Now, there's several types of special social enterprise organization forms.

The Benefit Corporation in the US is one.

But another very well known example is the Community Interest Company,

CIC, or CIC in the United Kingdom.

I'm here now with Helen Haugh,

senior lecturer at the Cambridge Judge Business School, and

she's an expert on research into community interest companies.

Helen, welcome here today.

And could you tell us a little bit about the history of how the CIC organizational

form was developed, and also give us some examples of CICs in the UK.

The community interest company was established in

legislation that was passed in 2005.

It was the end of several years of preparation that various

groups were involved in in bringing the legislation to the statute book.

The original ideas stem from 1998 and 1999 when

the new Labor administration brought in a raft of new ideas concerning

social justice and social entrepreneurship was one of those key elements.

And the idea was that up until the legislation for

the community interest company, there was no specific legal form that had

been established that would embed social purpose with trading.

Now I'm sure that many people are familiar with organizations like

charities that have charity shops to generate revenue, but

the legal structure is that the trading is carried out under a separate organization,

which generally gifts back the surplus to the charity.

So, we often can see that charities raise money from trading, but

it's done under a combined legal form,

whereas the CIC was established to bring together social purpose and trading.

Since the legislation in 2005,

we've had several thousand organizations adopt the CIC format.

So, from a practical point of view,

it's working and it's doing something that is of value to social enterprises.

Part of my research at Cambridge Judge Business School is to explore

the emergence of the CIC model and the adoption of the CIC model.

And through that research, I've had the opportunity to visit and

to interview people that have set up community interest companies and

to inquire about the business models that they've adopted, and there

are lots of very interesting organizations that have adopted this model.

So for example, there is an organization called Bikeworks which operates in London.

Now, this organization works with people who have

been long-term unemployed or perhaps ex-offenders, and

what they do is they offer a training program to enable

the people to learn about bicycles and learn how to repair bicycles, so

that they can then build their own bicycle and also look for work in that industry.

At the same time, this organisation sells

courses to organizations who want their employees to learn how to cycle,

to be confident about cycling to and from work, and so, they have a model where they

can earn revenue from selling bicycles and training courses around transportation,

but also, they can bid for contracts to work with the long-term unemployed.

And that's a very interesting organization.

And I think it would be very difficult to go to any major city in the UK and

not find a similar type of organization.

A second example of a community interest company which has got

a very interesting business model,

which is different to that of Bikeworks is the Canal and River Trust.

In the UK, many of the canals and

waterways were under the control of a government, a public sector organization,

and they were responsible for the upkeep of the waterways.

And many people in the UK live close to rivers and canals and

would often spend leisure time visiting, walking alongside the river banks,

many would have access to boats, traveling on boats on the waterways.

And so, they are a very important ledger facility within the UK.

About three or four years ago,

a decision was made to explore the idea of selling off the waterways.

And in response to that, and in response to a strong public opinion that this was

an asset that should be kept in public ownership,

the physical assets, the canals and

the waterways were passed into a community interest company.

And one of the big benefits of the community interest company is that

the assets held by the organization are held for community benefit in perpetuity,

so the business model provides protection to people that they can be confident

that those rivers and waterways will be held in the community interest company for

the benefit of the public to be able to use them in their free time.

And there are many examples of community interest companies up and down the UK.

A third example is that of the Isle of Sky Ferry.

Now this is a very small community interest company that provides a key

transportation link between a very remote region in Northwest Scotland and

the Isle of Sky.

Now the ferry was in private ownership and the original

owner was considering selling the ferry, and the community that lives in this

peninsula decided that they would take ownership of the ferry, so that they could

maintain this transportation link between their peninsula and the Isle of Skye.

A CIC, a Community Interest Company, is a new legal form within the UK, specifically

for social enterprise and it has a number of criteria which have to be fulfilled.

First of all, the, it has to be for community benefit, for

the benefit of the community and the registrar judges, in fairly basic

ordinary person terms: does this look as if it's going to benefit the community.

Secondly, there are constraints on the distribution of dividends and

the distribution of assets in the case of selling or in case of failure.

So, we call that an asset lock.

In other words, the assets of the organization will pass to

another social enterprise in case of sale or

in case of failure or dissolution of the organization.

And thirdly, it should, as a consequence of that,

it will be reinvesting most of it.

That's not a criteria, but that's a consequence.

It also has to produce a community report, a stakeholder report,

which is, could be anything from a page to three pages as part of its annual report.

It's really part of a wave of new initiatives, new legislative initiatives

we're seeing globally to respond to this great enthusiasm for

social entrepreneurship.

And, we see it in, for

example, the benefit corporations in the US, the L3Cs in the US.

In Italy, we see the social cooperatives, which is a hybrid between the non-profit,

and the cooperative.

In Belgium, we have a social purpose organization.

In Italy again, we have a social purpose as- organization.

So in many countries, we're seeing either countries forming social

cooperatives on the Italian model or social businesses,

social enterprises on the CIC model or some other model.

People say, do we need it?

And I think, probably the answer that many people say is:

we don't need it if we have non-profit structures that can trade.

And that's not the case in all countries.

Or if we have cooperatives that are able to operate in the welfare markets, and

can have volunteers, can have some of the attributes of non-profits.

Some people like the idea of for-profits, doing good while making money.

This is contentious in some countries, particular in, say,

traditional parts of the third sector in Europe, but

in other countries like the Anglo Saxon countries, it's more accepted.

It does raise more ambiguities about what happens to the assets at the end, and

so on and so forth.

So people choose a CIC, and choose to go for a CIC or similar legal structures.

If they want to be seen to be doing the right thing, ethically the right thing,

it would also give them probably more access to government finance,

cause the government will feel secure that any investment they make or

any assets that they give to that CIC will arrest in perpetuity for

the benefit of the community.

And they may also get donations from nonprofits or

corporate social responsibility as a result of that, and they may also benefit

from advice from government or other social enterprise support structures.

How do we decide what legal form to choose is the issue.

And I think the answer to that is that

a lot of social entrepreneurs don't like all this bureaucratic stuff.

They want to get on and be entrepreneurial and

make something happen and change the world.

Well, that's fine.

But the decisions that you make in formulating a legal structure will have

lasting consequences.

So, I think it's very important to give quite a lot of thought to what kind of

organization do you want to be.

Do you want an organization with a wide membership that's got close links with

the community?

In which case, you want a membership structure where those community members

can participate and be on the board.

Do you want to be entrepreneurial and mobile, maybe a one person or

a two person operation?

So those are two considerations.

You also need to think about where you get your finance from.

Do think you have a chance of getting government finance,

in which case you might think about nonprofits and CICs or

CIC-type structures as being more acceptable to public bodies that

have to be accountable for the way in which money is spent?

Or are you interested in crowdsourcing funding, which is like a donation,

which at the moment doesn't seem to have any payback to the donors.

And, or could you get bank finance or private sector, private sector funding?

And what's your ultimate purpose?

Do you want to grow and become something substantial?

Do you want to replicate?

In other words, do you want this model that you've got

replicated in every city around, every big city or around the world?

And that would govern the kind of structure that you'd choose.

I just want to add something about what's going on in Europe at the moment in

terms of mapping social enterprise.

There's a large project which is linked to the social business initiative which is

aiming to, through process of social innovation, cure your problems of

cohesion and growth, and productivity and so, all the easy stuff.

And this mapping exercise is looking at 28 countries,

and looking at what they understand by social enterprise, and

it's using the definition of social enterprise put out by

the Social Business Initiative, which draws very much on the EMES definition.

So it has three characteristics: a social purpose,

economic activity, and inclusive governance.

And it has defined about five core measures, five core

indicators with specific criteria to use in exploring the extent

to which different countries might operate with non-profits or cooperatives or

their own specific structures in a social entrepreneurial way.

The measures that, the indicators that we have are an economic activity.

Now, in some countries like the UK, it's

quite easy to find a lot of social enterprise with 50% economic activity.

In other countries where the NGO, the civil society is quite fragile, and

they're just on the pathway towards being more and more socially entrepreneurial,

we might just have five or ten percent that's getting an income from the market.

But we're hoping that's the future for

really substantial development in terms of, say, social service provision,

work integration, and other social entrepreneurial activities.

That's the economic activity. Social purpose.

It should also have some degree of employment really, but not too specific.

And indeed, in many social enterprise we see volunteers being

employed as a way of getting a free resource in social capital.

And it should have an inclusive governance which could be participative, but could be

a stakeholder form of governance, multi-stakeholder form of governance.

It also has a constraints on dividend distribution,

that's currently not specified, and the idea of an asset lock.

So it follows some principles similar

to the CIC, but it has inclusive governance which the CIC doesn't have.

So we'll see whether that forms, really,

a kind of emblematic set of criteria for Europe.

It could do, and we could see lots more organizations like CICs, taking up some

of those criteria in future, particularly in places where it's difficult for

nonprofits to trade or it's difficult for cooperatives, and for-

profits really are not trusted very much.

So, we're hopeful for a good future for social entrepreneurship.

New Organizational Form in the UK: Community Interest Company (CIC) | Helen Haugh & Roger Spear

Social Business Model and Planning for Social Innovation

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