Social enterprise: action plan

Developing Stronger Organisations

Prior to the Covid crisis the social enterprise sector as a whole was going from strength to strength. The pandemic has significantly impacted this progress with many social enterprises remaining fragile and unable to fully realise their potential. Through our Economic Recovery Implementation Plan we have put in place robust steps to ensure that, as we look to recover from the crisis, social enterprises will have the support, knowledge and networks they need to achieve their potential.

Summary Of Key Actions

During the next three years we will:

• Ensure that funding and support are available to social enterprises to help with sustainable recovery, move forward and adapt following the Covid-19 crisis. Including a further £14 million made available in 2021-22 through the Third Sector and Communities Recovery Programme.
• Pump-prime a range of direct funding mechanisms which, in combination, will provide the finance necessary to support the growth and sustainability of the sector.
• Ensure that our mainstream business support services continue to recognise and appropriately support social enterprises, while at the same time enhancing specialist provision.
• Ensure that support is available to social enterprises in rural areas and that this recognises the different challenges they face.
• Invest £1.5 million to create a clear pipeline for social enterprises from conception to the international market, with a focus on ethical opportunities in emerging markets such as Africa and South East Asia.
• Continue to support programmes that enable people within the third sector to develop entrepreneurial behaviours, mindsets and skills.
• Support further action to create stronger, more effective, and more diverse boards within the social enterprise sector.
• Continue to support social enterprise networks as well as other forms of business mentoring, coaching, and peer-to-peer learning.
• Attach Fair Work criteria to grant support for social enterprises (as well as the organisations that support them), asking them to commit to adopting fair working practices.
• Better understand the opportunities and enable the social enterprise sector to lead by example in combating climate change and achieving net zero.
• Ensure that social enterprises have access to high quality advice and practical resources to help plan, measure and report on impact.
• Set out our plan to fund an enhanced single intermediary body with responsibility for representing the social enterprise sector across Scotland.
• Launch a new £30 million Third Sector Growth Fund. This loan fund will be aimed at ambitious, high growth potential organisations that will be key to inclusive growth and the wellbeing economy.

Supporting Resilience And Recovery

2020 has seen enormous challenges for the social enterprise sector, as well as society as a whole. The Scottish Government acted swiftly putting accessible support packages in place to ensure local authorities, community groups and the third sector were able to support people and communities affected by COVID-19. A £350m emergency communities fund comprising eight funding pots was announced in March 2020. A number of these funds were available to support those in the social enterprise sector. We have also provided direct support for businesses with awards of more than £2 billion having been allocated between March and October 2020.

The Scottish Government continues to support the sector, the £25m Third Sector and Communities Recovery Programme was launched in September 2020 and we have confirmed that a further £14 million will be available in 2021-22, enabling support for Third Sector and community organisations to continue to the end of June 2021

From November 2020 the Strategic Framework Business Fund has offered grants to eligible businesses required to close or to those that have remained open and have had to significantly modify their operations by law. This fund is not only open to limited companies, partnerships and sole traders, but also to trusts, Scottish charitable incorporated organisations, social enterprises and community interest companies, provided they meet the eligibility criteria.

Access To Finance

The global pandemic means that public finances will be challenged, making it vital that we ensure we maximise the impact from funding over the next few years. This means continuing to be innovative with spending and exploring new ways of funding organisations.

The Scottish Government has also worked for many years to remove barriers to finance and encourage a more sustainable funding mix within the social economy. The Covid-19 crisis has shown the importance of this approach.

As part of this action plan, we will ensure that a spectrum of appropriate grant-based and repayable finance is in place to support the growth of the social enterprise sector. This will contribute to fulfilling our commitment in response to the Advisory Group on Economic Recovery which recommended that "we will explore new forms of social investment and finance to build upon Scotland's world leading position in social enterprise".

In the period to 2024 we will:

• Explore ways to work with the Scottish National Investment Bank to direct growth capital to ambitious, growth-oriented social enterprises that will tackle identified social and environmental challenges facing Scotland.
• Make ongoing investments through the Scottish Social Growth Fund, offering patient capital to support social enterprises sustain and grow their social impact.
• Continue to investigate new democratic forms of local capital, including Community Shares and Community Bonds, enabling local people to financially reinvest in their communities while unlocking affordable, appropriate and patient capital.
• Enhance the Social Entrepreneurs Fund to increase its reach and targeted impact on Scotland's social and environmental challenges.
• Deliver our Investing in Communities Fund, to increase support for place-based social enterprises that will address local priorities and needs, promote inclusion, and build on the assets of local communities.
• Invest any potential returns from existing and legacy funds into new financial products and services, as well as test innovative commissioning models, which will support the delivery of better public service outcomes.
• Launch a new £30 million Third Sector Growth Fund. This loan fund will be aimed at ambitious, high growth potential organisations that will be key to inclusive growth and the wellbeing economy. This approach will help the sector to continue to support the challenge of the pandemic and its anticipated impact in the long terms.

The collective response of social investors, foundations and public authorities to ensure the resilience of the social enterprise sector in 2020 has been a real positive to come from the crisis. We will continue to work with partners in the social finance community to deliver these funds, promote investment-readiness within the sector, and find the right funding models to ensure the long-term recovery and contribution of the sector.

We will also explore ways to work with like-minded grant-makers and investors to bring new capital and resources to the social enterprise sector and better understand the unique needs and contribution of social enterprise within the wider third sector.

Business Support

The challenges experienced in 2020 have highlighted the widely varying circumstances, needs and prospects of different parts of the social enterprise community. The Scottish Government continues to recognise that the varied aspirations and needs of social enterprises are best served by a diverse ecosystem of business support, mainstream and specialised, nationally organised and locally delivered.

We will work with national agencies and mainstream business support services to continue to recognise and effectively support social enterprises, as part of our wider encouragement and support for responsible businesses. The Find Business Support Gateway ^[18]has been available online throughout the Covid-19 crisis offering information online about relevant products and services from our enterprise and skills agencies and has been increasingly accessed by social enterprises, as well as the use of Business Gateway services. We will also encourage effective knowledge sharing and joined-up working across agencies, services and business advisors supporting the development of the social enterprise sector.

Through our Covid-19 response funds we have made available additional business support services and we will continue to enhance specialised business support for social enterprises including as part of Just Enterprise, the national programme of specialised business support. As part of this we will ensure an enhanced range of information, advice and training is available to social enterprises across all of Scotland and that providers are embracing innovations, including the use of digital technologies, to widen access and deliver more flexibly and efficiently to social enterprises.

Rural Social Enterprise

The Scottish Government recognises the unique importance of social enterprise to business and community life in rural Scotland, and the sector's particular impact on Scotland's most remote and fragile communities.

On the back of the Islands (Scotland) Act 2018 the consultation for the National Plan for Scotland's Islands^[19] highlighted a thriving third sector as a key strength amongst island communities – in many cases filling in gaps in service provision and vital to many island communities. It is clear that social enterprises play a crucial role in Scotland's Island and rural communities. Community led and collective leadership approaches are particularly evident across rural communities, offering opportunities for further learning and development.

As such, we will ensure that support is available to social enterprises in rural areas and this support recognises the different challenges they face. As part of this, we will encourage strong collaboration across Scotland's enterprise agencies to adopt and share best practice approaches to place-based business support for small rural enterprises and, where possible, to realise the contribution of local social enterprises to the wider economy. We will also ensure appropriate flexibility in the modes of delivery used within social enterprise programmes and initiatives to best serve social enterprises in rural areas.

This builds on the Scottish Government's commitment to a new approach to business support in rural areas, to enable the true potential of the rural economy to be realised.

Internationalisation

The Scottish Government recognises the important role played by social enterprises in strengthening our links with the international community, as a potential source of international trade, in supporting Scotland as an international destination and in developing Scotland's reputation as a good global citizen.

Since the publication of Scotland's Internationalising Social Enterprise strategy ^[20], we have: supported international social enterprises located in Scotland; enabled social enterprise activity in partner countries; and engaged strategically in the development of the social enterprise movement globally.

While Covid-19 has made trading internationally very difficult we must recognise that a key challenge during this action plan will also be Brexit and the uncertainty that this has brought.

We recently published the Scottish Governments Vision for Trade^[21]. Scotland wants to trade based on our principles of inclusive growth, wellbeing, sustainability, a just transition to net zero and good governance. These principles underpin the trading and investment relationships we want Scotland to have now and in the future, including how we implement our three cornerstone international economy plans on exports, investment and capital, and it articulates the approach that the Scottish Government wants to take in developing future trading arrangements.

The Vision for Trade includes social enterprises as a key exemplar and are covered throughout the document under the term "business". It recognises that Social enterprises often lead the way in their contribution to a Wellbeing economy. Scottish Governments aim is that social enterprises will become widely accepted as an increasingly just, democratic and inclusive way of doing business.

The Vision for Trade concludes with a commitment to engage with individuals, businesses, academics and other organisations in Scotland and globally on our approach to trade and how this will shape future trade-related decisions, this includes social enterprises.

Scotland already has many social enterprises who have made the transition to trading internationally, but we recognise the importance of both continuing to support these organisations and to help new organisation access these new markets. To do this we will invest an additional £1.5m to initiate a longer-term programme that will strengthen the multi-agency support available to social enterprises that wish to operate internationally. This will ensure accelerated progress through:

• Creating a clear pipeline of tailored support for social enterprises from conception to the international market, with a focus on ethical opportunities in emerging markets such as Africa and South East Asia,
• Ensuring that Social enterprises lead the way in delivering Scotland's Vision for Trade.
• Supporting social enterprises to be involved in strategic Ministerial engagements and a positive influence on the global social enterprise movement;
• Increasing two-way dialogue and learning between Scotland and partner countries;
• Fostering a more conducive environment for international social enterprises willing to locate in Scotland and build their businesses from here;
• Better access to business support, continued funding opportunities through Scottish Development International and learning opportunities for social enterprises moving into international markets, and supporting Scotland as an international destination;
• Strengthening international outlook and leadership within the social enterprise community; and
• A strong role for social enterprise in international development initiatives.

We will remain open to opportunities to harvest best practice from around the world and ensure that Scotland remains at the forefront of global social enterprise development.

Entrepreneurial Learning And Development

Scotland's long-term Social Enterprise Strategy sets out a broad commitment to developing leadership within the third sector, enabling organisations to be more entrepreneurial, more sustainable, and better able to serve their community.

Over the last three years we have supported a range of learning and development programmes. These have enabled people to understand the social enterprise approach, developed enterprising leadership and community leadership skills, and provided the knowledge required to start or develop a social enterprise.

Specifically, we will encourage programmes that enable people within the third sector to develop entrepreneurial behaviours, mindsets and skills. This will include learning and development programmes that focus on learning by doing and are flexible, practical and responsive. Our support will also enable further innovation in the learning programmes, formats, and platforms.

Building the leaders of tomorrow (succession planning & talent development) requires collective effort. We want to encourage partnership working and collective leadership approaches. It is important to instil the value of this into staff/volunteers at all levels so the leaders of tomorrow are natural collaborators with the skill to build and nurture relationships, think creatively about solving problems and draw on the strengths and skills of others.

Governance, Boards And Volunteers

The Scottish Government recognises the enormous contribution of volunteers to the social enterprise sector and communities across Scotland. The Volunteering for All: national framework^[22] sets out our ambition to create a society where volunteering is the norm – where opportunity and expectation are not limited by upbringing, social circumstances or gender, and where we all celebrate and honour the contributions we make. The recent Social Renewal Advisory Board Report picks up this theme, and highlights the importance of increasing the numbers of both disabled people and people from minority ethnic communities who volunteer in our social enterprises. We will continue to work with delivery partners to address the disparity.

In what has been an unprecedentedly difficult year the strong and agile leadership shown by the social enterprise sector has not only allowed many organisations to survive the crisis, but many have changed the direction of the organisation, identifying areas where communities are struggling or resources are needed and moving in to provide support.

Volunteer trustees/directors in particular have a key impact on whether a social enterprise thrives, through the leadership, behaviour, culture and overall performance of boards.

Over the last few years, the Scottish Government and partners have supported initiatives to review and strengthen boards in the third sector and to ensure that organisations are well governed, effective, and accountable. The last Social Enterprise Census showed that across small, medium and large social enterprises the majority are led by women this is positive, but we must push on, ensuring that organisations and boards are inclusive and reflective of the diverse society within which they operate. This is particularly important for ethnic minority groups and young people where the 2019 census shows that they are considerably underrepresented.

Building upon previous work lead by ACOSVO, we will work with national agencies and sector partners on initiatives to create stronger governance and boards using The Scottish Governance Code for the Third Sector^[23]. These should enable organisations to:

• Have a rigorous approach to board recruitment, performance and development;
• Ensure a range of professional skills, knowledge, and experience is available to the social enterprise sector; and
• Maintain and increase board diversity, finding ways in particular to enhance representation of young people and people from minority communities.

We will also continue to directly fund work to identify and raise awareness of the barriers faced by many ethnic minority groups and young people as well as striving to increase the number who are on boards.

This will build on other initiatives to support business growth and workplace innovation.

Networks, Peer Support And Mentoring

Social enterprises are often stronger operating together than alone, during a time of continuing uncertainty the importance of mutual support and a collective response is even more apparent. Through better connection and collaboration there are significant benefits for personal, professional and organisational growth.

In the last Social Enterprise Action Plan, we provided direct funding for initiatives that have supported collective leadership development, the formation of networks, and the exchange of learning.

We will work with sector partners to support vibrant networks of organisations, where they have coverage, enabling social enterprise leaders to come together, learn, collaborate, trade, and share services.

There has been a rapid change to digital technology, with companies investing in technology to compete and survive in a changing market. We will work with others to help bring forward more wide-ranging and efficient models of business mentoring, coaching, and peer-to-peer learning. Enabled both in-person and digitally, these will include new ways to combine skills, resources and knowledge within the sector, and draw on pro bono support from outside.

Ensuring Fair Work

Fair Work is central to achieving the Scottish Government's priority for sustainable and inclusive growth, through which everyone in Scotland can contribute to and benefit from our country's success. Fair Work is more important than ever and is at the heart of Scotland's economic recovery and renewal. The Government remains ambitious for Scotland to be a world-leading Fair Work Nation by 2025; accordingly, we are continuing to deliver our Fair Work priorities in line with the Fair Work Action Plan ^[24]and the Scottish Government's Fair Work response to the Advisory Group for Economic Recovery. Fair work will drive success, wellbeing and prosperity for individuals, businesses, and society.

While evidence suggests that social enterprises are leading the way on fair and inclusive working practices, the sector can go even further.

Through our flagship Fair Work First policy^[25], we are aiming to drive fairer working practices across the labour market by attaching Fair Work criteria to our support to social enterprises, where it is appropriate to do so. As such, we are asking social enterprise employers to commit to:

• appropriate channels for effective voice, such as trade union recognition;
• investment in workforce development;
• no inappropriate use of zero hours contracts;
• action to tackle the gender pay gap and create a more diverse and inclusive workplace; and
• payment of the real Living Wage.

Guidance for social enterprise employers will be made available and is supported by the online Fair Work Framework Benchmarking Tool, developed jointly by the Scottish Government, the Fair Work Convention and the enterprise and skills agencies. The tool enables employers to self-assess their practices and access support to help them strengthen their approach. Social enterprise employers should also encourage their staff to use the Fair Work Convention's separate online self-assessment tool^[26] which is designed to help employees assess their own experience of fair work and suggest actions that can be taken to improve on it.

Addressing The Climate Emergency

Scotland is facing a climate emergency. Like the rest of the world, we must act to mitigate the worst impacts of climate change on our people and our planet. Scotland is already leading the way and social enterprise can play a leading role in supporting this. Scotland has committed to some of the toughest statutory emissions reductions in the world to ensure that our contribution to climate change will end, definitively, within one generation.

The year 2020 has given a glimpse of how we can build back from COVID-19 in a way that respects the planet, how rapidly business can adapt to the opportunity of a low carbon economy, and how resourceful and co-operative Scotland's people can be. Our hope is for the social enterprise sector to play a leading role in showing how much better a post-pandemic society can be when we put environmental considerations to the fore.

But we need a step change in the way we live, work and do business if our climate targets are to be realised. Scotland's response to the climate emergency also requires us to work across sectors. We have already supporting businesses and communities to transition to a low carbon economy, through programmes such as our Environmental Placement Programme, a new Boost It fund for environment social enterprises, and the development of community climate action hubs.

The Scottish Government supported policy and practice conference has contributed to a collaborative effort to place social enterprise and the third sector in a leading role towards a net zero economy. Through this Action Plan we will work to better understand and highlight the challenges and opportunities of achieving net zero, we will introduce measures that will enable and support the social enterprise sector to lead by example in combating climate change, and develop measures to support creativity and innovation in this critical challenge. As part of this commitment we will ensure that social enterprises get access to the knowledge, advice and practical tools they will need to deliver climate action and play a major role to achieving Scotland's net zero ambitions.

Demonstrating Impact

The ability to demonstrate social impact has been consistently identified as an area of particular need among national agencies, sector partners, and social enterprises. We recognise the importance of ensuring that social enterprises are able to produce the evidence they need to show they deliver well, create impact, and live up to appropriate values and practices.

The pandemic has given many leaders and organisations the opportunity to think, challenge assumptions and reflect on where their organisation can make most difference. There has been a massive upswing in interest in support as organisations seek to consciously plan to make continuing impact, show they deliver well, and create value for society.

As part of the last Social Enterprise Action Plan, we supported some new and efficient ways for organisations to learn about and improve impact measurement practices – social and environmental. We have also introduced expert advisory support on this topic into Just Enterprise, the free national business support programme for social enterprises.

We will redouble our efforts to ensure that national agencies and sector partners are accounting for social value in appropriate ways and to ensure that frontline enterprises have access to high quality advice and practical tools to help plan, measure and report on impact. This will include access to one-to-one advice, training workshops, digital learning, and improved access to practical tools and techniques that can improve practice. We will also look to use the biennial social enterprise census to start the journey towards robustly measuring social impact on a national scale.

Sector Representation

Our ambition is to ensure that social enterprise plays a greater role in civic society and business in Scotland. To do this we must draw on the collective strength of social enterprises, ensure they are more visible and more active in public discourse.

For some years now, we have supported the work of a number of membership or 'intermediary'

bodies that represent and support some within the sector. With and through these bodies we have helped social enterprises to be heard, make connections, collaborate, and learn from each other.

As part of the changing landscape and in line with international comparisons we believe that the support provided to the Social Enterprise sector will be best served by having one clear voice advocating for it. During the first quarter of 2021/22 we will develop a plan, informed by partners, to fund an enhanced single intermediary body with responsibility for representing the social enterprise sector across Scotland; bringing together the very best of a sector that has enabled social enterprises in Scotland to flourish domestically and be recognised internationally.

We will work with this body together with national delivery partners to develop a national infrastructure that represents and supports the sector most effectively and works to deliver the priorities set out in this action plan.

Locally, we will support Third Sector Interfaces (TSIs) to provide meaningful and consistent support to social enterprises across Scotland, and an effective bridge into public policy-making at local authority level. Together, we must ensure that national and local support is both joined up and coherent.