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June 30, 2015

Community enterprises need right regulations

Community enterprises need right regulations

By Mike Coyne

At the heart of many social innovation projects, especially those developed in urban settings, there are often social enterprises or organisations that have grown out of local communities.

These organisations, and especially social enterprises, face many of the same problems as small businesses in general and share many of the same challenges. However, they also have their own characteristics and face particular difficulties that deserve special attention. It has long been recognised that small and medium-sized enterprises (SMEs) need special attention if the economy is to benefit from their great strengths and qualities. Similarly, the special contributions of social enterprises will only be realised if their particular characteristics are recognised and accommodated.

Social enterprises make a special contribution to society and the economy because they can develop innovative approaches to deeply entrenched problems. They can be especially helpful to public agencies by delivering services in ways that are more effective, efficient and sustainable. They generate enthusiasm and inspire people to make other improvements to their communities. Often they engage people who had previously been excluded for one reason or another.

But community enterprises and initiatives have difficulties over and above those encountered by traditional small businesses. In particular, they are often less equipped to deal with regulatory requirements. For instance, providing food as part of a community service can run into problems. This has led to complaints about bureaucracy and calls for regulatory exemptions. But there are downsides to this approach.

Regulations these days (especially European ones) are mainly about safety or the environment. Are we really going to say that community initiatives should have lower standards than commercial organisations? That it doesn’t matter if community enterprises occasionally poison or infect their clients or that they should ignore environmental considerations? Do we want community initiatives to get a reputation for low quality and a lack of professionalism?

As with SMEs more generally, the answer has to be in the design of the regulation in the first place. Rather than unwarranted exemptions, the “think small first” approach needs to be extended to take account of community enterprises. Regulation needs to be designed taking their circumstances into account and their needs built into impact-assessment procedures and the regulatory review process. Better regulation is the answer rather than no regulation.

Mike Coyne, a partner at the UK-based Centre for Strategy and Evaluation Services, has spent his career in business development and EU policy. His areas of interest include SME development, enterprise policy, innovation and the creative economy.