Social enterprise should become mainstream, says CEO

Like many socially-minded people, Matt Smith hopes that the coronavirus pandemic will help to rock the world of business on its axis, and leave it spinning in a slightly more equitable orbit.

By John Grainger
Saturday, 10th October 2020, 12:00 pm
Matt Smith, CEO of Sheffield-based The Key Fund, says there are steps that private-sector business leaders can take to support social enterprise. PHOTO: Antony Oxley.
Matt Smith, CEO of Sheffield-based The Key Fund, says there are steps that private-sector business leaders can take to support social enterprise. PHOTO: Antony Oxley.

But his optimism is tempered by experience.
“I remember the financial crash,” Mr Smith told The Yorkshire Post.
“It seemed like that had to be a point of change, that actually people had seen the impact of running parts of the economy like a casino, and change would surely follow – but it didn’t, not significantly.”
Mr Smith is the CEO of the Key Fund, which provides flexible finance to support community and social enterprises traditionally excluded by mainstream finance. He may be cautious about prospects for a change in the way Britain does business, but as a pioneer of social enterprise in the UK and one of the sector’s leading lights, he has nevertheless been heartened by the British public’s response to the pandemic.
While the Covid-19 crisis brought large swathes of the economy to a shuddering halt, it also kick-started thousands of small-scale community initiatives that provided for people’s immediate needs often with scant regard for the profit motive. Cottage industries sprang up providing meals on wheels, hand-sanitiser, face-masks and childcare for key workers, demonstrating grassroots entrepreneurialism at its most altruistic.
“I’m optimistic that people will see that there is a different way – a way in which companies can trade and tread lightly on the planet and still make a profit,” he says. “So I think it will resonate with some, but I’m guarded. There’s still a lot to be lost and won, going forward.”
Over the last 20 years, the Key Fund has supported over 2,500 social and community enterprises, created over 500 new businesses and thousands of jobs, helping to tackle deep-rooted challenges, from homelessness and youth unemployment to mental ill-health and the environmental crisis.
Originally from Doncaster, Mr Smith studied psychology at the University of Central Lancashire and initially intended to be a counsellor “to support people through the challenges in their lives”. But after a stint working at a student hardship fund, he heard about social enterprise and, his interest piqued, joined Key Fund as a grants and loans officer in 2002, at the age of 24.
He was made CEO in 2015, and just this week was awarded a CBE for services to social investment.
His rise through the ranks has been down to commitment – he says Key Fund runs through him like a stick of rock – and leadership, which was tested, successfully, when the coronavirus struck.
“I spent Christmas working on a brilliant strategic plan for the future, ready to launch in April, and then of course everything changed in March,” he says.
“What we managed to do very quickly is pivot the business towards what we believe the sector needed. Most of our clients are pretty small, marginal enterprises, and we knew that additional debt wouldn’t really move them out of this in a meaningful way. So we worked really hard to bring in grant monies to support them.
“We’ve assessed for one partner about £5m in grant funds over six weeks and with the support of the National Lottery’s Community Fund we’re in the middle of delivering another £3.2m. So the team have done an amazing job, almost flipping the whole business model to support the sector.”
It’s not the first time he’s had to bend with the prevailing wind. The result of the Brexit referendum made an impact that has taken years to hammer out.
“The organisation was very much dependent on grant funding, particularly European grant funding, for its ongoing work” he says.
“Over the last four-and-a-bit years I’ve been working on diversifying income streams and driving more income from trading – because we are a social enterprise – and that’s been pretty successful.”
As for the future, he is currently working on more patient-supportive long-term funds to help post-Covid recovery.
But he also wants to see wider change, beyond just his own organisation. His experience of the aftermath of the Financial Crisis of 2008 may have introduced some caution, but he remains guardedly optimistic about the prospects for fundamental change in business norms.
“When I go and talk to rooms full of businesspeople, my dream would be to see a much more even split of social entrepreneurs” he says.
“I really believe that there is a model for those businesses that, on the Venn diagram between social impact, making money, and values, there really is a spot in the middle that’s socially enterprising, that says ‘actually, we can still make money in a way that can help us to achieve what we want to achieve as individuals.
“I want to see it become mainstream – an acceptable and significant part of the UK economy. It’s about 5 per cent as a sector; I think it could be much bigger.”
For some businesspeople, social enterprise is a nice “add-on” rather than “real business”; for them, the profit motive will always reign supreme. But Mr Smith believes that most people can and do see the benefits of it.
“Every business that we invest in is focused on making at least a small profit or balancing the books, so it’s not just about the ‘warm fuzzy feeling’,” he says.
“Most businesspeople that I come across do actually think about this stuff; do consider the community; do think about how they project themselves. Lots of people give to charity or are involved in organisations like the Rotary Club or the Lions or their local community foundation, or give their time pro bono to charities locally.
“Social enterprise is a way in which they can meaningfully trade in their day-to-day business and still have an impact.
“I don’t think I’ve ever met a businessperson who doesn’t really care about anything apart from profit.”
For those businesspeople wanting to go an extra step towards supporting social enterprise, there are various options, but perhaps the best thing they can do is to review their supply chains, he says.
“The hardest thing for most social enterprises is finding the market, because they’re often trying to deliver quite difficult business models, and finding customers is really tricky for any business.
“So if entrepreneurs can think about supply chains, that’s really important, and can just help to sustain and build social enterprises that are already out there.”
If they want to go further still, they can even introduce an element of social enterprise into their own business.
“There are many hybrid models, where there’s a social enterprise/commercial business,” says Mr Smith.
“So if they’re thinking about setting up new divisions or new operations, they could look at social enterprise models, and building those in.
“There are a number of ways in which private entrepreneurs can really support social enterprise without necessarily thinking about becoming a social enterprise themselves.”
But whether they want to support a social enterprise or become one, Mr Smith says that it’s crucial that private-sector business leaders understand that the model actually makes good economic sense.
“The impact driven by a social enterprise is a compelling case for why somebody should use your business,” he says. 
“If you’re able to say on your website or in your annual report or in your tender responses that you trade actively with social enterprises, that through your work you’ve been able to support 25 disabled people to get into meaningful employment, I think that as human beings that makes most of us more likely choose your company.
“If it comes down to the fine margins between a few pence on price, it may well be the difference between getting a contract or not.”

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