Meet the coffee chain donating 65% of its profits to the community
Wouldn’t it be great if your morning coffee didn’t just taste good but also did good for the local community too? This is the principle that speciality roastery Social Impact Coffee was founded on.
While many business pledge to donate a proportion of their profits to charitable causes, its founder, Adrian Evans wanted to go one step further by establishing the business as a community interest company (CIC). CICs were first established as a way for businesses to reinvest their profits into social causes. They differ from other social enterprises in the fact that they are regulated and, as part of the regulator’s rules, there is a dividend cap of 35%, meaning that the remaining 65% of profits have to be reinvested into the local community or back into the business.
Since first being introduced in 2005, the number of CICs has ballooned from 208 to 28,952 today, while the number being founded each continues to rise. However, that means they still make up a tiny proportion of the UK’s businesses.
Evans, a veteran of the corporate hospitality sector, explains that a shift in values motivated him to set up his own social-focused enterprise. “The pandemic caused a real value shift for everyone and made us ask if we are working on the things that really truly matter to us,” he says.
With two children both on the autistic spectrum, Evans is particularly familiar with the barriers that neurodivergent people face when trying to enter the workforce (it’s estimated that 30% to 40% of the neurodiverse community are unemployed). As a result, Evans wanted to create a business that would help what he saw as the two most pressing issues facing society: protecting the planet and supporting people with mental health issues.
While he explored the idea of setting up a social enterprise in order to do this, the CIC setup appealed because it is regulated. “That’s a really important piece,” he says. “It’s not a charity, this is a business, but it’s committed to giving 65% of the profit to good causes.”
As a coffee roastery, Social Impact Coffee works with corporate clients to serve fresh coffee in their workplace. A portion of the profits made on each site are donated to local charities or community causes, while profits made offsite are donated to the mental health charity Young Minds. Evans is still focused on producing great coffee but with the added benefit that comes from running a CIC.
“The product still has to be the best that it can be,” he explains. “But customers’ purchases will also be doing good for the local community where they drink the coffee.”
How to set up a community interest company
Gaining approval from the CIC regulator is no easy task. It took six months of dialogue with the regulator in order for Social Impact Coffee to be approved, with Evans describing the process as very thorough.
The difference between CICs, charities and social enterprises
While all three have similarities, there are some key differences between a CIC, charity and social enterprise.
A charity will receive most of its funds from donations and gifts. In contrast a CIC will use the profits it makes from selling products or services to reinvest in social causes.
What separates a CIC from a social enterprise is the fact that CICs are regulated. This means that a CIC has a specific legal structure and rules that it must adhere to, such as the 35% dividend cap and an asset lock, which other social enterprises don’t require.
“The regulator was stringent, which we wanted them to be, but we were hoping it would be a little bit quicker than it was,” he admits. “Our documentation needed to be absolutely nailed on when we were sending information through to the regulator because they are so detail oriented.”
In order to become a CIC, an organisation must pass a ‘community interest test’ that must convince the regulator that its purpose is in the interests of the community or wider public. There is also a small fee that is paid to the regulator for its work, similar to the one paid to Companies House for registering a business.
Another fundamental feature of CICs is an asset lock that prevents the company’s resources from being used for private gain. “It’s a way to prevent CICs from being converted into a normal limited company. It means you can’t close the CIC down and move the assets over to a new company,” Evans explains.
CICs can issue shares but any dividend is capped at 35% of profits to ensure that the other 65% of the money made is reinvested into the company or used for the community it was set up to serve. While this may deter some investors, Evans doesn’t see it as a hindrance for his ambitions with Social Impact Coffee.
“We’ve intentionally not gone out for massive investment but we do hope that the model will scale. We want to create a bit of a movement and prove that this business model works,” he adds.
Organisations can also lose their CIC status if they are found to no longer be compliant. As a director of the company, Evans had to sign up to make the commitments required of all CICs.
Choosing the right model for your business
Evans acknowledges that the CIC model is not suited to every business, even those that want to bake in their values and social impact. While becoming a CIC was right for him and his business, others may want to set up a charity or a social enterprise.
“There are different benefits to each way of operating,” he says. “Look at the model and decide whether it’s the right thing for you first.”
In the case of Social Impact Coffee, Evans believes that the CIC model was right because he wanted to build a profit-making business that could grow while also doing good. “Setting up a charity seemed quite restrictive because charities don’t have the same growth expectations that are in the DNA of profit-making organisations. We want to be able to scale this so we can have as big an impact as possible.”
For those that do opt to go the route of becoming a CIC, he has found that being backed by a regulator has been reassuring for clients. “We’ve seen companies hit with accusations of greenwashing and social washing,” he adds. “That accountability allows you to demonstrate your values really clearly to any future customers and clients.”
Although Social Impact Coffee is still relatively young, Evans hopes that he can encourage others to explore the benefits of becoming a CIC. “Success for me would be other people looking at this model and saying, ‘this is a good way to do business’,” he concludes.
This article is part of our Going Against the Grain series, which tells the stories of companies bold enough to break business norms and try out new ideas. To explore the rest of the series, head here.