Business, Purpose and Profit

A Caribbean Model for Social Enterprise

By Dr. Axel Kravatzky a recognized figure at the highest international level in the Governance of Organizations.
By Dr. Axel Kravatzky

Disclaimer: the views presented are those of the author and do not necessarily represent those of any of the organizations he is associated with. Comments and feedback that further the regional dialogue are welcome at axel.kravatzky@syntegra-esg.com

All businesses, whether or not they are conscious of it, have, for better or worse, an impact on the wellbeing of people and the planet. Today, the move towards deliberately having positive impacts on people and planet is gaining ground, with some important Caribbean examples.

To realise what your firm’s impact is, your organisation needs to become aware of the different resources it is using as inputs, the outcomes it is generating through its products or services, and the associated changes in wellbeing for people and the natural environment.

These changes in wellbeing and nature, positive and negative, constitute the ultimate value that the organisation is generating, its realized purpose.

Many organisations naively, though sincerely, believe that the purpose of a business is simply to make money.  Most people, and most boards, are so caught up in ensuring financial viability and returns, or the doing and the satisfaction of customer demands,  that their impact, the ultimate value, is out of their attention span. Many are not even aware of the overall impact they have and find it difficult to conceive of a real bottom line, far less to measure it.

What is a Social Enterprise?

The world over, including the Caribbean, there is a sizable group of businesses, organisations and different legal entities that think of themselves as social enterprises. They are explicitly and systematically seeking to produce a positive impact on people, communities, and society using entrepreneurial means and re-invest any surplus into creating further positive impacts. Among these are cooperatives, mutual societies, social enterprises, affordable housing initiatives, associations and foundations. Together, they form the basis of the social economy.

The European Commission estimates that 10% of all businesses in the EU, approximately 2.8 million, are social economy enterprises. They employ 13.6 million people, or about 6.2% of the EU’s work force.

Social enterprises can operate using a variety of legal forms. Some are cooperatives, others are registered as private companies limited by guarantee, some are registered to be ‘for profit’, others ‘not for profit’, yet others as benevolent or friendly societies, foundations or charities.

According to Lex Mundi, in the UK the most common organisational form used by social enterprises are unincorporated associations, community interest companies, companies limited by guarantee, and community benefit industrial provident societies.

Social Enterprise in Jamaica

In a 2019 study on the state of Social Enterprise in Jamaica, 114 organisations were identified that fitted the definition of social enterprise used in the study:

• No more that 70% of funding used by the enterprise is sourced from grant funding and donations

• The organisation emphasizes collective benefit/social/environmental/cultural mission and profits

• The organisation reinvests any surpluses in the venture and social mission.

The majority of social enterprises in this study came into existence since 2011, indicating that the sector is relatively young.

Experience across the world shows that there is hardly any organisational form that prevents an organisation from being driven by its purpose, the ultimate value it is creating for identified stakeholder groups. This is at the centre of good governance for all types of organisations according to the recently published “ISO 37000 Governance of organisations – Guidance.”

In many countries, the Small and Medium Enterprise (SME) sector has been nurtured by evolving legislative landscapes, government policies, and as well as support initiatives. In that way organisational forms that are particularly conducive to complementing public efforts in promoting social development and the protection of nature have been created.

Recent and anticipated developments in Jamaica illustrate this well. In 2017 the Government of Jamaica amended its Micro, Small and Medium Enterprise and Entrepreneurship Policy to include a definition of social enterprise. Since then a social enterprise working group, led by the Planning Institute of Jamaica and the Ministry of Industry, Investment and Commerce, conducted research, consultations and worked with local and international partners to develop a draft act for social enterprise.

Two features highlighted in a recent article on the new social enterprise law published by Pioneerpost are particularly promising and interesting.

First, Jamaica will soon be considering a law that will create a new “legal status” that any organisation, irrespective of legal form, can seek to be granted – once it fulfils specified conditions – for social enterprise. This is not only immensely practical because organisations would not have to change their legal forms, it is also in line with the overall emerging consensus that all organisations, irrespective of form, need to fulfil their purpose, behave ethically, to responsibly steward resources, and to perform effectively.

The second feature is the fact that the Jamaican Stock Exchange created a Social Stock Exchange in 2019. Organisations that fulfil the social enterprise requirements will be able to attract different types of funding from investors who might expect both social and financial returns on their money.

At a time when the world is experiencing an increasing number of crises and organisations are  finding it persistently difficult to close the gap between action, commitments, and scientifically determined sustainable development targets, such innovation needs to celebrated, replicated and scaled up. Let this be our newest Caribbean movement.

Dr. Axel Kravatzky

Dr Axel Kravatzky is managing partner of Syntegra-ESG Inc., chair of TTBS/TC309 Mirror Committee, vice-chair of ISO/TC309 Governance of organizations, and the co-convenor and editor of ISO 37000 Governance of organizations – Guidance. He is currently the project leader for ISO 37006 Indicators of effective governance.

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