News and Comment

Can a private company ever fulfil a social purpose?

Thursday 23 August 2012

Which is more important: whether or not an organisation does good work, or the way they’re structured? As a ‘public interest company’ – a business with a strong social purpose – OPM has a unique perspective on this important question. In our experience, you can’t have one without the other.

As news broke that the Advertising Standards Authority had ruled training company A4e, was no longer allowed to call itself a “social purpose company”, by coincidence I came across a Guardian Social Enterprise network piece on “the new wave of interest in workers co-operatives”.

Although seemingly unconnected, the ASA’s ruling and The Guardian’s Social Enterprise article both provide food for thought as to what constitutes an altruistic organisation and how such organisations should manage and promote themselves.

Let’s begin with A4e. Never far away from controversy, the ASA ruled that: “Whilst we noted the ad made clear that it was A4e’s intention to improve people’s lives by helping them to secure employment or develop skills, we were concerned that individuals would understand the claim to mean that A4e was a not-for-profit organisation”. A4e has subsequently amended the ‘About Us’ section on its website to “a private company with a social purpose”. However the company contends that because the work it does is so closely bound to achieving improvements in social outcomes, its original description was valid and it is considering appealing the ASA’s decision.

The Guardian too looks at companies that are, according to the extensively quoted How To Set Up A Workers Co-Op book, “working for positive social change”. The main difference being that each of the companies mentioned is co-operatively owned, i.e. “owned and managed collectively by its workers for their mutual benefit.” The article cites successful examples of such businesses, including a Leeds based printers and a Birmingham bike foundry. Each of these laudable organisations has successfully followed the handbooks advice of “show[ing] how environmental and social concerns are at the heart of your business”.

Nevertheless, when compared to A4e it would seem that it is the way these businesses are organised – and they are indeed businesses – as opposed to what they do, which qualifies them as socially purposed organisations. In contrast A4e’s activities would seem to more directly influence social outcomes, (a point which is not without a contention, and whether they have positive or negative influence is another matter), but it is its structure, as a privately owned profit making entity, that has particularly irked critics.

So does structure matter? Do social purpose organisations have to be non-profit making? Or, to put it slightly differently, can profit making organisations pursue a line of business that is socially important?

At OPM we certainly believe so. As a private company we have to succeed as a business in order to carry out the vital work we do helping the public and voluntary sectors improve the services they offer to communities. One of the big differences between us and other businesses, however, is that we have constitutionally-enshrined checks and balances, accompanied by an external independent audit function fulfilled by our Public Interest Council, to ensure we stick to our word.

What may seem like a technical governance detail is in fact absolutely vital. Especially during difficult times, with pressure to ‘follow the money’ and neglect broader aims, acting in the public interest can quickly begin to seem like a luxury. Strong structures ensure that social purpose is always core business.