embracing a solidarity economy could lead to a more closely aligned Welsh social enterprise sector, which in turn would be part of a growing international movement striving for a new economy.

The Wales Co-operative Centre provides intensive, one-to-one support to social businesses which have ambitions to grow and a viable business proposal. This support is provided across the whole of Wales by the Social Business Wales project; it is funded by the Welsh Government and the European Union (European Regional Development Fund). For more information, please visit www.walescooperative.org

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Social Enterprise Innovation and its Future Growth Markets

Appendices

1. Wales Co-operative Centre (2015) Social Businesses in Wales: The State of the Sector 2. James Meadway (2013) Towards a Welsh Industrial strategy, a report commissioned by the Welsh TUC, New Ecconomics Foundation

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