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Developing sustainable business models

Tom Kenny

Social enterprise land management yields many benefits, but developing a sustainable income is often a struggle.  It is important to learn from and scale success stories. However, it is equally important not to make unrealistic demands about generating large incomes from land management, especially when organisations are delivering other valuable outcomes.

Many land-based social enterprises have developed innovative and sustainable business models, however others struggle to be financially sustainable. Our survey of woodland social enterprises in England found around half were making a loss or only breaking even, with a vast majority having a surplus of less than £5000. Another recent study looking at community partnerships taking over green space management, concluded that their effectiveness was limited “without sustained resources and ongoing public sector support”. Grant funding helps many organisations, but is unreliable and problems can arise when it runs out if replacement income has not been secured.

Why is it so hard to make money from land?

One issue is that the market economy can be hostile to the mission goals that guide land-based social enterprises. The enterprises often deliver value that is not currently compensated by the market economy. Natural capital is one example – many organisations seek to improve things like biodiversity or air quality that are incredibly valuable, but generally not adequately compensated by the market. Social value is another, for example community building. The government has already made some attempts to address this, for example biodiversity offsetting, payments for ecosystem services, and the Social Value Act. However, in general they are still largely undervalued. Finally, small land-based social enterprises struggle to compete in markets dominated by large producers and suppliers. For example, supermarkets dominate both buying and selling agricultural produce, meaning low prices for producers and difficulty developing supply chains.

Another issue is that it is unhelpful to assume that social enterprises can use volunteer labour to deliver cheaper services. Certainly, volunteers are a valuable part of many social enterprises, however they are not ‘free’ as many consider them to be. Rather they are a valuable resource, which requires management and technical skills to back it up. They are also not an unlimited resource, and many organisations we work with describe ‘volunteer fatigue’ as a major issue. Neither should volunteers be expected to pick up all the roles otherwise taken on by paid staff. Outdoors activities are often perfect for volunteers, however some tasks may be unsuitable either because they are particularly laborious or require a specialised professional skill set.

Government commissioned services are a potential source of income for many land-based social enterprises. However, as we discussed in an earlier blog, they often struggle to compete for these services as commissioning is not currently supportive of them.

Even beyond the reasons above, it is generally difficult to generate substantial incomes from land management, so expectations should not be set too high. The relative novelty of the land-based social enterprise sector means it needs time to identify and scale successful models. Furthermore, the business models of many large land-based businesses still rely on significant subsidies that are not adequately aimed at securing public goods. The Common Agricultural Policy is just one subsidy enjoyed by land-based businesses, with almost fifty large landowners receiving subsidies of more than a million pounds each. If we are happy to subsidise profit making organisations, why should we expect small, socially focused organisations producing a wide range of positive outcomes, to survive without support?

So how can social enterprise land management develop more sustainable models?

One important strategy is to find, analyse and celebrate successful models, and help them to scale. We already have a number of models that could work nationwide, such as adapting Business Improvement District legislation to support parks, ground rents from residents to pay for communal green space, private sector partnerships, and voluntary subscription fees. Developer contributions such as Section 106 agreements and Community Infrastructure Levies have also been used to support social enterprise land management, however this is more for capital costs rather than long term revenue. Lots of organisations are also providing great models of how particular activities can be funded. For example, Growing Communities developed a sustainable community-led food box business model which they have since scaled to nine other areas through their Start-up programme. We see celebrating successful models as a big part of our role, and also published a tool kit designed to help other organisations who are thinking of scaling.

However in addition to celebrating success stories, we need to acknowledge that some models provide non-market value worth subsidising. This means being careful not to fixate on revenue income at the expense of the social or environmental mission. In the first blog of these series we suggested that communities are being asked to do more for less money. We believe social enterprise can often be the most efficient way to deliver social and environmental benefits, however this does not mean it will not need any support. Large landowners, and particularly local government, should be prepared to offer a degree of technical, financial and other support in the long term.

Government can also help in a number of other ways:

  • It can pay for social and environmental value when it commissions services. Not only are these outcomes important, but social enterprises are often best placed to deliver them.
  • It can use its consumer power to support communities and social enterprises. For example, schools can look to local not for profit suppliers for their lunches.
  • It can strengthen legislation designed to make developers pay for social and environmental outcomes.
  • It can reform tax and subsidy systems, so as to redirect funding to small, environmentally and socially responsible enterprises.
  • It can look at how the planning system could enable social enterprises to use land in innovative ways, recognising the multiple values of land.

Please get in touch with any thoughts on this issue or any of the other areas we are looking at. The next blog looks at land value as a barrier to social enterprise land management. Previous blogs in the series are available here.

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