Mr. Martin Shanahan:

I thank the Chairman and members of the committee for inviting Forfás here today to discuss our report, Social Enterprise in Ireland, Sectoral Opportunities and Policy Issues. A detailed briefing note of my presentation has been circulated to members. With the Chairman's permission I will take that as read and will draw out some of the key points from the presentation.

Before beginning I will introduce my colleagues, Declan Hughes, divisional manager with responsibility for enterprise and trade policy and Marie Burke with responsibility for education and skills policy. We are also joined by Dr. Jonathan Healy and Laura Watts who are policy advisers and were involved in drafting the report under discussion. Forfás is the national policy advisory board on enterprise, trade, science, technology and innovation. We work closely with our sister agencies, IDA Ireland, Science Foundation Ireland, and Enterprise Ireland in the development of enterprise policy. We provide advice on a diverse range of policy areas which impact on enterprise, whether that is enterprise development, research and innovation, competitiveness, research and development, economic infrastructure and so on. We also have a role in the development of the Action Plan for Jobs and identifying sectoral opportunities and opportunities to create jobs. The report we are discussing fits into that area of our work.

Social enterprise in its broadest form is not a new concept in Ireland. In every community there are examples that were established because individuals grouped together to meet a need that was not being met by the State or by commercial businesses. In all aspects of Irish life community and voluntary organisations such as the Gaelic Athletic Association, GAA, Muintir na Tíre, the Irish Countrywomen's Association, ICA, agricultural cooperatives and credit unions have been the backbone of the social fabric. All of these organisations share a self-help ethos and philosophy and place themselves at the centre of their communities.

For our report a social enterprise is defined as an enterprise that trades for a social purpose; in which at least part of its income is earned from its trading activity; is separate from government; and in which the surplus is primarily re-invested in a social objective. Income from trading is an important distinction, as organisations such as pure charities may derive their income solely from philanthropy, grants or donations. In commercial enterprises, profit is divided among owners and shareholders, but in a social enterprise the profit, or the surplus, is generally re-invested in the social objective.

The Forfás report identified four main types of social enterprise in Ireland, those with commercial opportunities that are established to create a social return, for example, a restaurant whose profits or surpluses are used to fund a disability organisation; those creating employment opportunities for marginalised groups, such as employment centres for ex-offenders; economic and community development organisations, for example, community-run enterprise centres; and those that deliver services, such as community crèches or rural transport groups. These goals often overlap or the social enterprises have multiple objectives.

There is limited data available on the size and operation of social enterprises in Ireland. We have used statistics from 2009 to demonstrate the scale. Approximately 1,420 social enterprises employing over 25,000, with a total income of approximately €1.4 billion existed in 2009. This is equivalent to just under 1% of enterprises in the economy and over 1% of total employment. Social enterprises are labour intensive, with payroll estimated to account for 64% of total expenditure. This group of 25,000 that we have identified is a subset of a wider not-for-profit sector which employs over 100,000 people. Our report concentrates on the social enterprises at the commercial end of the not-for-profit spectrum.

Our report concluded that the sector has the capacity to double employment with the creation of an additional 25,000 jobs. We arrived at this conclusion having examined the levels of social enterprise in other jurisdictions and the averages across the European Union.
The Forfás report makes a number of recommendations to contribute to developing a vibrant social enterprise sector to support jobs in communities across Ireland. While a number of these recommendations are specific to social enterprises, many are recommendations that impact on all small and medium-sized enterprises from across all sectors of the economy.
The recommendations centre on six themes. There is a need to develop a policy for the social enterprise sector. There is also a need for an over-arching policy for social enterprise development to include adopting the definition of social enterprise as outlined, developing a co-ordinated approach to the sector across government and increasing our understanding of the sector, including the collection of appropriate data and metrics. A number of Departments are currently engaged with the sector, the Department of the Environment, Community and Local Government, the Department of Social Protection, the Department of Health, the Department of Agriculture, Food and the Marine and the Department of Jobs, Enterprise and Innovation.
The second set of recommendations relates to capacity-building and business skills development, including the promotion and replication of existing business support models and working towards ensuring that social enterprise is mainstreamed in all business courses to help in further developing the sector. The third set of recommendations deals with procurement, including supporting social enterprises in the same way as conventional SMEs can be supported by Government. This is to enable access to tendering processes. Social enterprises face many of the same challenges in this regard as commercial small and medium-sized enterprises. There is also an opportunity to influence social outcomes through procurement.
Funding and finance are dealt with, including assisting social enterprises in building capacity for business plan development to make access to finance easier so that they can take out loans on a commercial basis. There are multiple potential streams of income including philanthropy, grant-aid and commercial income. Many social enterprises derive their income from a mix of these sources. The sector wishes to achieve a greater level of income from commercial trading.
The remaining themes include developing leaders and harnessing community support and expertise and the theme of governance. A broad range of potential governance models exist and it is important that social enterprises choose a model which best supports their business activity.
The recommendations were developed by examining existing international policies and evidence, literature review and a wide range of engagement with stakeholders in Ireland. Since the publication of the report an interdepartmental group has been established and chaired by the Minister of State, Deputy Seán Sherlock with a secretariat provided by the Department of the Environment, Community and Local Government. The group is currently examining the recommendations of the Forfás report and is establishing a timetable for implementation.
Social enterprise is a growing enterprise sector that can bring further job gains and deliver economic potential as part of Ireland’s economic recovery and growth for the future. Like other SMEs, social enterprises have the benefit of being geographically spread throughout Ireland. They are set at the heart of rural and urban communities. Very often they employ those who are most marginalised and who find it most difficult to access employment opportunities. They tend to provide local services and so jobs are created in local communities. As well as multiplier effects from the direct jobs in the sector, further indirect jobs are created either by enabling the development of other enterprises, for example, by social enterprises that assist economic and community development, or by providing services that attract people to a community such as local festivals or community-run hostels.
The Forfás report sets out a list of recommendations to help ensure a supportive and enabling environment for a vibrant and growing sector of Irish enterprise. I welcome any questions from members.