Developing Scotland's Economy: Increasing The Role Of Inclusive And Democratic Business Models

Executive Summary

Developing Scotland’s economy for economic success, and achieving our wider ambitions for a thriving, fairer, greener, and more resilient economy for the people and businesses of Scotland, requires a strong platform of organisations that prioritise economic democracy and promote environmental responsibility, fair work, inclusion, and opportunities for all (Scottish Government, 2021).

Inclusive and Democratic Business Models (IDBMs) do this, and more (Roy, 2021). Around the world, they are not considered a ‘sideline’ to the mainstream economy, but a vital, growing and essential part of economic success. Over 280 million people in the world (some 10% of the world’s employed population) are employed by IDBMs, with the largest 300 of these reporting a combined turnover of over USD 2.4 trillion (International Co-operative Alliance, 2023).

IDBMs are central to Community Wealth Building (CWB), being key to the five pillar model (Scottish Government, 2022, EDAS, 2023), and delivering on a Scottish economy that is fairer, greener and more resilient.

They have an intrinsic and dynamic capability to aid economic transformation, distribute wealth, support workers and communities and be purposeful in ways that serve people, place and the environment. If more people have a genuine stake and say in the economy, then more wealth and prosperity for all Scotland’s people and communities can be realised. IDBMs contribute to economic prosperity, in terms of GVA, productivity, employment and innovation. They are an effective tool for economic transformation and wellbeing.

Given this undoubted potential IDBMs can play a far more pivotal role in building community wealth and a successful economy that:

• Is more productive and responsible.
• Offers greater investment / re-investment opportunities.
• Is more dynamic, innovative and flexible.
• Builds resilience in communities, supply chains and firms.
• Has fairer distribution of agency and power to business, workers and communities.
• Brings greater wealth distribution.
• Improves social and environmental impacts.

As such our call to action is to ensure we grow their influence and impact. The Review Group suggest we must:

• Support the mainstreaming of inclusive and democratic business models as a “golden thread” throughout all of Scotland’s economic strategies and work of our agencies.
• Support our entrepreneurs and wider society by helping to forge and embed a culture where the benefits of enterprises operating with a non-traditional business model are readily perceived and acknowledged.
• Enhance the existing eco-system of support, possibly in the form of a ‘Centre for Excellence’ to stimulate the creation of new enterprises, and strengthen employee-owned businesses, co-operatives and social enterprises enabling them to flourish and recirculate their surplus in a purposeful way which benefits both their organisations, local and national economies.
• Tripling of the number of IDBMs in the Scottish economy by 2034 - representing a shift from circa 7000 to 21000.

The independent Review Group remains committed to the central premise that working to significantly increase the numbers of social enterprises, employee-owned businesses and co-operatives in Scotland’s business base will ensure the transformation of our economy and achievement of wider ambitions in creating a thriving, fairer, greener and more resilient economy for the people and businesses of Scotland.

Recommendations

1. IDBMs should run through Scottish economic thinking and strategy as a central golden thread.

2. Establish an ‘Economic Democracy’ group.

3. Investment in data and evidence on IDBMs is required to support policy and service design.

4. National awareness raising and training programme.

5. Widen scope of existing Social Enterprise awards.

6. Ensure that outreach, awareness raising and pre-technical IDBM development is available.

7. Further and Higher Education Anchor organisations take a key role in promoting IDBMs.

8. The Economic Democracy Group should develop a clear action plan to create an effective and extensive ecosystem, possibly in the form of a Centre for Excellence, providing support for IDBMs.

9. Streamline existing public resources.

10. Map the current provision of support, identifying and assessing gaps in support.

11. Grow the role of the Scottish National Investment Bank (SNIB) to intentionally and specifically support IDBMs.

12. Consider extending the role of social investment and democratic finance providers (for example Social Investment Scotland, Scottish Communities Finance) to cover all enterprises operating with an IDBM.

13. Promote IDBMs and economic democracy within Economic Development and with grant givers, procurement and commissioning professionals within the public, private, third and community sector.

14. Amend the existing Sustainable Procurement Duty, to facilitate the participation of IDBMs.

15. Consider extending Scottish right to buy legislation to IDBMs.

16. Explicitly weave contribution and value of IDBMs into relevant economic indicators.

17. UK and Scottish Government to explore potential tax relief, work with the financial sector and instigate other legislation to support the creation and sustainability of enterprises operating an IDBM.