Local Economic Systems Session 4 Applying the theory to a hypothetical eco-social enterprise Tim Crabtree Outcomes OUTCOMES Customers According to Meadows “the least obvious part of the system, its function or purpose, is often the most crucial determinant of the system’s behaviour.” Operations: Inputs: Waste Recycling Goods & Services to Consumers Natural Physical Social Human Financial Financial Investment Co-production & Provision of Social Capital Primary Production Processing Distribution Retail/Food service Ethical Goals & Rules/Structure Paradigm: •Nature is a stock of resources to be converted to human purposes •The market is the ideal organising mechanism for everything •Money measures value •Growth is good •Self-interest is good Goals: Profit, growth, competition Rules/structure: Share company maximising shareholder value Ethical Paradigm: •Sustainable •Ecological •Connected to place •Democratic •Fair and just The 4 enterprises Enterprise Purpose or Goal The 4 enterprises Enterprise Outcomes Ec Soc Env The 5 enterprises Enterprise Customers The 5 enterprises Enterprise Operations Social capital •Who are the members of your enterprise? • •Social economy initiatives have some element of “social ownership”, one or more of: •Consumer membership •Worker membership •Supplier membership •Investor membership (with limited rights) • Key principle: rights to control Rights to vote at general meeting Rights to net surplus Rights to the net value of the assets Democratic rights Property rights Income rights What rights will the members have? Potential stakeholder Membership: Yes or no? Voting rights? Income rights? Property rights? Consumer Worker Supplier Investor What rules (legal structure) will you adopt? •E.g. –Charity –Social enterprise (for community benefit) –Worker co-operative –Consumer co-operative –Multi-stakeholder co-operative –Private company –Public share company • The 5 enterprises Enterprise Social Capital Members Legal form The 5 enterprises Enterprise Financial Capital 3 types of finance •Grants – these do not require a financial return. However, they do require the recipient organisation to demonstrate the social or environmental return that is being created. • •Loans (or debt finance) require interest payments and the repayment of the amount borrowed (i.e. it is investment with the expectation of repayment of the principle sum as well as regular interest payments). • •Equity is investment in exchange for a stake in the organisation, in the form of shares. This stake usually entitles shareholders to a share of the profits of the organisation, or interest payments once a certain level of earnings has been achieved. • Key principle: rights to control •Grants do not confer any rights, beyond the contractual obligations that a grant may entail. • •Loans carry with them an obligation to repay, but no other rights • •Equity can carry voting rights, income rights and/or a claim on the assets of the organisation. • •Equity has therefore proved to be problematic for organisations in the social economy (including charities, social enterprises and co-operatives ) The 5 capitals – market-based or “non-market”? •Inputs, the 5 capitals, do not have to be bought in the market. •Some inputs can be “commons-based” or “open-source”. Natural Capital Physical Capital Human Capital Primary production Processing Distribution Retail Local communities Eco-Social Enterprise Operations Inputs Outputs: goods & services Natural Capital Physical Capital Human Capital Primary production Processing Distribution Retail Local communities Eco-Social Enterprise Operations Inputs Outputs: goods & services Market-based Commons-based The 5 enterprises Enterprise Natural Capital The 5 enterprises Enterprise Physical Capital The 5 enterprises Enterprise Human Capital Creating sustainable, circular enterprises Enterprise Resource use, waste & pollution minimisation processes http://www.google.cz/url?source=imglanding&ct=img&q=http://www.fungi-futures.co.uk/wp-content/uploa ds/2011/11/coffeeGroundsLowRes-300x206.jpg&sa=X&ei=EU9tUNPtHqmA4gT6lYDQAQ&ved=0CAoQ8wc4Lw&usg=AFQjC NEPobGAlcIQQiVZygqz4EO8l44wzQ Operations: Inputs: Waste Recycling Goods & Services to Consumers Natural Physical Social Human Financial Financial Investment Co-production & Provision of Social Capital Primary Production Processing Distribution Retail/Food service Core Purpose Linking with other enterprises in the local food system Operations Inputs: The 5 Capitals Waste Demand & Consumption Operations Inputs: The 5 Capitals Waste Demand & Consumption Operations Inputs: The 5 Capitals Waste Demand & Consumption Operations Inputs: The 5 Capitals Waste Demand & Consumption Operations Inputs: The 5 Capitals Waste Demand & Consumption 1. Collaboration around inputs 4. Collaboration around waste 3. Collaboration around demand & consumption 2. Collaboration around operations