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14 Jun 2011

So, what exactly is a Transition enterprise?



 

‘From the Ground Up’: a Transition enterprise in Kingston, London, providing vegetable boxes to the local community.

Fiona Ward of Transition Network’s REconomy project has written the following to try and answer the question “what would a social enterprise founded on Transition principles be like?  This posted is intended to stimulate discussion, so do comment below.  Over to Fiona…

Why do we need this definition?

This document defines what is meant by a Transition Enterprise (TE). This definition is useful to the Transition Network because it helps us clarify:

  1. The kind of trading enterprises we would most like to see, as they best support the wider aims of Transition, and
  2. Where we should first direct our limited resources (e.g. via the REconomy project).

Other types of commercial enterprises can also help meet the aims of Transition. In fact, we need a wide range of business models in each local economy to provide the diversity that helps build resilience, including privately owned for-profits and ‘regular’ social enterprise. However we wish to focus our efforts on the TEs at this time as they best align with the aims of Transition, and are under-represented.

Transition Initiatives are welcome to refine this definition for use with their own locale, if useful.

Transition Enterprise Definition

A Transition Enterprise (TE) is a financially viable trading* entity that fulfils a real community need, delivers social benefits and has beneficial, or at least neutral, environmental impacts.

* means of exchange other than money may be used, viability is to at least meet costs

Transition Enterprise Characteristics (in order of priority)
1. Resilience outcome Will benefit the local community by improving its resilience or wellbeing in some way Produces energy from local assets, provides local food etc. Meets a real need. Resilience outcome as important as economic motive (i.e. provide jobs).
2. Low carbon Minimises carbon emissions and so contribution to climate change Minimises energy use of operations, distribution and products. Ideally carbon negative or neutral. Reduces exposure to high cost fossil fuel.
3. Natural limits Works within the natural resource (and energy) limits of the planet, including ecosystem services. Works with suppliers that do the same. Considers cradle to cradle design of products, industrial symbiosis etc. Sustainably sourced local materials. Understands our natural systems’ capacity to deal with waste, toxins…
4. Appropriate localisation Considers viability of business model post peak oil, and level of independence from globalized corporate macro-economy and its risks. Produces goods and services in demand locally/regionally. Not reliant on export or import markets unless for things unique to place. Virtual e.g. creative/IT goods and services excepted.
5. Not just for personal profit Goes beyond distributing profit to individuals, with at least some profits reinvested in the local community. Pays ‘living wage+’, minimises gap between high/low pay levels.
6. Community assets Holding public or “commons” assets and wealth in trust for community benefit (can’t be sold by individuals). Land, community buildings, energy resources, public money, major grants etc.

7. Locally accountable Independent and accountable to a defined constituency who are democratically involved in governance of enterprise E.g. local people invest in enterprise, then have right to vote directors in/out and helps define strategic direction and use of profits, employee ownership models etc.

 

An enterprise could operate as any one of different types of legal entity, and still meet most of these characteristics.

‘Regular’ social enterprises today often tend to lack 2-4 (i.e. those factors that are contributing to our environmental problems) and have a ‘social purpose’ rather than a local community resilience-building purpose.

Unlike most private-for-profits and some social enterprise, the trading of TEs should itself contribute to the resilience or wellbeing of the local community (and do no harm elsewhere). For example, it can’t import plastic products from China to sell in a local shop to raise money to fund Transition projects.

We suggest that this is as far as we need to go with this definition at this stage. It’s not yet clear what sort of economy we will see emerging over the next few years, or what types of enterprises will evolve out of Transition. We will revise this definition as appropriate, apply it with caution and develop a means by which we can evaluate against it, as well as its usefulness overall.

The evolution of local economies that have even a small percentage of enterprises meeting these characteristics is a massive shift from our current globalised capitalist economic system. This list is quite possibly unrealistic to find in many enterprises from the outset, and few will be able to meet all of the above.

This should therefore be seen as an aspiration at this stage and we may, for example, say some characteristics are essential, some important and some desirable to better define criteria for offering funded support, for example.

Use of these characteristics

TEs will be able to access the highest levels of funded support and advice that will be on offer via the TN’s REconomy project. Other enterprises that meet the essential characteristics at least may still be able to access parts of the support offer. We will learn more about the needs and how best to allocate our resources as we go.

Outside the scope of the funded support, the part of the TN that works with businesses and organisations (Transition Training and Consulting) will work with any enterprise that wants to make improvements in any of the above, but it will charge for these services.

To re-build a local economy, Transition Initiatives will need to work with other local partners, for example Chambers of Commerce. They may work together to produce a single vision/plan for their new economy, then agree to work on separate parts of the plan. For example, the Chamber of Commerce may wish to run a ‘Shop Local’ campaign which would include the private for-profits that don’t demonstrate any of the characteristics above. So this should not be seen as a means to exclude large parts of the local economy.

Finally… why not use ‘Social Enterprise’ or ‘Transition Social Enterprise’ rather than just ‘Transition Enterprise’?

Because social enterprise is already quite well defined and we don’t want to confuse things. Transition adds to this definition with the resource/environmental aspects and widens it from a ‘social purpose’ to be a ‘resilience outcome’ and insists that the trading itself is part of the solution.

[Reference: some input used from Social Enterprise in Anytown, John Pearce, p31]

Categories: General

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15 Comments

Gary Alexander
14 Jun 10:46am

This growing emphasis on social enterprise and Fiona’s clarity on what makes a Transition social enterprise is an important development for the Transition Movement.

I also like the footnote saying that says that “trading” could be other than for money, that the enterprise only needs to cover its costs. This is consistent with an enterprise driven by real social and environmental need, not driven by financial gain.

Finally, I would add an emphasis on developing a sense of the community providing for itself, on growing a relationship of mutual support, replacing purely commercial means of satisfying needs.

Luke
14 Jun 11:27am

Hi All

One thing I think that is missing is the connection to other businesses, enterprise and the broader community in the area. We need more of a collaborative system of business, governance, consumption etc. I’ve just established a social enterprise called Energetic Communities. One model I’d like to investigate is how to do this collaboratively, which adds resilience. How do those in collaboration share ideas without necessarily having ownership.

btw – It would also be good to have a ‘follow’/'email me’ button on these pages, for folk who don’t have a comment, but would like to be included on any future comments.

Simon Robinson
14 Jun 2:05pm

Hi Fiona

This is a very nice article and a subject that I am very much involved in here in Brazil. I am a volunteer advisor to a Brazilian social enterprise called SBrasil, and everything that the company does is based around shared values. A lot of work goes into ensuring that all partners in the business ecosystem have shared values, in order that projects can be built on shared meaning. However, SBrasil does not force these shared values on partners, what partners do is first make a commitment to the overall vision, and then they draw up their own code of conduct based on the development of how they define their own values.

SBrasil is still quite young, but we recently launched the first fair trade coffee in Brazil (i.e. coffee that can be purchased in Brazil) with the 5588 coffee co-operative:

http://transitionconsciousness.wordpress.com/2011/05/16/photos-from-the-fair-trade-breakfast-belo-horizonte/

Regards

Simon

Jeff Mowatt
14 Jun 5:21pm

I like what Simon says above about not forcing one’s values on partners. This in my view has been one of the great obstacles to social enterprise in general, that it divides itself into ‘churches’ who do not in general care to engage with each other. When we started in 1999, sourcing local economic development in Russia, there was clearly a need for micro enterprise of any form.

After Russia we brought our community re-investment model to the UK, together with a message about the fragility of traditional capitalism with the aim of replication.

As you will see, part of what we do involves education on the subject of Economics in Transition, with the Economics for Ecology conferences.

The emphasis of what we do is on creating a local environment for self help in which people and sharing replace a 20th century economics of production and scarcity.

http://forestofdean.socialgo.com/magazine/read/the-case-for-local-sustainable-enterprise_38.html

Jeff

David MacLeod
14 Jun 7:24pm

Looks good! I see the characteristics lining up nicely with a number of Permaculture principles. I’m wondering if you are consciously applying these principles, or if they are at this point just embedded in the thinking? Using more of the principles could possibly take TE even further.

See Rob’s post from Dec. 18, 2008: “David Holmgren on Permaculture, Business, Resilience, and Transition.”

Jeff Mowatt
14 Jun 7:52pm

HI David, not sure if you mean us or TT. For us conscious application which began in 2004 by being an instance of the model we advocate. First efforts were directed in a proposal to capitalise the development of other social enterprise by means of revolving community re-investment via the vehicle of local CDFIs.

http://www.box.net/shared/y3tpik8eg6

Looking back, it’s easier to see how some of the concepts proposed were perhaps incomprehensible to the social enterprise movement. We were talking about developing local economies, fair wages and human rights as a guiding principle and the insufficiency of traditional capitalism as an economic paradigm.

It began with a set of principles, arguing the case for reciprocity and sharing.

http://socialbusiness.socialgo.com/magazine/read/you-me-we-ethics-and-people-centered-economics_5.html

David Eggleton
16 Jun 4:21am

On the Transition in Action Social Network site, Les Squires asked What is a Transition Business? A couple of us have responded. We’d enjoy more voices there.

http://transitioninaction.com/profiles/blogs/global-transition-in-action-414

Jeff Mowatt
16 Jun 9:43am

I’ll be doing that David, as soon as my membership is approved. It’s what you said, about the whole person and the information age which interested me most. As you’ll see, these issues are raised in our founding paper which sets out the ‘profit for purpose’ business model.

http://www.p-ced.com/1/about/history/

Listening again to Prof Tim Jackson talking at Ted on prosperity, you’ll hear him describe the CIC and B-Corporation business models, which he says, indicate what the new approach to growth might look like.

The core argument from out white paper, reasoned that money imagined into existence as debt, had disenfranchised more than a billion people, to the point that they would consider their existence threatened. It asserted that:

“Economics, and indeed human civilization, can only be measured and calibrated in terms of human beings. Everything in economics has to be adjusted for people, first, and abandoning the illusory numerical analyses that inevitably put numbers ahead of people, capitalism ahead of democracy, and degradation ahead of compassion.”

Sonya
21 Jun 12:57am

Hi, Here on the Sunshine Coast we are setting up a social enterprise that has come about directly from our Transition Town work. Its a replication of Food Connect (www.foodconnect.com.au), Cheers, Sonya

Graham Mitchell
20 Jul 8:11am

A couple of points:

Whilst I’m sure it is useful to seek to develop a definition of what a Transition business might look like, I’m concerned that it might lead to silo thinking about whether a business is ‘one of us’ or not. As another commenter mentions, the notion of various ‘churches’ not talking to each other is a risk that must be avoided, and it does look to an outsider such as myself as if there is a growing ‘Church of Transition’.

It all feels a bit ‘top down’ to me. My experience tells me that strong businesses are built from the bottom up, and whilst education/indoctrination clearly has an important role to play, let’s not fall into the trap of thinking that top down approaches work. The document at https://www.transitionnetwork.org/sites/default/files/Totnes%20Local%20Economy%20Vision%20-%20draft%20v2.pdf that sets out some framework thinking about how economic development might happen in Totnes rings the same alarm bells for me.

As we move further into/past peak oil and the massive changes this will bring about, there will be many opportunities to develop new businesses. Some of these will be created by people who ‘get’ transition thinking, many won’t. Is it the role of TN to set a purist and exclusive definition of what a Transition compliant business might look like, or to define a more gentle, inclusive ‘ramp’ of qualities by which any business can aspire to be a transition business?

I chair the Green Valley Grocer – a community owned cooperative in West Yorkshire that you’re aware of Rob, and indeed you have mentioned us positively on several occasions, and which you might hold up as an example of a Transition business. While we might well aspire to the 7 point list above, we are by no means at the pinnacle. Inclusiveness is critical in developing this work, in my view.

And, on the point of viability, I would argue strongly that for a business to be sustainable it needs to generate a surplus/profit in order to ensure it has the resources to meet its needs over time. This might be covered by the notion of meeting costs, if that cost structure is viewed over a sufficiently long term.

Jeff Mowatt
20 Jul 11:32am

Hi Graham. The points you make resonate strongly with my own experience. In 2005, writing to the chair of the Social Enterprise Coalition, making the point about silo thinking or as I was to put it ‘operational paradigms’, was my great concern on the way the sector had developed. We could not push the envelope because we’d not aligned to one of the current churches. That she didn’t respond should perhaps be of greater concern.

http://www.box.net/shared/9c3x229hll

What I’m describing to her there is a work in progress in international development to leverage social enterprise on a national scale. In the strategy plan which came a year later you will find what you’ve said about about profit and viability, i.e.

“Enterprise is any organizational activity aimed at a specific output or outcome. Once the output or outcome – the primary objective – is clear, an organization operating to fulfill the objective is by definition an enterprise. Business is the most prominent example of enterprise. A business plan, or organizational map, provides a reference regarding how an organizational scheme will operate to produce a specific outcome: provision of products or services in a way to create profit. Profit in turn is measured numerically in terms of monetary gains, the “bottom line.”

This is the function of classic capitalism, which has proven to be the most powerful economic engine ever devised.

An inherent assumption about capitalism is that profit is defined only in terms of monetary gain. This assumption is virtually unquestioned in most of the world. However, it is not a valid assumption. Business enterprise, capitalism, must be measured in terms of monetary profit. That rule is not arguable. A business enterprise must make monetary profit, or it will merely cease to exist. That is an absolute requirement. But it does not follow that this must necessarily be the final bottom line and the sole aim of the enterprise. How this profit is used is another question. It is commonly assumed that profit will enrich enterprise owners and investors, which in turn gives them incentive to participate financially in the enterprise to start with.

That, however, is not the only possible outcome for use of profits. Profits can be directly applied to help resolve a broad range of social problems: poverty relief, improving childcare, seeding scientific research for nationwide economic advancement, improving communications infrastructure and accessibility, for examples – the target objectives of this particular project plan. The same financial discipline required of any conventional for-profit business can be applied to projects with the primary aim of improving socioeconomic conditions. Profitability provides money needed to be self-sustaining for the purpose of achieving social and economic objectives such as benefit of a nation’s poorest, neediest people. In which case, the enterprise is a social enterprise. ”

http://en.for-ua.com/analytics/2007/08/09/110003.html

Scroll down to the summary and you’ll see the case for inclusion and democratic oversight, with focus on “those in greatest need who must be helped first”.

David Eggleton
21 Jul 3:08pm

Fiona wrote: “This definition is useful to the Transition Network because it helps us clarify:

1. The kind of trading enterprises we would most like to see, as they best support the wider aims of Transition, and
2. Where we should first direct our limited resources (e.g. via the REconomy project).”

The “wider aims of Transition” reflect the permaculture ethics, which are central to Transition, no?

The second point means that what we see in the characteristics is a prioritization of momentary usefulness.

What sorts of give and take will work for communities and regions will change endlessly. That picture will change again and again; people will be in it as long as there is one.

Fiona
22 Jul 9:53am

Thanks David, and to all posters…

Many thanks for your thoughtful comments, ideas and suggestions all of which are very useful. To respond in more detail to a few specific things, particularly as raised by Graham Mitchell…

I agree strongly with the comments about the need for this economic development being bottom-up, and I’m not sure how much more bottom-up we can get, in that the key local organisations in our small market town have come together to define the vision for our new economy.

They directly represent the local people and businesses. The vision is very particular to our place, our local assets, our trading history and our sense of place. For example, one of the key factors is that the majority of local businesses have less than 5 employees – we have a micro economy here.

This partnership includes the local authority, town council, chamber of commerce, college, secondary school, development trust and other important organisations that represent our community and future workers.

The role of Transition Town Totnes here is to facilitate the work of this collective partnership. The vision document that Graham refers to is the draft vision we have collectively come up with.

What we’re trying to put in place with this framework are the enablers that might best help us grow the kind of economy we want to see, one that ‘maximises the happiness and well-being of our entire community’.

Clearly we can’t anticipate what will emerge, but for example, we can I think assess the demand for a food processing plant and local distribution system for local producers, for example, and help ensure this happens.

We can help ensure access to a range of work spaces and land. We can provide information to help new enterprises embed sustainable business practice from the outset. We can help the local community understand that every time they choose to spend money with this type of business or that type of business, then this has consequences, and so on.

I don’t see what we’re proposing here as top-down, but more fertilising the group at the grass roots level to help things grow, things that are healthy and beneficial. I agree that profit is desirable, it’s what that profit then serves that is of most interest.

Clearly our local economy needs to be a mix of types of enterprise – private, public and social. Each of the partners might have a preference for the types of enterprise they support.

For example, TTT is most interested in increasing the number of enterprises that meet at least some of the attributes of a ‘Transition Enterprise’ per the proposed definition. The Chamber of Commerce for example, represent the interests of the existing businesses in town, most of which are micro private for profits (most of them would agree that some profit would be nice!). What we have done collectively is to agree what we all want to see – not just TTT.

I like the idea of a business stating their own interpretation of shared values and will think more about how to incorporate this into our model.

I share your concern about a creating a them and us mentality around type of business, but at the same time, we feel the need to have some type of criteria that can be used to help decide where we focus our limited resources (in terms of trying to stimulate new enterprise) – that just means the TTT resources, not resources that other partners bring.

As David notes above, it’s important to state again that the Transition Enterprise criteria are aspirational – we do see this as a ‘ramp’ of qualities as you so nicely put it.

So that’s how we are proceeding in Totnes at the moment – if you’d like to stay informed about this work and the wider REconomy project (involving 10 Transition Initiatives around the UK), you can join our project workspace at http://www.transitionnetwork.org/cms/reconomy-project-workspace and get automatic updates when news and other items are posted, and you can comment freely.

Please do come and join us there and continue to share your thoughts and ideas, both critical and positive. We need all the help we can get, we’re not sure how this will pan out, but it’s an exciting and daunting adventure…

Graham Mitchell
22 Jul 10:32am

Fiona,
Many thanks for taking the time to come back on my comments and clarify. This is really helpful, and greatly allays my concerns on these issues. I think I’m hooked into the Reconomy thing on the TN site, and will endeavour to keep up with that and contribute as appropriate.

Christian Sweningsen
19 Aug 12:19am

Many thanks