Thought Leadership articles

Social enterprises can empower ordinary people to bring positive change to their communities and society, but what are the options  and where do you start? Chris MM Gordon outlines what’s involved, and the invaluable support accountants can provide If the COVID-19 pandemic has taught us anything, it is the importance to society of the power and resilience of ordinary people and local organisations providing community services.  Some of our busiest times at the Irish Social Enterprise Network were in the opening stages of the crisis when it seemed that for every private profit-making business that shut its doors, a social enterprise was opening theirs.  Communities formed groups to raise money for meals on wheels or to manufacture personal protective equipment for front-line workers. All of this was organic and determined—and because ordinary people felt empowered to make a difference. Throughout that time, more people became interested in setting up social enterprises, to better manage volunteers or oversee any money that is being raised and spent.  There was an increased drive from communities to form social enterprises, make them sustainable and retain goodwill—and they turned to their professional advisors to help them set up these new entities.  What is a social enterprise? A social enterprise is the original ‘business for good’. Social enterprises sell products and/or services for a profit, which is reinvested for a social and/or environmental cause. The National Social Enterprise Policy for Ireland 2019–2022 provides a more detailed definition:  A Social Enterprise is an enterprise whose objective is to achieve a social, societal, or environmental impact, rather than maximising profit for its owners or shareholders.  It pursues its objectives by trading on an ongoing basis through the provision of goods and/or services, and by reinvesting surpluses into achieving social objectives.  It is governed in a fully accountable and transparent manner and is independent of the public sector. If dissolved, it should transfer its assets to another organisation with a similar mission.” Social enterprises differentiate themselves in several ways. I find it useful to think of a social enterprises in terms of its ownership, funding and social impact. Ownership: Social enterprises are generally held by, or in trust for, the people they aim to serve. Social enterprises might be democratically owned, as in a co-operative where one person has one vote. More commonly, they might be structured as a company limited by guarantee, the idea being that no-one can sell the organisation for their personal gain. (Social Enterprises in Ireland: Legal Structures Guide, published by the Thomson Reuters Foundation and Mason Hayes & Curran, discusses the legal structures available for social enterprises in Ireland.) Funding: While social enterprises must generate income by selling products and/or services, it is common for them to receive grants or other public or philanthropic funding to supplement their income and allow them to function fully. Funding can come in many forms, but some funding streams are available to social enterprises only if they are set up as a specific type of company.  Social impact: There must be some measured social (and/or environmental) impact – for example, reducing homelessness – and the money raised or spent by the social enterprise needs to positively affect that impact.  ‘Work integration social enterprises’ are organisations that employ those that are furthest from the labour market. These could be people with physical disabilities or mild, moderate, or severe learning difficulties. Such social enterprises are providing employment and opportunities that may not otherwise be available. Setting up a social enterprise The best approach to setting up a social enterprise will depend on the context and a variety of other factors, including the nature of the problem the community or individual is trying to solve. For the professional advisor, the first step is to understand this, ask the right questions, and to listen. Community or individual?  Is the social enterprise being set up for and by a community or an individual? While it often takes a single individual to get things started, having the support and buy-in of a wider group of people shows there is a real need for the enterprise. It also increases the diversity of opinion and expertise needed to make a social enterprise successful. An issue seeking an enterprise? Someone wanting to set up a social enterprise may want to solve a specific problem that is close to them. They may have a sibling with a learning difficulty for whom they want to create a full-time job, for example. Their sibling loves making coffee, so they set up a café. This is an issue (finding employment for those distant from the labour market) that is looking for a business model to make it sustainable (a café). An enterprise seeking an issue?   The same could be true for someone with specific skills, such as a business-minded barista, who would like to do more than simply sell coffee. They are also looking for a social purpose to invest in and decide to employ people that are distant from the labour market—in this case, people with learning difficulties. This is an enterprise (a café) seeking an issue (employment for those distant from the labour market). Legal structure There is no specific legal structure required for social enterprises in Ireland. However, in my experience, people setting up a social enterprise for the first time often think that it must be a charity, without being aware of what that entails.  Gaining and maintaining charitable status can be onerous for a start-up and may not be necessary, or even relevant, in all cases. Some sources of funding may require charitable status, however. Knowing the sources and requirements of initial funding is important for choosing the right company type for a social enterprise. It may be tempting to advise a client to set up a social enterprise as a private company limited by shares and to spend its profits on whatever social cause they choose. This company type does not suit all circumstances, however.  Social enterprises come in a variety of forms. The use of each type of legal structure should be suitable, considered on its merits and aligned with the aims of the enterprise.  Again, the source of the entity’s funding and related requirements often determine the choice of structure. Here is an outline of the types of company set-up available to social enterprises: Company Limited by Guarantee (CLG)   This company type is the one most often chosen for social enterprises and comes close to company types in countries that have specific legal structures for social enterprises. CLG with Charitable Status   While charitable status (by application to the Charities Regulator) can apply to several types of legal structure, it most commonly applies to CLGs, subject to certain changes made to the constitution of the company, such as directors not being paid. There are advantages and disadvantages to having charitable status. Caution should be exercised as to whether it is necessary. Co-operative   A co-operative is an enterprise that is owned and controlled by its members and operates for the benefit of its members. A minimum of seven members are required to register a co-operative. The law governing co-operatives is currently being reviewed and updated. It is hoped that more co-operatives will appear as their benefits become more apparent. Private Company Limited by Shares (LTD)   Although this is the most common company type in Ireland, social enterprises tend not to be structured as private companies limited by shares. Designated Activity Company (DAC)  While the designated activity company structure has been applied to some social enterprises, it is more generally associated with financial institutions. There are relatively few DACs in Ireland that are considered social enterprises. The role of the accountant Working with social enterprises as they succeed in making a difference is inspiring. Accountants are in a unique position to advise individuals and communities from start-up, setting them on a path for sustainable impact.  Accountants can help social enterprises choose the first door they walk through. Picking the right door is the challenge.  People setting up a social enterprise often focus on the type of company that is being formed. Having taken time to listen to the client and understand the problem they are aiming to solve, the accountant can ensure that all of the available options (and the pros and cons of each) have been considered, the finance requirements planned for and aligned, and ownership and governance issues anticipated before a legal structure is chosen. Chris MM Gordon is Chief Executive of The Irish Social Enterprise Network Useful resources The Social Enterprise Toolkit is a resource for communities and individuals setting up a social enterprise in Ireland. It is available to download for free at socialenterprisetoolkit.ie The Irish Social Enterprise Network is the national body for social enterprise in Ireland. It provides information on the sector and useful pointers for people setting up a social enterprise online at socent.ie Social Enterprises in Ireland: Legal Structures Guide (Thomson Reuters Foundation and Mason Hayes & Curran, November 2020) is available to download at trust.org BuySocial.ie is a growing online directory of social enterprises operating in Ireland: buysocial.ie. The Charities Regulator provides guides to setting up a company with charity status: charitiesregulator.ie The Irish Co-operative Organisation Society (ICOS) provides information on setting up as a co-operative: icos.ie/starting-a-co-op/intro.

Our annual position paper, The Next Financial Year, published today. Researched and written by the Advocacy & Voice team at Chartered Accountants Ireland, with input from expert chartered accountants, it is an open letter to the governments on the island of Ireland, making realistic, practical proposals (50+ for each jurisdiction) on how to make life easier for business. To give government its due, from the perspective of SMEs, the response to the Covid-19 pandemic and its necessary restrictions, was swift and effective. Supports for businesses and their employees brought reassurance, calming the waters of the economy. A calm, measured approach is still required as we have entered another perfect storm; the challenging post-pandemic world of cost inflation, competition for talent, supply-chain disruption, and geopolitical uncertainty. We call on government to be sensitive to the challenges faced by businesses in what continue to be tough times. The Next Financial Year is a blueprint of the Institute’s public-policy thinking, relevant to issues that affect the lives of entrepreneurs, workers, and their communities. As a compendium of ideas representing our 30,000+ members its canvas is broad and holistic, ranging from technical accounting, tax and governance issues to hybrid working, sustainability and digitalisation. For me, three areas of focus stand out: supporting SMEs; making work and employment attractive; and signposting the journey to net zero. Supporting SMEs to survive and flourish From our discussions with members, a recurring theme is the importance of government supporting the SME sector, which employs most of the workforce. Wherever possible, government should remove red tape and administrative burdens. In both Ireland and Northern Ireland, there are excellent grants and support schemes available for small business – these need to be better communicated and their eligibility criteria broadened to include more of the economy, the more traditional businesses that provide services and employment to their communities. At the same time, grants should be used appropriately, and businesses made more aware of the longer-term benefits of equity investment, bringing expertise, connections, and improved governance. Improving financial literacy among small business owners and managers will pay substantial dividends for the economy. A perennial request from members advising businesses is to incentivise the continuing investment of talented, serial entrepreneurs by increasing the lifetime cap of €1 million on entrepreneur relief to at least €12 million. This would also have positive effects for the succession of family businesses to younger generations, again helping to invigorate the economy. Making work accessible and attractive Another stand-out theme in interviews we conducted for The Next Financial Year was the challenges businesses are experiencing in recruiting and retaining the right people, particularly in certain sectors like professional services and hospitality. A repeated request was for government to make it easier for people from overseas that are not automatically eligible to come and work here. Again, a call to remove the administrative hurdles. While the labour market is competitive and finding people is a challenge, employing people should be made as easy as possible. Tax policy should not increase the cost of employing people and, while necessary, legislative changes affecting employers, such as pension auto-enrollment, statutory sick pay, and the right to request remote working, should be introduced with timeframes allowing employers to adjust and prepare their systems. Investment in training the workforce for 21st-century skills is needed, particularly for digitalisation and sustainability, and government has an important role to play, for example in how Apprenticeship Levy funding is allocated in Northern Ireland. In Ireland, the Key Employee Engagement Programme (KEEP) scheme could be expanded to include a wider category of businesses to help them attract and retain talented people. Signposting the journey to net zero Consumers will look to businesses to take the lead with sustainability, for example in the re-use of materials, the reduction of packaging, and commitment to positive social impact. Clear and coherent guidance from government is needed, however, to ensure that the business sector is aware of what it needs to do to help achieve the net-zero targets. As well as the wider social and moral imperative, companies will need to understand the business case for climbing the mountain to net zero, such as business model resilience, brand-building and meeting customer and stakeholder expectations. Human beings do not like change, at least not initially, but with change comes the opportunity to develop and grow. Extensive and profound changes in behaviour are required; government can provide the necessary incentives through the tax system, by rewarding innovation, and by underwriting a system of ‘green finance’ for SMEs, from targeted grants and supports to enlightened equity investment. Despite the obstacles, The Next Financial Year reflects a broad sense of optimism and the huge potential in businesses, North and South, to achieve the best of possible futures. A PDF copy of The Next Financial Year is available on our website. Michael Diviney is Executive Head of Thought Leadership at Chartered Accountants Ireland.

June is the month of rainbows, but how can organisations extend the progressive support for the LGBTQIA+ community? June is Pride month. It is a time for celebration and an opportunity to decorate everything with rainbows and glitter, but also for commemoration and reflection. Pride is now an integral part of our culture, giving space and voice to those who have not had access to either in the past – and, in some places, still do not. In recent years, many corporations have wanted to visibly demonstrate their support for the LGBTQIA+1 community. For the month of June, rainbows will deck corporate logos, slogans and social media feeds. Webinars and events will showcase members from the LGBTQIA+ community, discussing important issues around celebration and acceptance. These actions are positive and progressive, but what can organisations do to prolong this momentum? Support local communities and charities Is there an LGBTQIA+ community or charity your organisation can support as part of its environmental, social and governance (ESG) goals? This could be a donation, a fundraiser or a volunteer day. Hold events at LGBTQIA+-owned establishments For your next corporate event or staff party, why not actively seek out local LGBTQIA+ businesses that can host it? For example, rainbowmile.ie has a great list on its website of LGBTQIA+ businesses and venues in Dublin. Use LGBTQIA+ suppliers Seek out LGBTQIA+ suppliers and businesses where you can. For example, if you are thinking of updating the office after the pandemic, why not contact an LGBTQIA+ designer or artist? You could also send corporate gifts to staff from an LGBTQIA+ company – check out Chupi's recommendations. Make sure you have a robust diversity, equity and inclusion (DE&I) policy Making your employees feel like they belong no matter who they are not only feeds into your organisation's ESG goals, but also increases the happiness and productivity of your staff. (For more information on this, listen to our podcast on the meaning of inclusion in the workplace.) DE&I committees If your organisation is large enough, consider adding a DE&I committee to advocate on behalf of LGBTQIA+ staff, customers or members. Even if your organisation is small, you can still designate a DE&I officer to oversee your DE&I activities. Educational workshops All of these acronyms can be overwhelming. Organise workshops or seminars to help educate your staff so they understand all the terms and why supporting LGBTQIA+ people is so important. Go beyond Pride to stay ahead Showing support for LGBTQIA+ throughout June and beyond is not only good for your company's ESG goals, but it is also beneficial for society. Furthermore, as Generation Z enters the workforce and jobs market, they will be paying close attention to the social activities of organisations – and judging them for it. Why risk being left behind in the cold when you can do good not only for your organisation, but for your staff and your local community? If you're looking for more information about what your organisation can do beyond Pride, the Institute's BALANCE hub has a comprehensive resources page. Sacha Brinkley is Publishing Executive at Chartered Accountants Ireland. 1. Lesbian, Gay, Bisexual, Transexual, Queer, Intersex, Asexual and Others. ↩