The concept of sector and community business

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Is the concept of sector useful in understanding and supporting community businesses?

Jan 5, 2022

Mylene Pacot

Mylene Pacot

Senior Project Manager, Renaisi

Renaisi led the evaluation of the Power to Change funded programmes Bright Ideas, Community Business Trade Up and Community Business Fund. As part of an extension to this evaluation, Renaisi have used findings generated from the evaluation to explore four thematic areas. The first of these papers explores the concept of ‘sector’ in the community business marketplace.

Read Sector and Community Businesses on the ICS Repository.

Sector classifications exist in many forms, ranging from widely accepted typologies such as the UK Standard Industrial Classification Hierarchy to those created by individual organisations for their own operations. Power to Change, like most funders, has developed its own classification to manage and categorise their diverse pool of funding. This paper explores whether the concept of sector can be useful to funders to understand and support community businesses going forward, using learning from the Power to Change-funded programmes Bright Ideas, Trade Up and Community Business Fund.

The key insights are:

  • Insight 1: Sector trends in the community business market are not easy to identify

Between 2015 – when Power to Change was established – to today, the marketplace for community businesses has changed significantly. There has been a clear increase in the number of community businesses operating in England. However, the change in sector profile of the community business marketplace is less clear. Different sectors have either grown, plateaued, decreased or fluctuated in terms of income and number of businesses.

  • Insight 2: Community businesses do not always operate neatly in one sector

As the community business market grows and community businesses evolve, the lines between sectors become increasingly blurred. Some community businesses fall into several sector categories – as offering a wide range of services can be part of their ethos – while others do not fit neatly into any of the existing categories. Sometimes, community businesses also operate in new and emerging sectors that are not yet covered in traditional sector classifications.

  • Insight 3: Sector typologies can still be beneficial

Despite the limitations of sector typologies, they nonetheless have functional benefits. In particular, three key benefits emerged for funders around decision-making and funding processes, managing funding programmes and research and learning. For community businesses, sector typologies can be beneficial to facilitate networks and encourage peer-learning.

  • Insight 4: Other characteristics can help categorise community businesses

Other characteristics could be used to complement sector typology and categorise community businesses in a helpful way. They include: the structure of a community business, the speciality and variation in service delivery and the commerciality of their product.

  • Insight 5: There are new market opportunities for the community business model

As the community business market continues to grow, new market opportunities are emerging outside traditional sector typologies. Three new market opportunities in particular were highlighted as promising for the community business model: the environmental and sustainability sector, the technology sector and the incubator and infrastructure sector.

  • Insight 6: There are both common and unique influencing factors across sectors

Research shows that there are several common influencing factors that cut across sectors, while certain factors are more prevalent in particular sectors. Common factors include staffing, confidence to trade on the open market, access to funding and perception of the community business in the community, amongst others. Conversely, market competition can be positive influencing factor for community hub, facility or space, yet can also be a challenge for other sectors (e.g., health, sport and leisure; culture and tourism; and community pub, shop or café).

Recommendation

Power to Change and other funders should continue using sector typologies to understand and support community businesses, while being mindful of their limitations. Sector categorisations could be used in conjunction with other characteristics, and should continue to evolve over time. For instance, sector typologies could include new market opportunities such as environment and sustainability, technology and incubator spaces – along with research into the role of community businesses in those markets.