Socents and Ladders

Recently I had the privilege to attend the first anniversary of the launch of Big Society Capital (BSC).  As BSC is ClearlySo’s largest investor many will question the objectivity of what I might say.  So let me just wish them a happy first birthday.

However, the evening prompted me to reflect on the question of what is the purpose of social enterprise, finance and investment—which two consecutive Governments and so many others seem to support as a great idea. This is a debate that has been raging recently which we discussed in a recent blog post. I would like to describe the debate as one between purists and the “ladderists”.

The purists tend to see social investment as something which should be dedicated to encourage a very particular type of highly social organisation. This is not yet a uniform view on exactly what type of organisation ought to be supported, but purists seek to target resources on those fitting a precise definition—those organisations most focused on generating social impact and needing the kind of support their BSC and other governmental initiatives are designed to encourage.  Those businesses which are not so purely focused ought to receive less support or no support, as they are not really social enterprises.  As we see it the world of the purist is black and white.

At ClearlySo we are in a different camp—we see many shades of grey (cue sniggering).  Our aim is to bring the greatest sums of capital imaginable into the sector—and in order to achieve this we might seek to attract mainstream investors with social enterprise opportunities that purists might consider unacceptable.  I am reluctant to try to place BSC on this spectrum, but as an institution formed by an Act of Parliament their remit is legally constrained.

In another debate, during the networking drinks, I confronted another purist—this time on the issue of social impact assessment.  Her contention was that this work is valuable and, in importance, equivalent to the work one might do in assessing financial performance.  Or on a pre-investment basis, she argued that financial and social due diligence were equally valuable.

Philosophically I agree with her.  My problem is that we do not live in this philosophically good world (I wish I did).  In the world that we confront, mainstream investors do not value social and financial analysis equivalently—they value the latter much more highly. If we can get them to start to use social analysis—even a little bit—then my hope is that we get them onto at least the first rung of the latter (hence the silly term I coined, “ladderites”, to describe how we see ourselves).  Over time I hope we can get the mainstream to climb up the rungs—but the hardest bit is to get them on in the first place.  The alternative, I fear, is that we will expend substantial effort to convince them they should jump very high up the ladder—and this will fail.

To be clear, I think the world needs both purists and ladderists—and one is no better than the other.  But I am most definitely a ladderist, and ClearlySo is absolutely focused on getting people on the first rung.  I have undying faith in the fact that once we do, the mainstream will inevitably climb up the ladder.  I think competitive forces and their own desire will drive them.

First Published in Third Sector in May 2013.