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09 October 2017 | FM World team


Cordant Group has unveiled plans to adopt the status of a social enterprise, Chris Weston reports

Chris Weston

Wider concerns than the bottom line

Social enterprises can consider wider outcomes than commercial organisations that have very specific contractual obligations. FM companies are often constrained in what and how they can deliver by the contracts they work to – wider concerns such as social improvement, energy efficiency, etc, are out of bounds, or classed as secondary ‘luxuries’. FM touches so many aspects of the services delivered to a community that I can see social enterprise being an innovative and useful model in this area.

There are good examples of social enterprises that work. Auriga has customers across the commercial landscape that value their ability to work with disadvantaged customers.

Social enterprises have their best chance of working in FM with organisations that have a genuine interest in wider outcomes. Where FM can help keep people warm, safe and dry in their homes and communities this can have a beneficial effect on social services, NHS, etc . These links are understood but hard to measure and work into a commercial arrangement.  

Chris Weston, technology adviser at Chainmaker Consulting Ltd

Martin Pickard

The Social Enterprise model is perfect for FM

Our sector contains thousands of small businesses, cleaning companies, caterers, and maintenance firms. We employ millions of workers, many of them in basic service roles, and well-managed facilities operations do tackle social problems, improve people’s life chances and support communities.

More than 70,000 social enterprises operate in the UK, many of them are from our sector. We have seen several as finalists for the BIFM Impact on Society Award, and I keep coming across them in my work as an FM consultant.

It’s highly unlikely that our big public corporations would convert into social enterprises, but even they are increasingly reinvesting profits into community benefit.

The success of this movement depends on FMs supporting social enterprises and to encourage their corporate supply chain to engage with them and to maintain their CSR investment. There is a small but growing trend for specifying this in procurement exercises and weighting in the favour of such good citizenship – an action I wholeheartedly support.

Martin Pickard, FM consultant

Mat Roberts

B Corp is probably the best way to go

Yes, a social enterprise (SE) model could be attractive to many clients in the FM sector, especially public sector clients looking to create the maximum social value. Contracts that have low barriers to entry (mobilisation costs and capital investment) are the most obvious targets. Where most of the contract is labour, then a model that places an emphasis on maximising social value creation is likely to be successful.

Quantifying social value is still a change for both sides of the relationship and using a social enterprise model is a simple way to wrap this up. There are challenges as SEs do not make TUPE easy, as assets are locked into the legal entity and transfer can be more complicated.

While not strictly a social enterprise, B Corp (for-profit companies certified by the non-profit B Lab) is probably the best way for FM providers wanting to use a different vehicle to go. B Corps can have a very similar structure to a normal limited liability company with the addition of a legally contestable public benefit clause or mission. These have been successful in the US and are taking off in the UK. One notable business to convert from limited business to B Corp is west Wales adventure business TYF. Founder Andy Middleton wanted to pass the business on to its staff and used the B Corp route to do this.

Yes, an SE can work in a traditional competitive environment. There are examples of local authority and NHS spinouts doing this successfully. Community Dental, which provides mobile dental services to the construction sector, is a good example, as is Haringey Community Transport.

There are a number of traditional FM businesses that have investments in SE delivery vehicles. Interserve at Sussex University and Engie at the Olympic Park are two that come to mind.

There will be a lot more on this at the 2018 Social Value Summit on 28th February.

Mat Roberts, group director of sustainability strategy, Interserve PLC

Lucy Jeynes 

The fat cats and ethical concerns

Becoming a social enterprise is a significant competitive differentiator in an industry that is reputed to be run by fat cats at the top making their money off teams of low-paid operatives with poor conditions at the bottom. Public sector clients and, increasingly, ethical commercial companies are becoming concerned about this following all media discussion of JD Sports, Uber, and the responsibilities of firms to workers.

A social enterprise determines what can be done with the profits of the company – so a cynical company might work in this way but generate quite small profit (social enterprises still allow people to be rewarded at the market rate, however that might be interpreted). Significantly, Cordant’s statement seems to indicate they will not be running their business in this way. The most important part of their announcement, in respect of their behaviours and of overall social value, is the capping of the family dividends (the Ullman family are the significant shareholders in Cordant). This means that profits in excess of dividends will be distributed to achieve the designated social objectives.

What does this really mean? Executive pay capped at 20 times the lowest-paid worker would mean that at the National Living Wage of £7.50 an hour, top execs could still earn £290,000 a year. If they hold shares as well, that could mean a dividend of up to £250,000 on top. And if they work for more than one company in the group, would this calculation apply for each role?

It feels churlish, however, to pick holes in an announcement that seems to be underpinned with worthy intentions. Let’s see what the social purpose of the company will be, and how much profit is generated to support this purpose. Last year, Cordant Group did not return a profit and did not declare a dividend. It is expecting to return to profit this year ending 2017 after a significant restructuring.

Lucy Jeynes, Larch Consulting