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Interview Toby Eccles discusses Social Finance

MAGAZINE

social, strategic and sustainable investment and innovation

Issue 1 // September 2012

Social Impact Bonds A panacea for the future? Granted

Social Enterprise

Balancing the Books

We talk to Inspiring Scotland’s Andrew Muirhead

Chic Brodie MSP examines the role of social enterprise

SROI, The Outcomes Star and Randomised Control Trials


Our Story! Serving Scotland through Children and Families, Adult and Older People’s services. We have been around for over 140 years by being flexible and adapting to the social care needs of the communities we serve. Our mission is at the heart of the support we provide to some of Scotland’s most vulnerable people. We ensure each individual supported by our services is given the opportunity to achieve the best their life has to offer regardless of age, ethnicity or religious beliefs. Be Part of It!

Tel: 0131 657 2000 www.crossreach.org.uk

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SI magazine September 2012

IN THIS ISSUE Page 7

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MAGAZINE www.simagazine.co.uk SI magazine is a quarterly digital publication designed to bring together original content which affects business within the third sector at a strategic level such as grant and loan funding, partnerships, social enterprise and efficiencies.

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SI News

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Headline Interview Toby Eccles of Social Finance

Publisher Andy Crielly publisher@simagazine.co.uk

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Social Impact Bonds

We interview Andrew Muirhead A look at The JESSICA (Scotland) Trust

The role of CDFIs

Cyrenians and Mitie, working in partnership

Fraser Kelly talks to us Chic Brodie MSP discusses the role of Social Enterprise

33 Leading by Example Pat Armstrong discusses support for Chief Executives We take a look at CrossReach’s pioneering work in Govanhill Stop It Now! examine the complexities of preventing sexual abuse

40 Balancing the Books: The Third Sector Research Centre discuss impact measurement Industry experts look at key financial and legal issues

44 Letters 46 Events Calendar SUPPORTING PARTNERS:

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Welcome! Welcome to the launch issue of SI magazine a new quarterly title dedicated to exploring the many innovative projects that third sector organisations in Scotland are involved in and how this work is funded in these testing times. We kick things off with an in-depth look at Social Impact Bonds (SIBs), for some the latest pocket-pleasing panacea to all our social ills, but to others yet another complex funding structure. We speak to Toby Eccles, the man who got this ball rolling and developed the model, along with case studies from Peterborough Prison’s One Project, and closer to home, Perth YMCA’s Living Balance programme – Scotland’s first ever SIB in action. Elsewhere in this issue, at a time when the very term ‘social enterprise’ seems under threat from certain bullish corporate quarters, we share a Kit Kat with Fraser Kelly, the chipper Chief Exec at Social Enterprise Scotland. We examine ways of measuring the economic and wider impact of the third sector and we find out from Pat Armstrong at ACOSVO why even local authority leaders need somebody to lean on. It’s high time the money makers and civic leaders shake along together and celebrate the great contributions the Social investment movement makes to our society and economy. We do hope all this gets your interest and sparks some lively debate which will rumble on in future issues. Don’t be a stranger now!

JStone Jools Stone Editor 2

SI NEWS

Crossing new ground

Christian social care provider CrossReach have just celebrated the conclusion of their first ever CrossReach Week. The week saw the Moderator of the Church of Scotland, Albert Bogle, enthusiastically spearheading a raft of activities to raise awareness of the work they do with a variety of socially challenged groups, including a challenge in which he roved around Scotland by sea, air, rail and road in tribute to their staff’s dedication who often ‘go the extra’ mile for their cause.

‘We’ve been amazingly blessed by the Moderator and his exceptional donation of a week of his time. Staff and service users have all been inspired by his words of encouragement. The week promoted CrossReach very well with many of our friends and partners inspired to donate time and money to enable us to continue to deliver quality services wherever needed.’

Highlights included the launch of a new CrossReach ‘anthem’, visits to the Daisy Chain project and the highly acclaimed Perth Prison project, the launch of a new toolkit for parishioners to help children deal with abusive parents, a Singing for the Brain event at Elderslie Dementia Unit and chef Neil Forbes helping a group of school pupils prepare a special dinner for CrossReach’s many partners, service users and staff.

Read more about CrossReach Week and their future plans on the Moderator’s blog: www.italker.org.uk

In summing up the week’s successes, Chris McNaught, Director Children & Families, said:


SI magazine September 2012

Higher Education pioneering a platform for social entrepreneurs

Social Impact Bonds go Stateside Goldman Sachs have become the first major investors in a American Social Impact Bond (SIB) project. In August 2012, the Urban Investment Group division of Goldman Sachs announced that they were putting $9.6 million into a New York City program at the Rikers Island correctional facility. The aim of the four year project is to lower the 50 percent recidivism rate among young offenders by 10%. This equates to a $2.1 million return if targets are met. The investment is a sign of confidence in the SIB model from a major multinational corporation and for how the SIB market is developing globally.

Philanthropy hits Dublin The European Venture Philanthropy Association holds their annual conference in Dublin for the first time in November 2012. Venture Philanthropy is a growing market which has seen its numbers rise from 20 to over 400 since 2006, while the calibre of members has steadily increased too.The conference brings together European delegates from venture philanthropy, social investment, the donor community, foundations, venture capitalists and private equity, advisory firms, academic institutions and selected social entrepreneurs. The conference is held at Croke Park, Dublin on 13-14 November.

Express Grants for Small Charities The Scottish Community Foundation (SCF) invites applications from small charities and community groups to their Express Grant scheme.  The Scotland-wide scheme offers awards of up to £2,000. The SCF say they’re ‘particularly keen to hear from groups who are involved in education, learning or employability, especially those based in the Edinburgh area.’ Express grants have a straightforward application process and a short turnaround time, meaning that in six weeks applicants will know if they have been successful. For more information visit www.scottishcf.org, telephone 0141 341 4960 or email grants@scottishcf.org.

Fifty six English Universities are taking the lead in a pioneering new scheme which sees the institutions putting social entrepreneurship at the forefront of their services. The universities will be receiving part of a two million pound higher education initiative by the Higher Education Funding Council for England (HEFCE) and their delivery partner UnLtd in January 2012. As part of the new funding programme, the fifty six universities will be required to roll out a wide range of outreach approaches that seek to develop and grow staff and students as social entrepreneur champions. Some proposals include ‘virtual hubs’ that seek to provide funding support, how to set up online support platforms and master classes delivered by high profile social entrepreneurs. Speaking at the announcement by HEFCE and UnLtd, Cliff Prior, CEO of UnLtd, said “We believe the chosen universities will deliver high quality support, helping both staff and students to start up and thrive as social entrepreneurs, and that they will show how this work can be embedded across higher education to improve student experience, employability, research and studies.” To see the full list of the Universities or to find out more information, then you can visit www.unltd.org.uk/hesupport.

See www.evpa.eu.com/events/ annual-conference-2012 for details. 3


September 2012 SI magazine

SI NEWS Start and Grow loan packages Are you a social enterprise that’s looking for investment to develop?

Co-operatives UK expands its help network A new online support service was launched in August 2012 as part of the Cooperative UK’s attempts to expand its support network for third sector organisations. The national trade association for cooperatives already has an extensive history of providing the community and voluntary sector with the necessary help during initial stages of set-up. With the addition of the online service, Ed Mayo, Secretary General of Co-operatives UK, commented saying it will “make our legal and registration services more accessible to those organisations most in need.” Tools and resources that are on offer include a section on successful charitable case studies, a step by step guide to setting up a third sector organisation and access to legal and governance advice. To access the new online support service for third sector organisations, please visit www.uk.coop/ thirdsector/third-sector 4

Business Group is surveying the future The Social Investment Business Group has taken it upon themselves to seek out what it is exactly that third sectors organisations need from financial support. Launched August 15th, the social investment intermediary has posted on it’s website a survey asking sector leaders if more access to finance supports hold the key to the success and growth of their social impact projects. The survey builds on a previous pilot exercise which highlighted that one in five organisations required additional funding of over one million pounds. In addition to discovering that funding will help charities and organisations expand their services, Jonathan Jenkins, CEO of the SIB Group, also commented that the “appetite for equity-like products looks strong and we are keen to understand this further.” The survey can be accessed at www.thesocialinvestmentbusiness. org/help-us-build-new-funds

If the answer’s yes, then Start and Grow from the Resilient Scotland Jessica fund could offer a helping hand. Start and Grow offers grant and loan packages up to £60,000 to both existing and new social enterprises in any of the following 13 eligible areas:  Clackmannanshire, Dundee City, East Ayrshire, City of Edinburgh. Fife, Glasgow City, Inverclyde, North Ayrshire, North Lanarkshire, Renfrewshire, South Lanarkshire, West Dunbartonshire and West Lothian. The closing date for the January Award Panel is the 31st October.  For more information visit www. resilientscotland.org.uk or email: enquries@resilientscotland.org.uk. See also our article about the fund with guidelines on how to apply on page 20.

Inspiring Scotland welcome two new members of staff Sam Linton and Mike Willis have joined Inspiring Scotland as Performance Advisors, both bring a wealth of knowledge and experience from their private sector careers to their roles. Sam previously was Head of Performance Networks for Bank of Scotland and Mike as Head of Board Development at the Institute of Directors.

Send us your news If you have a news-worthy contribution to make, send your story to jools@simagazine.co.uk


SI magazine September 2012

Talk abOUT it! To stop child sexual abuse we need to start talking about it Your first steps to getting the right support and advice if child sexual abuse has affected you or someone you know.

Call the Stop it Now! Helpline on 0808 1000 900


Headline Interview

Social Impact Bonds:

An Agent for Change? Jools Stone talks to Social Finance’s Toby Eccles, the creator of the Social Impact Bond, and finds him refreshingly pragmatic about his baby.

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ike many a graduate, Toby Eccles left university at something of a crossroads. Both private and charity sectors appealed to him. Soon enough though, the world of merchant acquisitions came a calling, offering him the chance to gain solid expertise in corporate finance, experience he would draw on repeatedly throughout his career. Several years later, when at Data Connection developing next generation software, Toby found himself in the midst of the first internet boom, which in turn got him interested in the emerging field of venture philanthropy.

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‘I became gradually more and more interested in how money could be used towards social causes, and in advising people how best to use it for that purpose,’ says Toby. ‘I took some time out and then helped build ARK, which focussed on child programmes in Africa. Soon I found I was advising hedge fund managers on how to put their money into charity projects.’ Toby’s work with ARK also got him involved with re-institutionalising Romanian orphans, after the fall out from Ceausescu’s regime, and with education projects back in the UK. It was during his next

role though, that the penny really dropped. The Commission for Unclaimed Assets, led by Matthew Pike, was set up to decide what to do with dormant funds in thousands of unclaimed bank and building society accounts. ‘This was where the concept of the SIB was born,’ says Toby. ‘It inspired the vision to set up Social Finance, an institution which could take a venture capital approach to social problems. It became clear to us that the way in which some projects were funded was part of the problem.’


SI magazine September 2012

[A SIB is..] It’s what you use when the present model simply isn’t working and is delivering poor results. Toby Eccles Social Finance

Why was the SIB invented, what needs does it address which other funding models can’t or don’t? ‘It became apparent to us that many organisations doing the toughest work in the social sector had the least financial certainty. They had to divert the majority of their time and energy focusing on how to make the existing funding systems work for them. They were basically firefighting most of the time. Also grant makers have certain requirements, which while understandable, certainly don’t make things any easier. Three year funding cycles are common and so is a shift in emphasis, so they may start out funding projects which tackle social poverty, only to switch emphasis later in funding only projects tackling obesity, for example. There will always be a need for grant funding, but the SIB model performs a different role. The one shouldn’t replace the other. The SIB has some surprising origins too. We have the sanitation conditions in deepest, darkest Peru to thank for their evolution today, as Toby explains. ‘The situation in Peru was driven around the question – can we get businesses to pay for a certain outcome which will raise money to provide the infrastructure to make it possible. This laid the foundation for our model, which is centred around ways to fund the prevention of a social problem by calculating the savings made if successful. It allows us to test various preventative models, providing a strong evidence base, while also returning capital.’

What type of projects are SIBs best applied to and why, early intervention/prevention etc? ‘Well the first thing I’d say is that it’s not necessarily the first model you should turn to, in fact far from it. It’s what you use when the present model simply isn’t working and is delivering poor results. It’s not for everything. It’s also useful in situations where you want to test new ways of working and where poor outcomes are costly. It requires a certain amount of political will, and other will, to try it out. And it’s got to be used for something that’s easily measurable of course.’ Does this rule out certain types of social issue then? ‘Some social problems, like drug rehabilitation for example, are notoriously hard to measure, though equally some problems are actually easier to measure than you might think. Measurability is essential for a SIB project. Problems which lend themselves to the model typically include reoffending rates, employability and working with young people in care. There’s been less investment in these preventative

areas historically, with the money tending to drift towards delivering acute services. It’s understandable. Under investing in reactive services tends to catch up with you much faster, politically and in terms of the media and the wider public noticing.’ How do you address issues around attribution? ‘Every project is different of course, but you need an objective measure. For the One Project, we’ve compared our data with that taken from the Police National Database. For projects focused on kids in care there is a historical baseline to work with. One just has to be practical about building their attribution model, it can involve a lot of work, but it can be done. Some programmes have just not been measured very successfully. What processes like SIBs help organisations focus on are things like writing a contract and being specific about outcomes. Minimising costs doesn’t always lead to the best services being delivered.’ 7


September 2012 SI magazine

Headline Interview If organisations can learn to become more focused on outcomes it will free their resources up. Toby Eccles Social Finance

How is their return measured, in both social and financial terms, is there any ‘weighting’ between the two criteria? ‘Getting it right requires a lot of scrutiny. We’ve worked hard to align them, crucially we feel that you get a better result this way anyway because you’re not asking funders to make any compromises. It avoids conflicts and incorrect short cuts which could lead to perverse incentives. Having a high proportion of social investors on board typically means that they’re keen to avoid any short cuts. In the case of residential care, it’s relatively easy to calculate the saving and of course the social value is high, so that needs to be taken into the equation. If you think about the wider cost of reoffending, the cost to society, the cost of crime is potentially huge and that’s what the public at large will be interested in. So Peterborough’s One Project for example, has a wider social benefit and that has a value. We’re working to capture the broader benefits of positive outcomes there and their social value.’ How do you see the application of SIBs evolving here in Scotland, any notable differences or challenges to the rest of the UK? ‘I think that Scotland brings lot of benefits and opportunities actually. The simple fact that it’s smaller geographically certainly helps. Government departments tend to talk to each other more than elsewhere in UK government. Scotland faces similar social challenges in general, allowing for some obvious differences, and there’s a strong investor community that is very 8

committed to and attracted to supporting Scottish social projects.’ Looking at SIBs elsewhere, the case of the New York City reoffending project is an interesting one, with the Bloomberg Foundation underwriting Goldman Sachs’ investment to an extent. Do you see a similar scenario playing out with other SIBs in the UK? ‘Well Bloomberg is a very specific case. They are in a fortunate position with the foundation having the capacity to offer that. So far we’ve found that foundations here are not especially attracted to the idea of underwriting more commercial investors, but I think it’s entirely valid for a foundation to take a first loss position in that way. There’s no reason it could not be done in future.’ What would you say to people who are uncomfortable about these type of private public partnerships, citing say, PFIs as an example of it not working well in the past? Is there a danger that government will use the model to justify further spending cuts? ‘Well there’s little doubt that over the next five years or so, all funding sources will come under threat, but there’s a broader need to measure the value of any services provided. We anticipate that there will be a definite shift towards demonstrating value. It’s important to bear in mind that this could also be seen as a positive thing. If organisations can learn to become more focused on outcomes it will free their resources up.’

With the One Project, it’s interesting to see that all of the investors were from the third sector. What are your plans to involve more private individuals and corporate investors with SIBs in future? ‘Private individuals are beginning to engage now [some of the funders for the One Project invested anonymously through a charitable foundation] and there are other investor opportunities coming through, due to the enterprise investment scheme and other tax incentives. I think it will take a little longer to get the corporate sector on stream, but it will come.’ It’s exciting for Scotland to be running its first SIB through the Department of Work and Pension’s (DWP) Innovation Fund and to see how the One Project is progressing, both of which we’re covering in this issue. What other projects are on the horizon? ‘There are seven or eight projects in the works, several through the DWP’s Innovation Fund. Local authorities are starting to engage with projects around children in care. We’re working with the Greater London Authority on a £5m SIB outcome contract, aimed at improving the health, employment and housing prospects for 700 regular rough sleepers in London. There are some interesting projects happening elsewhere too, particularly America, Australia and Israel. Investors are willing to partner, there’s clearly an important and ongoing role for social investment and of course there’s still a lot of learning to be done on both charity and investor sides.’


SI magazine September 2012

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Our services Through more than 150 sites nationwide, our services impact on the lives of over 17,000 people. We aim to continuously improve the services we provide and want to tell you more about them, the needs they address and the benefits they deliver. We believe effective partnerships are the foundation of sustainable, value-added services. Expert at providing quality education and residential services for children and young people.

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Registered and Head Office: Quarriers, Quarriers Village, Bridge of Weir PA11 3SX Tel: 01505 616000/612224 Fax: 01505 613906

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September 2012 SI magazine

cover story

Preparing for

Prevention Still in their infancy as a funding model, Social Impact Bonds present challenges and opportunities in equal measure.

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aunched a mere two years ago by London-based Social Finance Development Director Toby Eccles, Social Impact Bonds are already being feted as a win-win solution for a wide variety of social projects which have been traditionally hard to fund and will probably be increasingly difficult as the present economic stalemate grinds on. While it’s still too early to assess their full impact just yet, it’s fair to say that there’s a good deal of excitement about the opportunities they could bring. Of course they bring plenty of challenges to work through too, with multiple partners and a balancing of social good and cold, hard economic value being intrinsic to their make-up – two things which might not always be seen as ideal bedfellows. All the parties involved will have to get accustomed to a different way of working under the SIB model, which places a strong emphasis on working collaboratively, setting specific outcomes, sharing data and rewarding quantifiable results.

From an investor’s perspective, SIBs are about making money revolve. Andrew Muirhead Inspiring Scotland

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Stateside SIBs Although created in Britain, it seems the model is being enthusiastically embraced overseas, particularly in the USA. Last month Mayor Michael Bloomberg announced the first SIB tackling reoffending among young men in New York City, the first US city to adopt the scheme. Goldman Sachs has invested $9.6 million to non-profit group MDRC

to fund a tranche of education, job training, and life skills courses for youth offenders. The independent Vera Institute for Justice will evaluate the programme. If it finds the project’s work reduced re-incarceration by 10 % or more, Goldman gets its money back. When the rate drops by more than 10%, Goldman begins to see a return.


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cover story The final step looks at developing the financial model. Can savings for the commissioner and a return for investors be generated within an acceptable time frame? Gareth Magee Scott Moncrieff

Depending on how well the project works, Goldman could be looking at a profit as high as 21%. Interestingly the Mayor’s own Bloomberg Foundation has underwritten the project, capping the bank’s loss at 25% – presumably this measure was introduced to encourage investment from the private sector. No such failsafes were offered to the investors in Peterborough’s One Project, where all the funders come from the non-profit sector. The State of Massachusetts was quick to follow suit. They’re currently seeking out social investors for a SIB focused on homelessness and juvenile crime in Boston. Perth and District YMCA was one of six organisations selected to run Scotland’s first SIB this year, while elsewhere in the UK, SIBs are now being trialled or rolled out in Essex, in London by the Greater London Authority (GLA), in Manchester and Liverpool too. So what are the staple elements of a SIB? With a six or three year revenue cycle, they’re typically best suited to tackle long term social problems, with projects which are targeted on prevention. The ‘payment by results’ model means that common success measures have to be identified across all parties, as does a representative target

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population to avoid any convenient ‘cherry picking.’ Outcomes need to be objective and quantifiable, with the funders given more control since they’re assuming the risk. A SIB project needs to demonstrate cost savings for the government, which only pays when success is delivered.

Operational Issues NCM Finance administrates the first SIB fund, on behalf of Social Finance. Their Chief Executive Kathleen McLeay explains that a SIB is an investment product, just like any other: ‘This means it’s regulated by the FSA,’ she says. ‘So an FSA accredited financial management company is needed to operate its bank accounts, payments and auditing for investor protection. But unlike traditional investment products, the SIB is promoted on both financial and social return, with promotion naturally targeted towards investors who value both.’ So what specific challenges do SIBs present?

Thinking Differently Andrew Muirhead of Inspiring Scotland sees SIBs as a ‘rational funding model’ but feels one of the biggest challenges is simply ‘to change the mindset that financing SIBs is an investment and not a grant. The return has got to be in line with what both the public and the government are comfortable with. From an investor’s perspective, SIBs are about making money revolve.’ Gareth Magee, Partner at Scott Moncrieff (auditors of the Peterborough SIB), agrees ‘a change in mindset is needed.’ He argues that ‘a structure to help manage a SIB is needed, taking in not just planning and accounting for success but also its potential failure.’

Cash Questions Andrew also harbours concerns about ‘cashability’ and scale, with worries about smaller scale ‘SIB-lites’ and their potential to produce the type of cashable savings which a SIB project should aim for. Andrew suggests that investors do not necessarily have to fund the entire SIB project but can support an area which best reflects their own interests. The result is that the SIB can quickly gather together different sums of money from a range of sources. One source could be endowed charities. ‘There’s no reason endowment cannot be used, especially to fund the large initial capital needed to take a SIB project to the scale which would maximise returns.’ Gareth Magee feels that measurement and the speed of returns are the key issues on which many potential SIBs will hang. ‘It will be crucial to create a robust output metric which is part of the overall development of the business case for the project,’ he says. ‘‘It’s the foundation of the whole bond – the key factor indicating if a project is suitable or not. The final step looks at developing the financial model. Can savings for the commissioner and a return for investors be generated within an acceptable time frame?’ One solution to the measurement challenges could be the use of a control group, either historical or current, during the length of the project. Whether these output metrics will stand up in practice remains to be seen, but it seems a general attitudinal and operational shift in managing social projects is the key to making SIBs work less like a charity and more like a business, where the end product benefits the targets of the project, and by extension, society as a whole.


SI magazine September 2012

CASE STUDY

One for All The One Service was Britain’s first SIB pilot project launched in September 2010. This was the start of a six year contract with the Ministry of Justice and the Big Lottery Fund to reduce reoffending rates for 3,000 men on short sentences (12 months or less) coming out of HMP Peterborough. What problem did the project address? Short term prisoners typically have a high tendency to reoffend: 60% are convicted of a further offence within a year of being released. Despite this statistic, no one has statutory responsibility for these offenders once they leave prison. They set out with an average of £46 in their pocket, often with nowhere to live, no job to go to and no family waiting for them. As a result, a high proportion of them leave prison only to return a few months later. Why wasn’t it already being tackled? Effectively short term offenders were falling through a provision gap. Funding for programmes working with this group were run on a short term, piecemeal basis with a focus on ‘quick wins.’ There are numerous resettlement programmes delivered in prison but those on short sentences are not inside long enough to benefit from them. What services are now provided? The One Service contracted four organisations to deliver its core activities: St. Giles Trust, Ormiston Children and Families Trust, YMCA and Supporting Others through Volunteer Action (SOVA). St. Giles Trust and Ormiston Children and Families Trust focus on the immediate needs of an offender and his family before and after release. These needs include accommodation, healthcare, family support, employment and training, benefits and financial advice. SOVA and YMCA then attend to their social needs on a longer-term basis. They assign a volunteer to support the offender, to act as a positive role model, someone who can provide a job reference and introduce them to a new circle of friends. St Giles also runs a ‘meet at the gates’ service for everyone on release, whether they’ve requested it or not. Often

prisoners make their own plans only for them to fall through, so this bridges the gap between custody and community. Has it worked? So far the progress of some 500 individuals is being monitored. Participation in the One Project is voluntary, but it’s clear that a significant group are getting the help they need on release. In the first year of operation, 537 offenders have been admitted to the project, with 473 getting a successful assessment. Obviously tackling reoffending behaviour takes time and patience. The true results of the pilot won’t be known until year four. Rewarding Results: The Funding Model The SIB model aims to align returns with positive outcomes. For the Peterborough project, this means a 10% reduction in recidivism promises a 13% return for investors. If the 10% target isn’t met, then the offenders are reassessed. If a 7.5% reduction is achieved then funders will have their investment recompensed. The project raised £5 million from 17 investors, more than half of those were investing in criminal justice work for the first time. The reduction targets are for short term prisoners as a whole, whether or not they’ve participated in the programme. How has it been managed? The project has been run with open discussion as a touchstone and with all data shared by all partners, which has informed decision-making rather than anecdotal evidence. This means focusing on outcomes, instead of processes. An intermediary was used to provide leadership and liaise with all parties. The objective is to create a structure providing value for money.

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September 2012 SI magazine

cover story CASE STUDY

Happy Balance Ian Marr, Chief Executive of YMCA Perth, explains how Social Impact Bond funding for their Living Balance project has freed them to focus on what they do best: empowering young people. YMCA in Perth, working with Indigo Project Solutions, established Scotland’s first Social Impact Bond (SIB) in partnership with the Department of Work and Pension (DWP) earlier this year. Part of the DWP’s intent in creating the Innovation Fund was to develop the social investment marketplace. This has certainly allowed YMCA to develop an unique version of the SIB in Scotland which is becoming known as “SIB-Lite.” It’s a model very much rooted in its local community. What the Project Delivers As one of only six programmes in the UK funded from the first round of the Innovation Fund, the Living Balance programme at YMCA in Perth supports young people reach a positive destination in employment, training or education. This could involve re-engaging in school or in further education. The assessment process for joining Living Balance is designed to ensure that the programme supports those who are unlikely to benefit from mainstream programmes available elsewhere and specifically avoids the possibility of “cherry picking” participants who are closest to the labour market. Living Balance benefits from the support of 10 investors and the level of investments vary in size, so it’s significantly smaller than other Social Impact Bonds in the UK. This has allowed it to be owned and rooted uniquely in its local community. A number of these investors already knew about the work YMCA does in their community. They were aware of our track record of effective impact and they wanted to invest in a provision which directly benefitted their community. Skills Investment Several of the investors are local business people who are now investing more than just their finances: they’re providing supported work experience placements, simulated job interviews and offering advice on preparing CVs. This active engagement aids understanding about the nature of unemployment for young people in general.

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The SIB structure provides a consistent, sustainable cash flow over an extended period of time, one reason why it’s such a powerful tool in creating effective provision in the community. YMCA is released to focus on creating consistent, high quality provision for the programme’s young people. Indigo Project Solutions manages formal relationships with the investors and DWP, further freeing us up to focus on the young participants’ needs. Living Balance is the first of several Social Impact Bonds which YMCA hopes to establish in Scotland. For further information please contact Ian Marr, YMCA Scotland (0131 228 1464) or Jill McGrath, YMCA Perth (01738 630121). About the Author Ian Marr is the Chief Executive at Perth and District YMCA where he has worked for over 10 years. Ian has always been passionate about giving young people the best possible opportunities to realise their full potential.


SI magazine September 2012

Promoting Excellence in Leadership and Management

“Everyone thinks of changing the world, but no one thinks of changing himself.” Leo Tolstoy

Waves of Change, Oceans of Opportunity ACOSVO Annual Conference and AGM 8th November 2012, The City Chambers, High Street, Edinburgh

How do we identify the opportunities when they may look very different to how they did in the past? As leaders in the third sector, this conference will give you the opportunity to explore these questions and many more. It will offer the opportunity both to listen to excellent speakers and to take part in table discussion with sector leaders on a choice of related topics.

Speakers include

Why you should attend?

Sue Bruce Chief Executive, City of Edinburgh Council Simon Watson Head of Group Community Affairs with RBS Andrew Dixon Chief Executive, Creative Scotland

 Programme specifically aimed at Leaders from Scotland’s Third Sector  Inspiring and thought provoking speakers  Great networking and good practice sharing opportunities  Exhibitor info – make connections and find out more from a range of partners working in the sector

Cost

Members £100

Non-members £120

Chair

Louise MacDonald Chief Executive, Young Scot

To find out more and book a place, visit our website at: www.acosvo.org.uk/conference-2012 15


September 2012 SI magazine

Granted

Rational Measures Declan Murphy speaks to Inspiring Scotland’s Andrew Muirhead and learns how a pragmatic, measured approach to funding social programmes should pay dividends.

A

t a time when Social Investment was a relatively obscure buzz phrase, Andrew Muirhead spotted an opportunity for Scotland to innovate with its use of both money and skills for major social challenges. Established in 2008, Inspiring Scotland became the vehicle Andrew used to deliver his vision. It builds on the years of experience Andrew has accumulated in the banking and philanthropic sectors. It’s not surprising that social investment has become increasingly relevant as financial bodies are tightening their belts. It’s often assumed that social investment was created in reaction to the economic crisis but, as Andrew explains, a search for rationality was the driving factor.

Rational Approach “The thinking for Inspiring Scotland came at a point of everything being possible, when the world 16

was in an upward trajectory. I had taken an interest in the world of Venture Philanthropy and applying quite significant disciplines to the use of money. I was interested in appealing to the head as well as the heart, trying to talk in a language that was about logic models and understanding the outcomes of money being applied. This was not in the context of a tightening environment but in the context of ‘this is how we should be doing things anyway’. Why was this approach necessary? “Creating a new service that works and then looking at the traditional way charities are funded revealed, quite frankly, a lack of rationale which informs funding decisions in the charitable sector. What drove me was a rationalist desire and the need for a better understanding of outcomes for money spent during more certain times. That does not mean that social investment is

not important in times of austerity – it is even more important now. What we have recently seen means people are more discerning, keener to see what their financial investment achieves. I met lots of people around the time of setting up Inspiring Scotland who were disillusion by the social sector, where they would typically hear nothing of the organisation for two years until they were looking for money. That has got to change – people have got to see a return on their investment if only because it makes good business sense.” Our discussion then took a very slight tangential turn, towards the power of footballers and football clubs as a means to create role models and cause people to act in different ways. This goes to the core of what social investment projects are trying to achieve – positive change.


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17


Granted I think social investment needs to start operating on a scale when a prison closes or even a prison wing closes. Andrew Muirhead Inspiring Scotland

What characterises this role modelling and character shaping is just how subtle the actions for change can be. “So subtle you barley notice,” says Andrew. This idea of subtlety plays directly into the conversation on social investment – how do you know what makes something happen? How do we correlate attributions to the benefits? This is an important question when investors are setting tariffs, especially because the investment and the expected returns must be clear and understood by all parties involved. I posed the question to Andrew.

Metrics “Perhaps the reason why the first Social Impact Bond (SIB) was about reducing re-offending at Peterborough was because you have a very clear metric on that. You are doing a range of things in supporting young people but the measurement for how successful that support is fairly black and white – you either have someone in prison or you don’t. There are issues beyond that about cash savings etc, but at that level it is pure. The same applies to projects that are providing social investment to reduce methadone dependency. You have an annual cost to Scotland which can then be compared to the programmes that seek to reduce that, and find the discrepancy. So there are issues where you can make an intervention and track it and know roughly what that has produced in terms of costs 18

to the tax payer. That makes good sense and a good deal for the tax payer. It allows us to say that for every pound we save in tax taken from running a social programme, 50 pence goes back to the provider for capital to make that work happen, for example.” Andrew did admit however that until the social investment market becomes more sophisticated, it will be difficult, if not impossible, for projects which are involved in multiple interventions to be considered worthy of investment. “The problem with such projects is that no one will be able to work out quite what is due back on the basis of an intervention.”

Scale Beside the issue of multiple interventions, the question of scale is one that Andrew also believes should be carefully considered. “We probably have to assert that a social investment project needs to be significant in scale in order for it

to work. That’s in terms of running costs, but also from the counter party’s (or service commissioner’s) view, if the scale is not right then it might become all the more difficult to cash. Using offending for example, can you get the money back out of system when you have reduced the number of people staying out of the system by only 50? Does helping 50 people reduce the number of staff needed to run the project? I think social investment needs to start operating on a scale when a prison closes or even a prison wing closes. When real savings can be made. Only projects based on a large scale can achieve that.”

Tariffs Beyond this discussion on how subtle impacts to individuals can be measured concretely, especially when the variables increase, Andrew confessed that what worried him and the majority of his peers the most were social investment tariffs. “It is too easy for the tariff to distort. We have looked at tariffs from time to


SI magazine September 2012

That does not mean that social investment is not important in times of austerity – it is even more important now. Andrew Muirhead Inspiring Scotland

time on schemes based on payment by results where the tariff seemed to be in cases overly generous. I think that if your project was working with young people on the margins of employment, who needed fairly moderate levels of support to get on to a training place, the tariff for that seemed very generous. On the other hand, if that is what your project did and you couldn’t make the tariff work then you would need to be pretty poor. But if you were working with kids with very complex needs towards a work place vocation, the tariff looked wholly inadequate. What we don’t want is for voluntary organisations to frame what they do in relation to what they might get paid, because there is a range of things that need to be done and need to be addressed, so the creation of a tariff is critical to anything we undertake in this space. It’s also vital to avoid cherry picking.”

Government’s Role On the question of who Andrew believes should be responsible for establishing the parameters of a tariff, he was in no doubt. “Ultimately the social investment market is a very young market but the counterparty, the re-payer of the investments (whether it is payment by results or whatever), should be governmental because social investment works on the proposition that if we can save the tax payer money then in some ways, the cash goes back to the investor in the first

place. So the tariff setter has got to work for government, they’ve got to work for the statutory agency. This is probably not something that comes to down to one party’s responsibility – we all have a responsibility. I think that when a marketplace is at this very young, almost embryonic, stage there’s a collaborative approach required until we know more and are a bit more sophisticated. When we reach that stage, then the ultimate responsibility is the counter party and the tariff has to work for them over anyone else.”

Implications What does this mean for the social investment sector as a whole? ‘The task for the social sector is to look at that tariff and work out whether it’s a social enterprise or a voluntary organisation, what type of work they do and if their core proposition fits with that. There is a bit of strength required that if it does not fit, if what you do does not sit up against that comfortably, we should be able to walk away, rather than try to shoe horn in or modify. We’ve got some remarkable people involved in social investment in Scotland that

can do the most amazing things around changing people’s lives and the last thing we can afford to do is have a structural thing drive what they do. It should be driven by the mission of their organisation rather than ‘what wins the cash.’”

Looking ahead Looking towards the future, how does Andrew envisage the next number of years developing? He remains optimistic that, like any marketplace, social investment will become more mature and that all of these early concerns will simply evaporate through practice. He argued that what is crucial at the moment is to minimise any potentially negative impacts of SIBs through greater understanding. “This is why it’s really helpful to have the Peterborough SIB. It is by no means perfect but it presents us all with a great opportunity to think things though and learn from it.”

Further information Learn more about Inspiring Scotland and the many projects they help fund at www.inspiringscotland.org.uk

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Granted

Growing Resilience A mix of grant and loan funding is set to bolster some of Scotland’s most disadvantaged local community projects, thanks to the JESSICA Trust.

T

he ownership and development of assets by communities is increasingly seen as a key means of improving the economic, environmental and social future for Scotland’s people.

JESSICA (Scotland) Trust, which has since received charitable status. Meanwhile, the Foundation paved the way for the future work of the Trust by establishing the Trust’s Corporate Trustee, Resilient Scotland Ltd.

Social investment vehicles, which combine social, environmental and financial returns, are now recognised to offer greater sustainability and improve outcomes for communities.

Resilient Scotland’s JESSICA Fund is a £15 million endowment providing combined grant and loan packages to community organisations leading sustainable development initiatives in their neighbourhoods. It’s designed to nurture resilience by investing in enterprising community-led organisations in some of Scotland’s poorest and most disadvantaged communities. JESSICA will ensure the ideas, ambitions and assets of a local community are brought to the forefront when capital projects are implemented by other

Last autumn, the Scottish Community Foundation was invited by the Big Lottery in Scotland to establish a new community regeneration initiative that went beyond grant funding and reflected a social investment approach. With approval from the Big Lottery Scotland Committee, the Foundation established the 20

investors. The idea is to help develop sustainable, locally-driven enterprises, services and facilities that, in turn, build economic and social capital. The Foundation is contracted by Resilient Scotland Ltd to deliver the work of the Trust. Resilient Scotland’s JESSICA Fund has moved into its operational phase and launched its first funding strand, Start & Grow, in late spring. Start & Grow offers combined grants and loan packages of up to £60,000 to organisations working to bring economic, social and environmental benefits to the eligible communities through various types of enterprise activity. The communities must be from one of the 13 designated


SI magazine September 2012

local authority areas that have been identified as most economicallychallenged and most in need of additional regeneration. The eligible areas are: Clackmannanshire, Dundee, East Ayrshire, Edinburgh, Fife, Glasgow, Inverclyde, North Ayrshire, North Lanarkshire, Renfrewshire, South Lanarkshire, West Dunbartonshire and West Lothian. Enterprising community organisations interested in applying to Start & Grow should first complete an eligibility checklist, which is available on the Resilient Scotland website www.resilientscotland.org.uk. This will take them through a series of simple pre-qualifying questions to see if they meet the basic criteria. The next step is to call the Resilient team for an application form. According to Resilient Scotland’s Chair, Ella Simpson, applications are welcomed from “existing and new social enterprises that can manage a mixed loan and grant arrangement, helping them to sustain their efforts and achieve lasting impact in Scotland’s communities.” The Foundation has also partnered with the Scottish Community Alliance to design and deliver a series of Community Options Appraisals which will assist targeted communities to plan for larger grants and loans packages of up to £1 million. In the coming year Resilient Scotland will also work directly with the Scottish Urban Regeneration Forum (SURF), to shape a long term learning programme. The deadline for applications for the next round of Start & Grow is 31 October.

Further information For further information, please contact the Resilient team on 0131 524 0300 or email: resilient@scottishcf.org

Good to Know What interest rates can you expect on the loan? The interest rate will initially be set at the base rate + 6% (fixed). This is competitive when considered alongside other social finance available in the current market. How do we define ‘social enterprises’ and social or environmental objectives? We define social enterprises as businesses with social and/ or environmental objectives whose surpluses are reinvested in the business or in the community instead of maximising profit for shareholders and owners. Here’s a good example. The Bike Station now operating in Edinburgh, Glasgow and Perth, is Scotland’s largest bicycle recycling organisation. It takes in nearly 10,000 old and discarded bikes every year. Every bike donated supports its work promoting cycling as well as reducing waste going to landfill. This organisation is clearly driven by strong environmental objectives – and we’re sure the Bike Station team would have a lot to say about their social objectives too! Can you apply even if you’re not based in one of the 13 specified local authority areas? This is possible in certain circumstances. For example, if you’re proposing to start up a new enterprise to extend an existing activity which will create or sustain employment in one of the 13 areas you may be able to apply, even if your main operational base is elsewhere. If you have answered “yes” to all the eligibility checklist questions but still have doubts about whether you can apply you should contact us to discuss these in more detail. What is an asset lock exactly and how does it relate to applying for these funds? An asset lock restricts the transfer of company assets. Community Interest Companies (CICs) must have an asset lock. This means that the CIC cannot generally transfer its profits or assets for less than their full market value except as permitted by regulation. It will also protect any remaining assets for the community if you dissolve the CIC. Your constitution (also referred to as your governing document, Articles or Trust Deed depending on the type of organisation) must include a clause that sets out what you need to do in the event of a decision to wind up or dissolve the organisation. Your dissolution clause will need to be worded so that it demonstrates your compliance with charity legislation and/or Company Law, depending on how your organization is incorporated. To be able to apply to Start & Grow the governing documents must state that the organisations assets would be transferred to another body for community or charitable use should it be wound-up or dissolved.

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BANKING

Community Chest Struggling to get a bank loan for your social project? Alastair Davis at Social Investment Scotland suggests a solution you can bank on.

I

n recent years, as grant funding and bank lending has slowly dried up, charities and third sector organisations have started looking elsewhere for funding solutions. This demand for alternative funding sources has fuelled the growth of Community Development Finance Institutions (CDFIs).

What are CDFIs? In existence since the early 2000s, CDFIs provide loans and other repayable investments to charities, community organisations and social enterprises that may find it difficult to access finance from mainstream sources. A CDFI’s main priority is to support growth within the third sector and communities by providing a wide range of finance products tailored to the unique requirements of those organisations. Funders invest in organisations they believe have the capability to make sustainable social impacts, create employment prospects, aid 22

community engagement and enhance economic development.  Without any requirement to meet shareholder profits, CDFIs play a role in building a sustainable economy. Social Investment Scotland is Scotland’s largest not-for-profit provider of business loans to the third sector. Providing loan finance of £10,000 up to £1 million to third sector organisations, Social Investment Scotland has made over 180 investments throughout the past 10 years with demand for finance increasing year on year.

While many mainstream lenders have cut the cord, charity banking has increased in popularity. Organisations such as Triodos or Co-op Bank don’t need to compromise on social goals and understand how charities and social enterprises work. Yet, for some, securing finance even from charity banks can also be difficult.  Organisations may be intimidated about approaching a bank, banks may request information in a set format that they find difficult, or require some form of security or collateral that organisations may not be able to provide.

The requirement for funding alternatives

Building relationships between funders and customers

Third sector organisations are struggling to access finance in the current financial climate. Government funding is scarce and banks are simply not lending to organisations which don’t satisfy their increasingly stringent risk criteria. Banks also lack the expertise in dealing with third sector organisations, which can present another barrier to lending.

CDFIs help third sector organisations by introducing them to other companies and funders that may be able to help them. It’s this element of trust that makes CDFIs so unique. A funder is backing the people as much as the organisation, which is why they get to know and build a relationship with the people who deliver the organisation’s vision.


SI magazine September 2012

Changework’s strategy will influence Scotland’s ambition to deliver the most ambitious climate change legislation in the world. Alastair Davis Social Investment Scotland

One such relationship is that of Social Investment Scotland and Edinburgh-based recycling company Changeworks. We provided (via the Scottish Investment Fund) Changeworks with a £1million investment which supported the shortfall in cashflow during their expansion. It also went some way towards purchasing essential equipment required to support it. The support of Social Investment Scotland allowed Changeworks to maintain a long term business strategy with confidence – a strategy that leads the waste and resource industry in meeting its legislative compliance – and a confidence that would otherwise be compromised by the prevailing economic conditions. The positive impact of this long term strategy will influence Scotland’s ambition to deliver the most ambitious climate change legislation in the world.

A simpler model of funding for the third sector CDFIs can help to simplify the funding process in the knowledge that many customers won’t necessarily have the financial expertise of a commercial enterprise. This support helps customers understand their financial obligations along the way. The funding itself is also frequently much more flexible, reporting mechanisms are simpler and funds can be used for ongoing costs such as building purchase, renovation or working capital.

Competing in a commercial world Charities and third sector organisations are becoming increasingly aware of commercial realities and there is a greater willingness to compete. This competitive streak has given rise to a greater understanding by the third sector of a need to operate as sustainable enterprises and to demonstrate the social impact of their activities. I firmly believe that if Scottish charities and third sector organisations are to achieve this goal of sustainability, then they need to start talking to CDFIs who can provide loan finance that will not only

help them grow and support their communities, but will ultimately allow them to operate without a reliance on grant funding. When third sector organisations fully understand the potential of alternative funding sources that exist to the main traditional lenders, the third sector will flourish once again.

About the Author Alastair Davis is the Chief Executive of Social Investment Scotland.

Things to consider when applying for a CDFI loan Regardless of size, for any charity or third sector organisation applying for and securing funding can be a daunting task. Some may not know where to start, who to contact or what information to collate. Here is some advice from Social Investment Scotland. Ask questions Third sector funders exist to benefit their customers.  With this in mind, customers should feel free to ask as many questions as possible and not feel inhibited from finding out about basic financial terms and requirements.  It’s much better for customers to be fully armed with as much knowledge as possible early on in the process. Round up the key information It’s not necessary to spend hours preparing a detailed, in depth business plan.  Ask us what is required, we understand your resource pressures, so often will look for key information on financial projections, and crucially, the assumptions that underpin them Acknowledge risks When applying for funding, charities should always acknowledge the main risks.  The funder must have an understanding of what these risks are as well as a clear understanding of how that customer would mitigate against those risks or deal with them should they arise. Introduce your team It is important for customers to provide a clear illustration of the management and governance set-up of their organisation. After all, a funder is backing the people as much as the organisation, so it’s essential for them to find out, get to know and build a relationship with the person or team who will be delivering the organisation’s vision.

23


Corporate Philanthropy

Good to the CORE Edinburgh Cyrenians and MITIE highlight their innovative recycling social enterprise project, CORE.

E

dinburgh Cyrenians is an independent Scottish charity with an outstanding track record in pioneering creative solutions to the contemporary problems faced by people on the margins of society, such as; homelessness, poverty, deep unemployment, recovery from addiction and recidivism.

24

The charity also has an environmental brief, seeing the connection between valuing people and valuing our planet as part of the solution to a sustainable and happy future for society. Cyrenians’ trade-mark approach is to do new things really well and use the evidence of benefit to inform and inspire wider change.

Cyrenians Social Enterprises combine a drive for business success with a caring and compassionate social ethos. The primary objective is to provide a stable job and a supported working environment for vulnerable or marginalised people. The more successful the enterprise is, the greater the social and environmental benefits.


SI magazine September 2012

Cyrenians’ work is currently part-funded from public and private sources along with earned income and we also have the support of a dedicated team of volunteers and contributors.

CORE started in 2009 as a social enterprise collecting commercial food waste, with part of its business model committed to providing training and jobs for people rebuilding their lives after personal setbacks, such as homelessness. The groundbreaking partnership with MITIE, a strategic outsourcing and energy services company, provided the opportunity to grow this unique food waste enterprise.

Cyrenians’ work is currently partfunded from public and private sources along with earned income and they also have the support of a dedicated team of volunteers and contributors. The organisation is passionate about the people they help and passionate about the customers who use their services. In addition to the successful partnership with MITIE in respect of CORE (Cyrenians Organic Recycling Enterprise) the charity operates three additional Social Enterprises (Cyrenians Farm, Good Food Project and NHS Community Gardens).

The partnership gives financial support to the charity but also works closely with Cyrenians Enterprise to Employment Team in providing placements and training for people taking steps back to employment with a recent trainee going on to full time employment with MITIE. The Scottish and UK governments are committed to working towards a zero waste economy, with food waste a significant part of its most recent waste review. Millions of tonnes of food are wasted in Scotland each year and CORE works with commercial organisations throughout Edinburgh and Fife, such as IKEA, Aegon, the Scottish

Parliament and Scottish & Southern to manage and reduce their waste. Chief Executive of Cyrenians, Des Ryan, heralded the deal as a win-win for MITIE and the charity: “We want to see our food waste social enterprise grow to its fullest potential. Both parties are passionate about developing the collection and use of food waste as a resource that will create employment and training opportunities as well as bring climate change benefits and support for the UK low carbon economy.” Ruby McGregor-Smith, Chief Executive of MITIE, said: “We are delighted with this development. CORE will support the growth of our existing waste business. It has a sustainable business model that provides opportunities for people to re-enter the workforce after homelessness and has an innovative approach to reducing waste in the UK.”

Further information Find out more about CORE at their website.

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Social Enterprise

Star tipped enterprise Jools Stone quizzes Fraser Kelly, the man at the controls of Social Enterprise Scotland.

U

ntil moving to the Borders last year to take up his new role Fraser Kelly had lived in the same town for the duration of his life, so it seems entirely appropriate that he’s passionate about local ownership and projects with strong local involvement. He was appointed Chief Executive of Social Enterprise Scotland last July. Fraser comes across as affable, measured and genuinely enthused by his role at the helm of Social Enterprise Scotland. He’s spent over 20 years working in local government, economic development and regeneration, including a stint as Chief Executive at Castlemilk Economic Development Agency. Even his very first full time job pointed to his future path: 26

‘During my very early career I worked for Edginton, a firm owned by outdoor retailer Blacks,’ says Fraser. ‘This was long before the days of social enterprise of course, but they were a family-owned business, locally owned and controlled, which had a very strong commitment to the community it served. Looking back I suspect that fashioned my views on how I behave now and what’s of value to me.’ With the Salesforce debacle fresh in our minds we wondered exactly how long the term ‘social enterprise’ has been in currency. Social Enterprise UK, who have been spearheading the Not in our Name campaign to prevent US social media software company Salesforce from trademarking the term, have cited

its use by the UK government back to 2002. Fraser remembers working for a local agency which ran a commercial property arm and funnelled the funds back into a charity. ‘This was only 4 or 5 years ago, but I don’t think we ever called it a social enterprise.’ Indeed Fraser seems far less interested in labelling things than simply getting people together to get things done towards a common goal. He’s not overly fond of terms like ‘social enterprise sector’ and sees social enterprise as ‘more of a business model than a sector’ citing John Pearce’s seminal book, Social Enterprise in Anytown, as ‘one I’d urge anyone to read.’


SI magazine September 2012

There’s more work to be done to get that investment, but on many levels the social enterprise market is ready to hold its own with any other business. Fraser Kelly Chief Executive, Social Enterprise Scotland

Tell us a bit about the role of Social Enterprise Scotland ‘We’re a membership organisation representing and campaigning on behalf of our members on a number of fronts. 40% of our members come from the social care sector, they’re involved with housing, homelessness, employability, credit unions. It’s very interesting to represent organisations which have such a broad range of interests and to do so at scale. I think it’s very important that the voices of the smaller organisations aren’t crowded out by the larger ones. For me, the locally-controlled agenda is absolutely crucial.’ Social enterprises comprise an important part of the economy, responsible for an estimated two

thirds of £3.87 billion third sector revenue in Scotland. We’re clearly long past the stage where they can be written off as the latest business fad. But how are they faring in the current economic climate, compared to other businesses?

People in local communities are demanding a different way to deliver their services, that demand is growing and they have more ability to influence it than they might think. Trading conditions just need to be more equitable.’

‘I was listening to Tom Hunter at a recent business debate in the Parliament, who said that Scotland still isn’t starting enough businesses. Now this goes right back to the 1993 Business Birth Strategy and we’re still saying the same thing! I think there’s a healthy level of interest in social enterprise start-ups and we need to encourage more of that. I’m concerned that we see the current economic situation as just a correction in the market. We’re in a good position, but it’s still a challenging place to be.

What needs to be done to achieve that? ‘Achieving that takes investment in social enterprise. It’s about knowing the demand is there, that it’s investment ready. There’s a perception that banks don’t loan to Social enterprises, but I’m not sure there’s any evidence for that. I think banks are finding it hard to lend to any business at the moment, but a good business plan should always secure the funding. There’s more work to be done to get that investment, but on many levels the social enterprise market is ready to hold its own with any other business.’

The conditions facing us are no different from any other business.

It’s very interesting to represent organisations which have such a broad range of interests and to do so at scale. I think it’s very important that the voices of the smaller organisations aren’t crowded out by the larger ones. For me, the locally-controlled agenda is absolutely crucial.

What specific challenges do social enterprises face just now, is regulation a problem? ‘Procurement is always an issue. The Procurement Reform Bill will take us considerably further forward in terms of procuring public services. Many social enterprises are operating in 27


Social Enterprise the public services arena, but I don’t feel there’s a huge amount of further legislation required. I think it’s a case of understanding what social enterprises can actually do, but at the same we’ve got to take some time to understand the regulatory requirements of the statutory agencies. We’ve just got to get to know each other better before we say that neither is an appropriate partner. There’s been significant improvement across a number of areas in the recent years, in terms of financial capability assessments, performance and quality standards. The next step is about tackling capacity.’ What defines a social enterprise, how are new members qualified and recognised as such? ‘We have a voluntary code, a set of behaviours we ask our members to aspire to. Underpinning this is the ability to create a market, selling goods and services, but with the primary objective to create social good. There’s no prescribed legal structure for a social enterprise, but there is a requirement that the surplus of profits generated are retained in the business and put towards the objectives set. The asset lock ensures that if the business ceases to exist any profits will be redistributed to a local community or to an organisation with a very similar purpose. The debate on exactly how you characterise a social enterprise has been debated for many years and will no doubt continue to be.’ Your membership isn’t just restricted to social enterprises themselves is it? ‘Not at all, no. Our membership has grown around 20-25% this year. We have 186 members, this includes a number of associate members, like

MacRoberts and RBS, who are strong supporters of social enterprise. We’re very pleased that North Lanarkshire and Glasgow City Council have joined in the past few months and we’re in discussions with several other councils. A few national charities have joined us too, not because they see social enterprise as a badge of convenience but because they believe the model is the way forward.’ How easy is it for a charity to make the transition to a social enterprise? ‘It’s clear that the environment for charities reliant on donations is difficult, the business model has to change and that’s why the role of social enterprise appeals. The charities we’re seeing coming over are mature organisations, they’re well structured, well governed, high performing and viable in their own right. For them, the transition is more about long term planning than anything. To me it just seems like normal business behaviour. If you felt that your business model was becoming less viable then you would change and I think it’s really exciting to see charities adapting in that way.’ Are there any trends emerging, any new types of social enterprises coming through? ‘We’re seeing good growth in startups and our colleagues at Firstport should receive huge credit for that. We’re seeing some business who’ve been trading for a while who haven’t necessarily recognised themselves as social enterprises, but who are now beginning to understand how to identify themselves and make their case. When the Self Directed Support legislation comes through that will present huge opportunities for social enterprises to spring up at a local

I believe social enterprises can do more. Take the London 2012 Olympics, for example. Social enterprises could have delivered more within the mainstream programme, rather than just being involved with the legacy. 28

level and deliver services in a way that’s more tailored to the needs of the people using them. The pressure on public services will not go away, so we need to find a different way of doing things. That’s not an argument to demand cheaper services or transfer risk from the statutory agencies, it’s just about responding to market conditions. I believe social enterprises can do more. Take the London 2012 Olympics, for example. Social enterprises could have delivered more within the mainstream programme, rather than just being involved with the legacy. (For example, Jones Long LaSalle managing the Velodrome.) I think a social enterprise could have handled the security, which although grew to 20,000 staff started at 3,500. Requirements to scale things up could have been tackled through the use of consortia, joint ventures etc.’ Any particular success stories you’d like to flag up? We have some great organisations operating at scale: CrossReach, Cornerstone and Wise Group spring to mind, and we have some fabulous smaller organisations joining us, many from the arts sector. Identity Artworks are doing some great work with offenders, Resonate Arts, Gallery on the Corner selling art to fund their work with people with autism. The Engine Shed, Dundee


SI magazine September 2012

International Women’s Centre, organisations delivering across the whole country. People are genuinely interested to see how they can work with us. The social enterprise networks are an interesting mechanism for us too. We’re maturing; businesses are joining together, collaborating, finding ways round things and not trying to tackle all of the elements themselves. Contracts are getting bigger too.’ How reliable is the Social Return On Investment (SROI) metric as a way of assessing the impact of social enterprise? ‘It has its value, but it needs to become a little more sophisticated. I’d be disappointed if assessment boiled down to a simple metric. We may be looking for something different to measure social impact, something which better articulates how social enterprises affect communities. We need to find something which gives the financers an equitable equation, that factors in the social impact of a project – an easily understood model that articulates the added value of a project. We know the cost of longterm unemployment, or offending, for example, but we need to translate the value of it too. Those costs have to translate somewhere on the balance sheet.’ What role could Social Impact Bonds (SIBs) play? ‘The jury’s still out. What vexes me is the question of who pays the dividend. I can see the rationale behind it, but it makes me wonder why would they become involved and who can guarantee that investment return. I know the Scottish Government have been doing a lot of work in this area but I don’t think SIBs are the only answer. The model has a way to go yet and the Peterborough project needs to play out. We’re interested in a whole range of investment models, including SIBs and charity bonds, but there’s no silver bullet.’

What are your big campaigns at the moment? We’re keen for our members to contribute to the Community Empowerment Renewal Bill. They’re well placed to get involved with community asset transfer, if the conditions are right. Coming from a local authority background myself, I feel there’s a collective responsibility there. There are issues around communication and getting the empowerment element right. Communities need to feel they have the ability to make improvements, beyond their usual democratically elected channels. That’s where social enterprises can play a significant role in the local agenda. The Welfare Reform bill, which is a reserved power, is a huge consideration for housing associations. Any social enterprise should be able to identify what it achieves, so long as it’s allowed to compete in the same way that any other business would.’

What industry events are on the horizon? We run six local events throughout the year in conjunction with the Social Enterprise Networks in their local areas and this year we’re combining our annual parliamentary reception with the Social Enterprise Awards on 13 November. We work closely on this with Social Enterprise UK and the Welsh Social Enterprise Coalition. There are no big ‘cash prizes’ of course, but the recognition and affirmation from peers is so important. Next March we have the Social Enterprise Exchange at the SECC, an international event with strong support from our supply chain. Last year 77% of attendees traded services or made viable business contact, which was really heartening. Rather than wait for the market to change, we actively try to change it ourselves. There’s a real opportunity just now to change things for the better.’ 29


Social Enterprise

There’s no such thing as a coincidence… Chic Brodie MSP finds some intriguing serendipity in his holiday reading matter. Ethical Investment. Remember the phrase. You will now hear it often. I will remember it and here’s why… Economic and political anorak that I am, while most people take as holiday reading Fifty Shades of Grey or whatever colour they like, I took the excellent and easy read, Freefall, by Professor Joseph Stiglitz. The Professor is one of the leading – if not the leading – economists of his generation. In brief, Freefall explains how the current financial and economic structures have failed us and how we now have the opportunity 30

to create a new global economic order. It is a recommendable read. I finished it last week and have started it again. Yes, it really is that good – even for a sloppy reader like me!

So what does ’coincidence’ have to do with ethical investment and Stiglitz? The day after I completed the book, I was asked to meet a very personable man who indicated he wanted to put something back into our society. He wanted to create a social enterprise which would add value to our environment, whether it was cleaning up our iconic buildings, our streets or recycling our waste. I didn’t ask about

funding, though there was an allusion that there should be no pain to the public purse and also that he had the financial capacity.

So the lack of coincidence? A world-renowned economist calling for a new economic order, a request to use an ethical investment vehicle to improve our social assets, a ‘cry of the heart’ to get youngsters back into employment, to improve our environment and do all the things we think about. I used to have a boss who said, “I have enough thinkers, I need doers.”


SI magazine September 2012

We’ve had the Industrial Revolution in which Scotland played a huge part and, indeed, in some areas led that revolution. There is a new revolution. The time is ripe for Scotland to be at the forefront of a real social revolution with social enterprise, community investment and community involvement at its heart. But we need to think in a different way when it comes to determining how we support and finance our social enterprises and cooperatives in future. Social Investment Scotland (SIS) as the largest investor of its type is doing a very robust job in supporting third sector organisations to fill the void created by the normal funding channels, but if we are to grow the sector it needs much more than that. Many of our social enterprises, cooperatives and other third sector organisations require, firstly, business support from those that have been there but also an empathetic approach when it comes to investment. Social Investment is now attracting a range of interests from a whole range of bodies and governments but we now have to establish focus and market penetration. Coming back to my old manager, he also used to say “think outside the box ‘cos that’s where the answer lies.” So, let’s think outside the box. We need a greater focus, cohesion and comprehensive organisation of the social enterprise industry and to think about how we do that.

There is no benefit in putting the direction of the sector in the hands of the few. We have to open that up to community-led involvement. Chic Brodie MSP

The social investment sector’s experience is critical to this exercise, as will be the outcomes and experience of those promulgating Social Impact Bonds (SIBs) and other social investment vehicles.

There is no benefit in putting the direction of the sector in the hands of the few. We have to open that up to community-led involvement. The Scottish Government’s commitment to the Community Empowerment Bill and the Public Procurement Bill should and will enhance the role of social enterprises.

But what of the funding? I am now of the view that we should evangelise for a Social Enterprise Bank that will embrace all current potential funders. This ranges from philanthropists to trusts, to private investors and, yes, even to retail banks, even if it were along the lines of the Scottish Enterprise Co-Investment Fund, it takes us one step forward. The social investment sector’s experience is critical to this exercise, as will be the outcomes and experience of those promulgating Social Impact Bonds (SIBs) and other social investment vehicles.

The social entrepreneurial revolution is upon us. The business support and financial vehicles and processes could be immense – not just for Scotland – but once again we can take a lead. In the afterword to his book Stiglitz says “muddling through would not work, it was still not too late to set an alternative course.” I believe that social enterprise in Scotland supported by Social Investment Scotland has started us along that alternative course.

About the Author Chic Brodie MSP is a member of the Economy, Energy and Tourism Committee, and also convenes the Cross Party Group on Social Enterprise.

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SI magazine September 2012

Leading By Example

Peer Pressures Declan Murphy meets Pat Armstrong Director of ACOSVO and finds that in challenging times even leaders need a reliable support mechanism.

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It’s apparent from listening to Pat that members’ feedback plays a vital role in shaping and directing services offered at ACOSVO.

or the past seven years Pat Armstrong has been the Executive Director of the Association of Chief Officers of Scottish Voluntary Organisations (ACOSVO) a role that follows her 23 year career spanning the private and voluntary sectors at both local and national level.

in leadership and management and offers ‘an environment where leaders can network and connect with other leaders to share and learn from experience and good practice.’ With around 300 members across Scotland, ACOSVO focuses on supporting both current and emerging leaders.

The common theme running throughout Pat’s diverse employment and volunteering history is her interest in engaging with individuals and groups. For the most part this is centred around developing networks to make things happen or move thinking forward.

So how and why did ACOSVO come about, why do leaders need a support network?

“We pride ourselves on being able to identify the issue and provide the matching service. This ensures that ACOSVO remains relevant and effective, that all of our events are developed to meet the specific needs of leaders in the sector in response to issues raised by members.”

“Prior to ACOSVO being established, sector leaders readily identified how isolating the role of Chief Officer could be,” says Pat. “Any insecurities or vulnerabilities by leaders could not be shared with clients, staff, board, stakeholders or funders so peer support was seen as an important way to address this isolation.”

In their 2012 members’ survey, ACOSVO registered a 500% increase in the number of members who listed strategic planning as a skill they were more interested in developing. Pat and her colleagues were then able to create a programme which puts events on strategic planning at the forefront. “What our survey

Established in 2000, ACOSVO is a unique forum for Chief Officers and Senior Managers in Scotland’s Third Sector. It promotes excellence

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Leading By Example highlighted over and over again was that the most valuable feature is peer support and being part of a ‘community of leaders’. One member whose response was typical of many remarked that, “leaders are by the nature of their jobs very isolated. It’s this element that I would enjoy more support with, in a nonthreatening environment where I can learn from either more experienced leaders or leaders who have faced particular challenges and won.” ACOSVO’s events are typically delivered as either discussion dinners or master classes. This means that although pitched at a high level, they still create a safe space for sharing ideas, concerns and giving peer support. “Continually our surveys show that members get as much, if not more, out of hearing each other’s stories as they do out of the expert input.” Pat and her colleagues have found two main changes in their members and their needs since the economic crisis:

“We’re receiving an increase in membership applications as more leaders see the value of the support we offer. At the same time, and at almost the same rate, we are losing members – either through retirement, moving jobs or budget constraints.” When it comes to funding matters, the messages emerging from ACOSVO members are resoundingly similar. They report static or even reduced levels of recurring grants. Services are being dramatically reduced due to funding cuts and both regular giving and one-off gifts have fallen. This has in turn altered the type of services that ACOSVO now offers. “With members finding it harder to justify events with a remit centred purely around networking, sharing good practice or building relationships, our events now have to have a very strong, relevant topic. It’s becoming more and more difficult to justify both time and money for anything other than keeping their own organisation above water. We

have found that this means that quite often their own personal development needs slide lower down the priority list as “firefighting”, funding and organisational issues always take precedence.” ACOSVO’s work with Chief Executives has been undoubtedly successful: 89% of respondents gave an overall assessment of ‘Excellent’ or ‘Very Good’ at their latest annual conference and a further 98% agreed that their knowledge has improved. One member said, “These are difficult times and it’s a challenge to take time away from the office, but it was so worthwhile to attend the conference.” ‘Difficult times’ is another recurrent theme that emerges when talking to members. With 40% admitting in the survey that they foresee a decrease in their income over the next 12 months, compelling topics will become more difficult to maintain, but Pat remains positive that they can continue to deliver.

We need funders to not lose sight of the bigger picture and the importance of strong, resilient leadership in the sector to pull us all through these challenging times.

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SI magazine September 2012

Any vulnerabilities by leaders couldn’t be shared with clients, staff, funders or other stakeholders, so peer support is an important way to address this isolation. Pat Armstrong Director of ACOSVO

Recent activity ‘Good Governance’ Under the leadership of Shirley Otto, Masterclass Facilitator, ACOSVO used the theme ‘good governance’ as a marker for its work in 2011. The theme was explored over a series of materclasses organised under the headings of; Roles and Responsibilities, Who Leads? and The Relationship Between Chair and Chief Officer  

Investing in Events ACOSVO have also been struck by the challenges caused by the economic crisis, not least in terms of funding. Currently 50% of ACOSVO’s revenue is government sourced while membership fees constitute just 16%. Constrained financial resources mean that ACOSVO has to look at alternative revenue streams. Once again Pat is optimistic about the future but she is still aware of the dilemmas that many infrastructure organisations such as ACOSVO face. “We exist to support leaders in the sector and although we raise some income from membership and events, we want to be able to offer a service to all who need it, no matter what their financial situation. This model means that we are reliant on funders to support our work. We do not want to view sector leaders as our “market” for income as this goes against our aim to support them through these difficult times.”

need. Although a very valid approach, the longer term support of the sector as a whole and the infrastructure that supports it also needs to be funded…but it’s harder to evidence the impact and how it filters down to the frontline clients. We need funders to not lose sight of the bigger picture and the importance of strong, resilient leadership in the sector to pull us all through these challenging times.” On being asked about the potential of using the Social Impact Bond (SIB) model, Pat was unsure: “I think that at the moment we need to carefully consider all options and funding alternatives, but we have to do so from an informed position and consider all the implications. I think we will be keeping a close watching brief on developments and anything that helps this process is very welcome.”

So what are the options to maintain ACOSVO’s work?

Further Information

“It gives us the challenge of finding funders who will support our work. In times of tight budgets even among our funders, priority is given to frontline services and those most in

To find out more about ACOSVO, their upcoming events and the services that they offer, you can contact Pat and her team at office@acosvo.org.uk or alternatively on 0131 243 2755.

For the financial year April 2010 to March 2011, ACOSVO invested over £21,334 on the organisation and running of its events. This represented an increase of over £3,262 since 2009, reflecting the success of ACOSVOs objective to increase the range of services to members.  

Growing Members and Growing Networks

2011 saw 45 new members join ACOSVO, taking the total number of members to 268. This exciting development means ACOSVO has been able to increase the diversity of the peer-to-peer support network it offers to Chief Executives. Members have been quick to recognise the benefits of ACOSVOs growing numbers“I have found membership of ACOSVO both to be very useful in expanding my network of contacts and in giving a platform for the ready exchange of information with peer chief officers which might not otherwise be possible.”

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Leading By Example

Bridging the Isolation Gap CrossReach’s Daisy Chain project helps families struggling with social problems and care needs join up the dots for their tots. Declan Murphy dropped in to learn more about this innovative project which could be ripe for social investment.

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or years, a growing body of research and evidence has supported the theory that early years intervention has been the most effective preventative measure against the cycle of dysfunction and underachievement in vulnerable children. This evidence informed CrossReach’s thinking when they created their new social care outreach programme in Govanhill, Glasgow, last year. Working in partnership with the Elim Pentecostal Church, the Daisy Chain Early Years Project aims to provide support and care to young families in the Govanhill community. With a population of 1500, the majority of vulnerable young families come from ethnic minority backgrounds, many with multiple issues. CrossReach found that many of the ethnic minority

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families’ needs were not being met by the local statutory authorities. When care needs were being addressed, they lacked a concerted approach, a result of the silo environment that the different departments and statutory authorities work in. Families found themselves lost in the increasing bureaucracy with each new care provision department and their level of care was compromised. Chris McNaught, Director of Children and Families Services at CrossReach, explained how a new approach informed the thinking at one of the largest social care agencies in Scotland: “Traditionally, the group orientated format of care has been a problem, but now a shift is occurring. At

CrossReach we’re beginning to offer ‘wrap around services’, where the focus is on the person and not the problem.” Wrap around services mean care provisions are provided by a single authority. Instead of being passed from one service provider to another, an individual will receive their substance abuse counselling or autism care under one roof: The care provision works around the person, not the other way around. The Daisy Chain Early Years Project is an exciting opportunity to test the viability of this model. With over 20 years’ experience working in nursing and care, Cathy Paton leads the care services at the Daisy Chain Early Years Project. Along with two


SI magazine September 2012

other full time members of staff and a host of vital volunteers, Cathy began operating at the Elim Center in December 2011. Daisy Chain opens three days a week as an open door drop-in centre – a “place where race and religion do not matter,” says Cathy. Playleader Frances Turnbull remembers the apprehension felt by staff in those first few weeks of opening when numbers of families were low. Now, over 100 families pass through their doors and they’ve even begun to turn away parents and children after continually reaching capacity. “We have children turning up on Monday morning almost banging down the door to get in! That for me is a sign that we doing something right here,” commented Frances. The enthusiasm of their staff and volunteers is evident and seems to rub off onto the families using the service. One of the biggest obstacles Daisy Chain are trying to overcome is the poverty of isolation; parents who find themselves isolated at home with no actual help or moral support raising their children. Many of them lack the basic parenting skills and knowledge needed to further their children’s development. As opposed to simply teaching the parents, the technique used by the Daisy Chain staff is modelling and good practice. They begin by creating an environment where parents feel safe and relaxed and where the children can take part in fun organised activities. Educational components are built

The care provision works around the person, not the other way around.

into many of these activities around specific themes such as nutrition or substance abuse. Parents watch how the Playleaders interact with the children, are encouraged to take part themselves and create their own positive relationship, along with skills that they can apply at home. Fun, support and care sums up the ethos behind Daisy Chain’s approach. The Daisy Chain project has been taken in ‘baby steps’ - both the number of families using the service and the level of trust between the staff and parents has been built carefully and gradually. Cathy and her colleagues are already seeing real changes in the families but threatening to undo all these months of positive change is the matter of funding. The project secured government funding until April 2012, after which it’s reviewed on a six- monthly basis. This sense of uncertainty not only damages staff moral but also that of the families who have come to rely on these services. If Daisy Chain fails to secure future sources of income, it would create a care provision vacuum in Govanhill even more detrimental than before. To meet these challenges, Chris and his colleagues at CrossReach are examining how the social investment model could be used to support the Daisy Chain Early Years Project. These discussions are very much in the early stages. There are hurdles to overcome first, the issue of measurability being one, but Chris was optimistic that a solution could be found in the Social Impact Bond

Parents watch how the Playleaders interact with the children, are encouraged to take part themselves and create their own positive relationship, along with skills that they can apply at home.

(SIB) model which could be replicated across Scotland. Scale and size provide the crucial factor, explains Chris, which make SIB a suitable platform for the Daisy Chain model. Early years intervention and wrap around services are applicable across a number of different settings in Scotland. A Prison Visitor Center is currently being rolled out in Dumfries and in April 2012 the BBC documented the success of CrossReach’s work with teenage boys at Ballikinrain school. By increasing the scale of these projects, the potential for greater long-term savings increases. What does the future hold for Daisy Chain? Funding issues aside, CrossReach envisages a future where the residents of Govanhill are in sole control of the running of the centre. A future where Daisy Chain is a fully integrated, self-sustaining and core component of the community. Cathy could already identify mothers who had the potential to become leaders, making the transition from client to carer. Daisy Chain in providing the foundations and tools needed for a community to bridge the isolation gap.

Further Information Find out more about the Daisy Chain Project. Contact directly them at Daisy Chain Early Years Project, 42 Inglefield Street, Govanhill, G42 7AT, call on 0141 423 1250 or email, daisychain@crossreach.org.uk.

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Leading By Example

Stop it Now! A Challenging Case for Social Entrepreneurs Stop it Now! Scotland is the national programme for the prevention of child sexual abuse. Their credo is that it’s the responsibility of every adult to protect children and that sexual abuse is entirely preventable. It’s challenging work at the best of times, but certain aspects of their work require particularly innovative thinking.

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top it Now! receives core and project funding from the Scottish Government, the former funded on a three-yearly cycle. With this they run a number of projects including delivery of a Community Engagement Toolkit at neighbourhood level to prevent abuse, while also delivering information on sexual abuse to prisoners across Scotland and run the National Community Disclosure Scheme, ‘Keeping it Safe.’

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Perhaps their most unique project is undoubtedly their most challenging, in terms of both delivery and funding. They work with people under investigation for ‘child pornography’ internet offences and crucially with their families and partners. Unusually, this project works with people at the point of investigation in order to change their thinking and behaviour. It’s also a project for which they receive no dedicated funding at present.

A key element of the project attends to the ‘hidden victims’ of this crime, the partners of offenders who usually have no idea their partners have been commiting them. Suicide rates in affected families are high and family break up is common. This work is delivered through INFORM, a 6 week support programme of group learning workshops which help shellshocked partners pick up the pieces. The following is a personal testimony of a typical case:


SI magazine September 2012

Lisa is 37 years old and lives in Edinburgh with her husband Ray and her two boys aged 12 and 15. One day in January her life changed forever. She describes that day like being in a film she was watching. Three detectives arrived unannounced early one morning and told her that they were seizing all computer equipment, phones and cameras from the family home as they suspected her husband had been downloading indecent images of children. Her husband confirmed that the police would find child sexual abuse material on the computer. Lisa could not believe it and was in a state of complete shock: ”This man I had been living with for years and had 2 children with, who I loved and trusted, appeared a stranger before my eyes”. Ray was arrested and charged. He admitted accessing child pornography websites and other chatrooms. The children in her family were interviewed by police and social services. Suddenly Lisa was faced with this devastating situation and didn’t know where to go for help: ”I had always been capable and taken responsibility for dealing with personal problems in my life. However, I was in no way emotionally or practically prepared to deal with this situation which is so horribly shocking and taboo….I questioned everything about my life”. The effects on the family have been far reaching. Lisa knew that Ray was not a monster but also knew there was something terribly wrong. Her children were confused about what was happening and why their father could only see them under supervision. Lisa did not know what to tell them. Lisa did the obvious things - visiting her GP, speaking with a counsellor – but still felt isolated. No one had any answers. She wanted to understand why her husband behaved in this way and if her family would ever be a safe place again but nobody seemed equipped to help. Then Lisa remembered that on the day of the police search they had given her a booklet called ‘Still Reeling?...’ provided by police investigators in all such cases. In this booklet she discovered that there was a service that might help. “I called them immediately and found that I was speaking to someone who understood and was listening. I went along to an appointment and spent the first 30 minutes crying… at last there was someone out there I could talk to who didn’t judge me or our family.” She was offered a place on INFORM. This really helped Lisa manage life by meeting others in similar situations and know that she wasn’t only person in this situation. The programme deals with subjects she’d previously been afraid to discuss and helped her understand Ray’s thought processes leading to his offending. It educates participants about the serious, growing problem of online child abuse empowering them to safeguard their own children against internet dangers. Lisa is now aware of the triggers and signs of offending. She says she has better communication with Ray then ever before. His behaviour had seriously damaged their relationship but he has been made to take responsibility for his actions and understand their impact on the family. Ray is now in prison but there is a future for the family when he is released, although this will look very different from their past.

We believe that successfully preventing sexual abuse means doing something different, being creative and showing real results for real people. Social financers are used to taking a more innovative view than the norm and that’s what we’re looking for.

Development Manager Martin Henry is keen to extend the service across Scotland. ‘We don’t believe in turning people away when they’re in turmoil and know that this help can really equip victims to make their families, partners and community safer.’ He feels that social entrepreneurs could be up to the challenge to fund this progressive project, citing internet businesses who may want to be associated with something admittedly difficult, but groundbreaking, and will have new ideas to contribute. ‘No other agency in Scotland delivers targeted services in this area,’ says Martin. ‘We believe that successfully preventing sexual abuse means doing something different, being creative and showing real results for real people. Social financers are used to taking a more innovative view than the norm and that’s what we’re looking for. We’re taking bold, positve steps to solve what many believe to be an irresolvable problem.’

Further Information To find out more about the work of Stop it Now! Scotland, got to www.stopitnow.org.uk

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Balancing the Books

Demonstrating impact:

how do we know what difference third sector organisations make? Malin Arvidson, Research Fellow at the Third Sector Research Centre (TSRC), explains how the work of third sector is quantified, drawing on research carried out by a group of researchers at the TSRC. What is the value of non-profit organisations and of the third sector as a whole? These are essential questions for policy makers, funding bodies, and indeed third sector organisations striving to improve their social impact. Demonstrating achievements, success and impact has become essential for third sector organisations today. Perhaps this is a result of the sector becoming a successful and considerable contributor towards increased welfare and equality in society. And with success follows calls for accountability and transparency. Recent research shows that pressure from resource providers – 40

government, philanthropists, social investors and grant making bodies – is the main source of motivation for engaging in impact measurement. Third sector organisations are now offered an array of tools to measure, define and communicate the impact of their activities to the outside world. Yet the decision regarding how and what to measure is not easy, much due to the difficulties in defining success and in capturing impact. There are two defining features of the position of the third sector and its activities that provide inherent challenges to the measuring of impact in the sector. Firstly, it

operates in a context of multiple stakeholders with a diverse range of interests. Secondly, since we deal with intangible outcomes and organisations that often deliver a vast range of services and with multiple goals, we are faced with methodological questions of how to capture impact and what to actually measure. Third sector organisations speak to an array of stakeholders of different backgrounds and interests. While on the one hand funders and donors may look for efficient ways of allocating limited resources, assessing the value of an impact based on costs and savings for


SI magazine September 2012

the public purse, the beneficiaries’ definition of success reflect their personal circumstances and life trajectories. Also among funders we may find a diverse set of interests. Today we can note that concepts such as value-for-money and returnon-investment are increasingly defining the way we talk about our expectations of what TSOs should deliver. The Third Sector Research Centre (TSRC) is researching a range of aspects related to impact assessment, including how evaluations are used in the context of public service delivery and the third sector. In recent work TSRC has analysed three frameworks that have attracted attention: Social Return on Investment (SROI), the Outcomes Star, and randomised controlled trials (RCT). They all share an ambition to capture intangible outcomes, but their underlying principles differ considerably. The Outcomes Star is rooted in the principles of participatory evaluation. It aims at not only evaluating a service, but also empowering service users: the evaluation procedure shall reverse roles underlined by power and hierarchies. As a result, the definition of impact becomes flexible. It is defined by beneficiaries and staff. SROI share a similar approach in that it emphasises stakeholder involvement in defining what outcomes (negative and positive) they value. RCT on the other hand does not engage with stakeholders in this way. Here, impact is defined prior to the evaluation and is seen as the difference in change between one group of beneficiaries that has undergone treatment, and one that has not. In other words, the tool ignores any unintended outcomes; the voice of service users and other beneficiaries (family members for example) is not heard. So, on what basis would third sector organisations make a choice between evaluation frameworks?

Recent research shows that pressure from resource providers is the main source of motivation for engaging in impact measurement. If the aim is to communicate results to an audience that is seeking ‘evidence of what works’ the choice would perhaps fall on randomised controlled trials: although somewhat disputed, this represents what is referred to as the golden standard of evaluations. But does an evaluation based on pre-defined goals accurately reflect the actual effect of an intervention? It can be argued that social interventions seldom have the intended effects, and by recognising their actual effect, as defined by beneficiaries, their families, and other stakeholders, we may understand more about both intervention and needs. In this respect both SROI and the Outcomes Star approach allows for a wider understanding of the effect of interventions. But it is also in this flexibility that these tools can be criticised: the subjective judgement in the evaluation process is seen as a weakness.

Presented with evaluations from such different approaches, how can we know which impact story to trust? And how can we compare one story with the other? Although calls for standardisation of measurements, evaluation principles, and models for the presentation of results can help both organisations and their stakeholders in making sense and use of impact evaluations, the prospect of establishing the impact of the third sector remains a real challenge. But, as DiMaggio puts it, while measuring the impact of the sector may be ‘impossible’ attempting to do so can still be ‘useful’. The sector’s ability to evaluate and demonstrate impact will continue to be of great importance and can provide us with important insights, in particular if we look not only for end results of evaluations but also pay attention to processes and relations surrounding the implementation of impact evaluation.

About the Author Malin Arvidson (PhD) is a research fellow at Third Sector Research Centre, based at the universities of Birmingham and Southampton. As a sociologist her research focuses on how the social impact of the third sector is articulated and demonstrated. She is also involved with the Real Times research project, a qualitative study of third sector organisations and change. Malin can be reached at m.arvidson@soton.ac.uk

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Balancing the Books

Bond Proof Gillian Donald outlines some key practicalities and considerations for those setting up Social Impact Bonds.

Gillian Donald, Head of Charities, Scott-Moncrieff

A Social Impact Bond (SIB) is a new means of achieving socially beneficial outcomes while generating a financial return for investors. As the continuing recession generates more individuals encountering social issues, charities are increasingly expected to provide social support programmes. Many local authorities, under pressure to make cuts, are divesting themselves of direct responsibility for such projects, by creating Arm’s-Length External Organisations (ALEOs). In light of this, might we expect to see more charities becoming involved in setting up SIBs?

Results and Returns Technically, a SIB is not actually a bond (a debt instrument) but an investment product with measurable return and repayment dependent on results. The Peterborough programme has the advantage of being one where the outcomes are easily measured – there are well-known rates for reoffending, making benchmarking simple. So if a charity is considering creating a SIB, it will be most easily achieved where there are clear, measurable outcomes. This becomes even more pertinent for investors – they are being asked to fund a social programme. Indeed, fundraising is the major challenge facing SIBs and while there may be a number of socially philanthropic sources for funding (the Getty Foundation has visited Peterborough) there will be an onus to demonstrate that a positive, measurable financial return is due, with the figure of 4% mooted as a likely minimum.

Key Factors It’s important then that charities are fully aware of the key elements that need to be considered when initiating a SIB: 1. Those charities with an established track record of delivering successful outcomes in their field will be best placed to attract investors 42

2. Demonstrating a clear need for social intervention will be crucial, especially where there’s no provision to deal with a problem or where existing provisions are ineffective. 3. The charity must be capable of creating the strategic plan of how the SIB will function and be willing to invest the time to pursue potential investors to back it. Integral to this is a robust metric for measuring outcomes, while the model must also demonstrate whether savings can be generated for the commissioning body and a return to investors within ‘an acceptable time frame’, with seven years seen as the maximum. There’s still debate around the practicalities of how SIBs may be operated. Issues such as the ‘cashability’ of any given programme, for example, will dictate the level of interest of many potential investors and will rule out many charitable activities.

Creative Sparks It’s clear that we’ve experienced something of a paradigm shift in thinking about how social investment programmes can be funded. SIBs offer an exciting new model to help fill a void in the provision of “preventative” programmes. They have also sparked some creative thinking around the idea of social investment, which combined with the increasing popularity of ‘crowdfunding’ schemes, presents opportunities to increase the range of potential investors. I’ve written to the Chancellor to ask for equality of tax treatment for social investment with schemes such as Venture Capital Trusts and Enterprise Investment Schemes – both of which have similar investment risk and return objectives. This could really make social investment accessible to the mass market - and would see the UK demonstrating its leadership in promoting a healthy society.


SI magazine September 2012

Sound as a Pound Malcolm Rust explains how good governance lies at the heart of third sector cost efficiency. Earlier this summer a report by think tank New Philanthropy Capital, suggested that one in ten charities in England and Wales could close within a year.

Malcolm Rust, Partner, Shepherd and Wedderburn Solicitors

From the work we do in Scotland I know that similar challenges exist for many third sector organisations here. Many charities are cutting posts and services with some at risk of closing down, because of reduced budgets, declining donations and government cuts. With the squeeze likely to continue for the foreseeable future, the need to deliver maximum cost efficiencies is vital. Many organisations may feel they’ve ‘been there and done that’ in terms of reviewing their day-to-day operations. That’s undoubtedly an important part of cost efficiency, but charities could realise far greater financial benefits by looking at their governance structures. Good governance is critical for two reasons. Firstly, a lack of proper structures can have an impact on expenditure. The potential cost of an employment tribunal caused by the lack of a clear HR policy is one example of how funds could be wasted by failing to make upfront investment in proper governance. There’s also the ‘dead effect’ this has on a charity spending time and energy on unwanted issues, instead of their cause. The second reason for committing to good governance is that many funding organisations, such as the Big Lottery, will simply not fund any charity that doesn’t have proper structures in place. Given the decline in other lines of funding, who can afford to close themselves off to this channel? Many individual donors are now stipulating that they will only support charities with sound governance, to prevent their money from going into a black hole of administrative costs. Good governance requires trustees and charity management to scrutinise the

The potential cost of an employment tribunal caused by the lack of a clear HR policy is one example of how funds could be wasted.

structure of the organisation and ask fundamental questions such as: ‘Do the trustees fully understand the aims of the charity and their role on its board?’ Seems obvious but it’s surprising how many charities fall at this hurdle. Charities should also review their constitution regularly. Is it still relevant? Do their trustees understand and agree with it? Do they understand their responsibilities and potential liabilities? Have they received any formal training? There’s also the question of conflict of interest – are trustees aware of any conflicts and is there a policy to deal with them? These questions are crucial and, if addressed upfront, can prevent costly issues arising. Other areas of good governance which need to be reviewed regularly include succession planning, risk assessments and health and safety. They’re not always the most uplifting issues, but they need to be addressed with robust policies. A final area revolves around up-to-date accountancy practices. Charities should apply appropriate standards to their financial reporting, dependent on their size and their constitution. Ensuring that a charity’s financial statements are correct and compliant is a vital to demonstrating good governance, both internally and externally. 43


YOUR LETTERS MAGAZINE We hope that you’ve enjoyed the first issue of SI magazine and we’re sure that you’ll have found some fuel for future debates in these very pages. Got a burning issue to share or maybe you’d like to reply to one of our columnists or contributors with a question or a statement? Or perhaps you’d simply like to raise an issue which you feel is important within the sector? This is your space, so drop us a line if you have a letter that you’d like us to consider for the next issue, which will be distributed on December 10th 2012. Letters should be no more than 250 words long and please do let us know your name and which organisation you represent, if relevant. If you fancy penning something a bit lengthier that’s fine too, we are always happy to give consideration to our readers’ press releases. If so, then our letters page is the place to do it. Just to get things started, we thought we’d include a few missives from our distribution partners… Please send all correspondence to: jools@simagazine.co.uk

The family philanthropy journey Around the kitchen table ... is often where I first learn what makes our clients tick, what drives them to give as a family. A decade ago the answers ranged but usually included: because we care; the issue worries me; and, perennially, because we want to make a difference. Slowly, the last answer has changed a bit over the years. Alongside self-recognition that they are, indeed, philanthropists is a parallel acknowledgement that their ‘gift’ is an investment. The family owners of William Grant & Sons have focussed their Youth Opportunities Programme and are now looking for attendance by young people on pre-vocational courses, as programme outputs, toward a first step in a much wider lifelong outcome. Similarly, the family behind the East Neuk Fund

know that inbetween the affluent coastal towns are pockets of marked deprivation. They’ve done their research and have a fair idea where and how to target their funding. They have begun to see their role as stimulating local enterprise. Again, a ripple approach, this time in local economic growth. Sometimes the challenge for SCF, and for other supporting organisations, is to bridge different worlds. To support families embarking on their philanthropic journey, who discover that the sentiment of making a difference might not be rewarding enough, is a patient, but honoured role. Whilst that warm glow from giving counts for a huge deal, family members value a guide, initially, around the brave new world of social investment. Whilst family philanthropy might be the smaller cousin in overall investment terms, it can sometimes take the biggest risks and go places other types of finance just cannot. So, in the development of new social initiatives, ways to measure progress and, ultimately, ways to support and define change in the lives of people and communities – spare some time to look through the philanthropist’s lens. Consider ways to welcome individual funders, not just institutional ones, into the social investment world. And, if your ideas and plans can be digested round the kitchen table, you’re off to a great start! Giles Ruck, Chief Executive Scottish Community Foundation

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SI magazine September 2012

Stop US firm using ‘social enterprise’ for its own gain In July we became aware that the US giant software company Salesforce has applied to trademark the words ‘social enterprise’ for its own private use in the EU, US, Australia and Jamaica. If they are successful they can stop real social enterprises from using the term, and not just those operating in software and CRM because the trademark applications are so descriptive. Salesforce is also claiming that its customers, including the private companies Virgin America, Burberry and Spotify, are transforming into social enterprises. This is not true - they are just buying Salesforce products. We have mounted a campaign, #notinourname, which has support from across the world. Together we will continue to ask that Salesforce drops its trademark applications and stops using the term social enterprise for its own gain. Salesforce risks harming the social enterprise movement’s future. A great deal of energy and resource has been invested into the social enterprise movement in the last 20 years. We’re at a tipping point where people are beginning to understand that business can be established primarily as a tool for social and environmental good. This effort and hardwork must not be undone. We hope that Salesforce will think again and find another term to describe their products rather than seeking to appropriate the goodwill associated with social enterprise movement. Peter Holbrook CEO, Social Enterprise UK

Salesforce risks harming the social enterprise movement’s future. A great deal of energy and resource has been invested into the social enterprise movement in the last 20 years. We’re at a tipping point where people are beginning to understand that business can be established primarily as a tool for social and environmental good. Peter Holbrook, Social Enterprise UK

Never a better time to address social impact issues and opportunities We welcome the launch of SI Magazine and look forward to reading about the latest innovations, fresh ideas and debate about how we achieve sustainable finance for our innovative social enterprise community. There has never been a better time to think about solutions to how we achieve growth and extend our social impact across Scotland and further afield. With social enterprises facing challenges and opportunities on many fronts, from procurement, to Community Benefit clauses, to private investment, new financial delivery mechanisms and winning business from individual consumers, practical and realistic responses are the way forward. Fraser Kelly Chief Executive, Social Enterprise Scotland

The majority said their funding had decreased over the previous year. Pat Armstrong, ACOSVO

A vehicle for discussion ACOSVO are delighted to welcome SI magazine to the sector. Diversification of funding is always an item on the agenda of third sector leaders and never more so than in current times. We welcome any opportunities to discuss a wide variety of funding possibilities and look forward to using this publication as a vehicle for further debate and discussion around the issues. In our recent members’ survey, we found that although we all recognise how important leadership development is, 90% of those who responded said that lack of time was the most significant factor in limiting their involvement in leadership and personal development. Whereas less than half, 42%, cited cost and finance as a critical issue (in relation to personal development). On a more general note, the majority (54%) said their funding had decreased over the previous year. This background all highlights how important it is to have accessible, quick and relevant ways to interact and discuss topics of importance.  I’m sure SIM will be a useful addition to this debate. Pat Armstrong Chief Executive, ACOSVO 45


EVENTS Calendar Welcome to our events calendar. This section of SI magazine is designed to give our readers an opportunity to find out what events are coming up over the coming months, and while this list is by no means exhaustive in such an active sector we hope that you find something here that you can benefit from. September 2012 20th – Caring Capitalism A partnership event between Edinburgh University’s EClub, Inspiring Scotland and Acquiring Business 4 Good. Please visit www.business-school.ed.ac.uk.eclub for further information. 20th – Social Enterprise Scotland Policy and Networking Roadshow, Helmsdale Please visit www.socialenterprisescotland.org.uk/news/ events/ for further information. 25th – Social Enterprise Cross Party Group Meeting, Scottish Parliament, Edinburgh Please visit www.socialenterprisescotland.org.uk/news/ events/ for further information. 21st – Social Enterprise Scotland Policy and Networking Roadshow, Elgin Please visit www.socialenterprisescotland.org.uk/news/ events/ for further information. 27th – Social Enterprise Scotland Policy and Networking Roadshow, Loch Arthur (Dumfriesshire) Please visit www.socialenterprisescotland.org.uk/news/ events/ for further information.

October 2012 5th – Byte Night The IT industry’s annual sleep out in aid of Action for Children. Please visit www.bytenight.org.uk for further information. 24th – Social Enterprise Scotland Policy and Networking Roadshow, Stirling Please visit www.socialenterprisescotland.org.uk/news/ events/ for further information.

November 2012 7th – Social Enterprise Scotland Policy and Networking Roadshow, Dunoon Please visit www.socialenterprisescotland.org.uk/news/ events/ for further information. 8th – Waves of Change, Oceans of Opportunity ACOSVOs annual conference and AGM. Please visit www. acosvo.org.uk/conference-2012 form further information. 20th – Estate Scale Micro Renewables An Architecture and Design Scotland event looking at the future of Scotland’s sustainable energy sector. Please visit www.spectrum-events.co.uk for further information.

December 2012 10th – Sustainable Building An Architecture and Design Scotland event looking at the role of sustainability in social housing and public projects. Please visit www.spectrum-events.co.uk for further information.

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Architecture and Design Scotland (A+DS) is Scotland’s champion for excellence in placemaking, architecture and planning. A+DS is an Executive NDPB of the Scottish Government that aims to support the creation of well-designed environments that are ultimately, places where people want to be. We champion the highest standards in architecture and placemaking across all sectors, advocating a better understanding of the importance of quality design in both the public and private sectors. A+DS works through a number of established programmes to champion excellence and advocate the benefits of best practice in design. Our programmes are Urbanism, Design Review, Sust., Access to Architecture, Schools Design and Healthcare Design. Sust is a programme within A+DS that is dedicated to sustainable design in architecture and the built environment. Sust aims to raise public awareness of sustainable design and the contribution it can make in delivering a sustainable future, and improve an understanding of sustainable design for those commissioning new buildings.

Upcoming Events From November 2012 – March 2013 A+DS will be running a series of events examining key issues surrounding sustainability in Scotland:

Estate Scale Renewables November 20th 2012 Grosvenor Hilton Hotel, Edinburgh SPONSORED by

SUPPORTING PARTNER

Sustainable Building December 10th 2012, Glasgow SPONSORED by

Green jobs March 2012, Aberdeen

For further information on A+DS please visit www.ads.org.uk and for further information on our events, sponsorship packages and delegate bookings please visit www.spectrum-events.co.uk or call 0131 553 9387 Produced by

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A bank that gives you more The Co-operative Bank actively supports charities and social enterprises of all sizes. We are proud to work with organisations that share our values of fairness and social responsibility, and are committed to transforming lives through making social, economic and environmental change. Our specialist Relationship Managers provide innovative solutions nationwide that assist social enterprises to achieve their strategic objectives and grow. So if you want a banking partner with in-depth knowledge of your sector and proven financial expertise, look no further.

Relationship banking. It’s better together. For more information call

0131 229 0151

socialenterprise@cfs.coop co-operativebank.co.uk/socialbanking

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The Co-operative Bank is authorised and regulated by the Financial Services Authority (No. 121885), subscribes to the Lending Code and the Financial Ombudsman Service and is licensed by the Office of Fair Trading (No. 006110). The Co-operative Bank p.l.c., P.O. Box 101, 1 Balloon Street, Manchester M60 4EP. Registered in England and Wales No. 990937. Calls may be monitored or recorded for security and training purposes.


SI magazine Issue 1 September 2012