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Social Enterprise: Blending Business with Social Justice – What’s Possible?: 

Social Enterprise: Blending Business with Social Justice – What’s Possible? Prepared for the Faculty of Business, University of Victoria, Victoria, October 21, 2005 Edward T. Jackson

Social Enterprise:: 

2 Social Enterprise: The Short Answer: Not everything, but a lot! The Long Answer: UPSIDE Social enterprise takes many forms, and produces a wide range of goods and services The benefits of social enterprise include: enhanced livelihoods and employability for marginalized groups; production of reasonable-cost, good-quality, socially useful and environmentally sustainable goods and services direct governance by local communities, either place-based or interest-based creative mobilization of diverse public and private resources to advance social justice and economic opportunity Business schools and governments have discovered social enterprise and are promoting it in increasingly robust fashion Blending Business with Social Justice – What’s Possible?

Social Enterprise:: 

3 Social Enterprise: LIMITS But, starting and growing a social enterprise – especially, balancing the social, environmental and commercial objectives – is hard work Well-trained and well-supported managers of social enterprises are in short supply Social enterprises can complement, but not replace: social policy regional policy trade unions political activism political parties Blending Business with Social Justice – What’s Possible?

The Social Enterprise “Zone”: 

4 The Social Enterprise “Zone” Private Sector Government Civil Society Social Enterprise: Any business that seriously seeks to achieve social or environmental as well as commercial objectives

Types of Social Enterprise: 

5 Types of Social Enterprise Newman’s Own LARGE SMALL FOR-PROFIT NON-PROFIT $100 M Sales $100 K Sales Aarong Crafts (BRAC) Oxfam-HK Second-Hand Shops Horn Afrik Radio Gariba Development Associates (GDA) The “Democracy Arc” COOPERATIVE REST >$200 M Sales Body Shop Ben & Jerry’s

Capital Markets for Social Enterprise: 

6 Governments Regional Agencies Capital Markets for Social Enterprise Grants Loans / Equity Governments Development Agencies Foundations Corporations Community Futures Community Loan Funds Credit Unions Social Venture Capital Banks Credit Unions Business Development Bank Regional Agencies Labour Funds Banks Credit Unions Targeted Pension Investments Regional Agencies Labour Funds

Case Study - REST: 

7 Case Study - REST

Case Study – Newman’s Own: 

8 Case Study – Newman’s Own “We were a joke in 1982, but the joke has given away $150 million so far – so we are a very practical joke.” (Paul Newman) Reading: Paul Newman and A.E. Hotchner, Shameless Exploitation in Pursuit of the Common Good

Social Enterprise: the Business School Response: 

9 Social Enterprise: the Business School Response Harvard Business School – Social Enterprise Initiative SE: “the contributions of any individual or organization can make toward social improvement, regardless of its legal form (non-profit, private, or public sector) based on the belief that these organizations individually and collaboratively can generate significant social value.” Achievements since 1993: Established an SE tenure-track position Engaged over 40 faculty members in SE research and teaching Produced 164 cases and 25 working papers Courses on SE added to the curriculum “enabled HBS to take a leadership role in positioning social enterprise as a vital intellectual discipline and critical factor in the global business equation”

Social Enterprise: Government’s Response: 

10 Social Enterprise: Government’s Response The European Union SE: The social economy, or third system, includes cooperatives, mutual societies, associations and foundations. The enterprises in the social economy privilege social objectives over capital, operate under democratic control of voluntary members, promote solidarity, are independent of government, and distribute surpluses for public-interest or member objectives. European Employment Strategy: Regional development agencies promote entrepreneurship by the social economy to: increase employability and enhance integration of disadvantaged groups into the labour market, including immigrants, women, youth, the disabled and others Build local social capital Convert and legalize the informal economy Reading: eurada.org; aries.eu.int

Social Enterprise: Government’s Response: 

11 Social Enterprise: Government’s Response United Kingdom SE: “a business with primarily social objectives whose surpluses are principally reinvested for that purpose in the business or in the community, rather than being driven by the need to maximize profit for shareholders and owners.” Three Key Outcomes Promoted by the Department of Trade and Industry Create an enabling environment (coordinate government activities, address legal and regulatory issues, lever public procurement) Make social enterprises better businesses (provide business support and training; provide finance and funding) Establish the value of social enterprise (establish the knowledge base, celebrate achievement, build confidence through performance and standards) Reading: dti.gov.uk

Social Enterprise: Government’s Response: 

12 Social Enterprise: Government’s Response Canada SE: “Social economy enterprises are run like businesses, producing goods and services fro the market economy, but they manage their operations and redirect their surplus in pursuit of social and community goals.” Includes non-profit and cooperative enterprises. Appointed Parliamentary Secretary for the Social Economy – Hon. Eleni Bakopanos National Roundtable appointed and convened Budget 2004 provided funds via regional development agencies (Western Diversification, FEDNOR, CED-Quebec and ACOA) for: Capacity Building: $17M over two years (05/06-06/07) Financing: $100M over five years (05/06 – 10/11) SSHRC : $15M over five years (05/06-10/11)

Ten Limits and Contradictions of Social Enterprise: 

13 Ten Limits and Contradictions of Social Enterprise Businesses can fail, jobs and services can be lost Surpluses can be small, negative or unreliable Local markets offer limited growth opportunities Partnerships with government, especially contract-based relationships, can be asymmetrical and create dependency Social enterprises may not provide universal coverage of their services Balancing the need for business expertise on boards with the principle of democracy is very difficult

Ten Limits and Contradictions of Social Enterprise: 

14 Ten Limits and Contradictions of Social Enterprise The private sector can claim “unfair competition” by social enterprises The political left is concerned that social enterprise can displace unionized, government services, thereby providing cover for neo-liberalism Movement leaders seek to mainstream social enterprise and CED but yet retain its autonomy Social enterprise leaders are in short supply!

Intermediaries Optimize Social Enterprise Success: 

15 Intermediaries Optimize Social Enterprise Success Forms: Community development corporation, non-profit umbrella, foundation, program, network Functions: Technical assistance (consulting, training, business planning, market studies); financing (grants, loans, equity); management support; political support (promotion, lobbying, regulatory change) Funding: Foundation, corporate and government grants; loans and other program-related investments; contracts; enterprise surplus; asset appreciation; private philanthropy; donations and gifts; volunteer time Factors (of Intermediary Success): Leadership (skills, vision continuity, succession); structure (flexible, evolving); strategy (growth opportunities, backward and forward linkages, first-mover advantage); management; human resources; innovation; replication and scaling up; financing (diversification of revenues); accountability

Case Study – New Dawn Enterprises: 

16 Case Study – New Dawn Enterprises Cape Breton Association for Co-op Development New Dawn Enterprises (Non-Profit CDC) Cape Care Services Ltd. Home Care Services Cape Breton Association for Housing Development Real estate company for affordable housing Highland Resources Ltd. Private career college New Dawn Guest Home Ltd. 30-bed residential care facility David Realties Commercial landlord 1973 Reading: newdawn.ca

Case Study – Oxfam Hong Kong: 

17 Case Study – Oxfam Hong Kong Oxfam International - 12 Oxfams working in 110 countries Hong Kong and Chinese Donors Special Events Trailwalker Hike - $21M Other events and appeals $18 M Community Development and Capacity Building in China Oxfam Rice China Development Fund - 120,000 packets sold for $3M $5M contribution Two Second-hand Stores - $2M revenues second-hand CDs International crafts 100 volunteers Funds, Expertise $6M Funds $52M “Rural Women Knowing All” - 200,000 copies - Currency in Hong Kong Dollars - Reading: Oxfam.org.hk $39M contribution

Case Study - BRAC: 

18 Case Study - BRAC

Case Study - Benetech: 

19 Case Study - Benetech Jim Fruchterman,Founder Beneficent Technologies (Non-Profit) Bengineering Inc. (For-Profit) Revenue from monthly subscriber fee plus grants for rollout Revenue from server maintenance and administration, customizing software and training Reading: Benetech.org

Case Study – Social Capital Partners: 

20 Case Study – Social Capital Partners Social Capital Partners Social Venture Portfolio Renaissance, Montreal Inner City Renovations, Winnipeg Social Enterprise Investment Decision Steps Concept Review Business Plan Review Due Diligence Alignment and Deal structure Investment and Ongoing Working Relationship Monitoring and Reinvestment Social Enterprise Research on SROI/Evaluation Bill Young/ Bealight Foundation Sector and Policy Engagement $100K equity $100K loan Used to test new ideas in marketing, merchandizing and pricing $50 K grant and board involvement Grants, Loans, Equity Reading: Sean VanDoorselaer, “Venture Capital for Social Enterprise,” Making Waves, 15(3), 2004, 10-13 Challenges “Dearth of great social entrepreneurs” Lack of sophisticated business models Limited sources of social capital

Corporate Social Responsibility through Social Enterprise: 

21 Corporate Social Responsibility through Social Enterprise Strategies: Grantmaking to SE/CED projects (Bell, RBC, Cooperators) Venture philanthropy (e.g. Social Capital Partners) Joint ventures (RBC-St. Christopher House, Dupont-McGill) Procurement from community/social enterprises (Suncor, Syncrude) Opportunities: Multi-stakeholder exchanges: corporations, governments, SE sector organizations Replication and scaling on business-community partnerships Incentives to do more and do it better: awards, recognition, tax incentives Research Questions: How can SE–through–CSR models be effectively sustained, replicated and scaled?

Innovation in Social Enterprise: 

22 Innovation in Social Enterprise Innovation Defined: “a change that creates a significant new dimension of non-profit performance” (Drucker) Key Elements: Knowledge management (explicit and tacit knowledge, ICTs) Value-added production technology Social entrepreneurship of the CED organization or other intermediary Research Questions: How does the innovation process really work in social enterprise, and how can it be enhanced?

Evaluation of Social Enterprise: 

23 Evaluation of Social Enterprise Evaluation Defined: Assessment of social, environmental and commercial results, lessons learned and accountability systems by key stakeholders. Promising Methods: Return on Taxpayer Investment (ROTI) – Input-output modeling of direct, indirect and induced effects of government-supported interventions Social Return on Investment (SROI) – Method for assessing the social costs associated with the individual employees and the social enterprise itself (Social Capital Partners, REDF) Enhanced Value-Added Statement (EVAS) – Quantifies the value of social impacts and volunteer contributions of a non-profit or cooperative (Quarter et al)

Evaluation of Social Enterprise: 

24 Evaluation of Social Enterprise Issues: Attribution: Need to tell credible evaluation stories demonstrating results-chain linkages How to mix stakeholder participation and outside experts in the evaluation process Research Question: What methods are most effective in accurately and appropriately assessing the social, environmental and commercial results generated by social enterprises?

Questions for Discussion: 

25 Questions for Discussion What current teaching and research activities at UVic, inside and outside the Faculty of Business, are related to social enterprise? What further work could be done in teaching and research with respect to: Social enterprise in BC coastal communities? Businesses driven by green technologies? Social enterprise in the Asia-Pacific region? What opportunities could be provided to Business students to engage with social enterprise, through field research, cooperative placements, case-study preparation or advisory-service delivery? To what extent do possibilities exist for inter-Faculty cooperation on social enterprise?

Useful Websites: 

26 Useful Websites