Anna Kucinska
25 November 2014

SEN peer review in Cyprus: the Scottish Social Enterprise Code

In 2002, the UK Government published an ‘official’ definition of social enterprise (SE) which was also adopted in Scotland. The ensuing 10 years has seen a dramatic rise in the popularity of SE – but the government definition was never invested with sufficient authority to be effective. Its meaning became increasingly diluted.
In response the Scottish SE community has set down the values and behaviours by which they recognise each other. They refer to this document as a voluntary code of practice – or simply the Code. The Code recognises the following five Basic Criteria for social enterprise:
1. A Social Enterprise (SE) is a business trading in the marketplace – selling goods and services – but whose primary objective is to achieve social and/or environmental benefit.
2. Regardless of its legal form, the constitution of a SE will include the requirement that profits are reinvested in the business or in the beneficiary community – and not distributed to owners/shareholders/investors.*
3. The constitution will always require that on dissolution, the assets of the SE are reinvested in another organisation with similar aims and objectives.
Taken together Criteria 2 and 3 are referred to as the ‘asset lock’ – the defining characteristic of a SE – which distinguishes it from the private sector.
4. SEs are different from those charities and voluntary organisations which do not aspire to financial independence through trading.
5. SEs are distinct from the public sector and cannot be the subsidiary of a public body.

In a short Appendix the Code identifies some less ‘defined’ Values/Behaviours/Influences familiar to the social entrepreneurship movement. They include: tailored support, social investment, better value, being based on values, being good employers, being democratic, offering empowerment and promoting collaboration.

For Pauline Graham, CEO, Social Firms Scotland and Kim Wallace, Director of Networks, Senscot, the SEN “has been the most engaging and productive network they have been involved in at an EU level”. They said, “We have used the strength and collective voice of the EU SEN and the peer review outcomes to influence and advance as a far as we practically can, social enterprise interests within the new EU Funding programme in Scotland (2014-20)”.
For more information on the Code and its full version visit:
* This Code does not exclude that certain types of social enterprise could be ‘honourable exemptions’ to the zero dividend norm. But this number is very small.