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Social enterprises use a business model to achieve social outcomes. That’s a valuable contribution to creating healthy and sustainable communities. So what do we need to do to support their development, growth and success? In the past several years, the Enterprising Non-Profits Program (enp) and the Social Enterprise Council of Canada (SECC) have used a simple but interrelated framework to define the components required to create a supportive environment for social enterprise:

  • Evidence of the social impact: research and evaluation.
  • Business skills development: supporting non-profits along the social enterprise development path.
  • Access to appropriate financing: the “right money at the right time.”
  • Enhanced markets: build the demand for social enterprise products and services.

Recently, I was asked at a forum what could government do in the immediate future to support social enterprise and social finance. After some thought, I realize there are both some long-term issues that need addressing, as outlined above, but there are some real easy, quick things with minimum costs and efforts that would have a real impact on the social enterprise environment.

So I suggest five simple “tweaks” of existing government policy that will move the social enterprise environment agenda forward. They require a minimum investment and offer the potential for a huge return.

1) Recognize non-profit incorporation as a legitimate business model.

No longer is it just the traditional for-profit corporation, business for the shareholders; we must accept that ‘business’ can include a social value return on investment. Businesses can legitimately be “owned” by non-profit societies, co-operatives and charities. Business can legitimately have a blended financial and social return on investment.

We don’t need huge re-regulation or additional bureaucracy to make this change, just a mere adjustment to our perception and conception of what is business.

Governments should include social enterprise in their business policies and programs. It follows then….

2) Government should provide social enterprises access to their existing SME programs and services

Research conducted in early 2011 by enp regarding access to government-funded SME (small and medium size businesses) services for social enterprises discovered that currently only 5% of the government programs clearly give access to social enterprises, while 93% are ambiguous and confusing on access, and 2% specifically exclude access to non-profits.

A necessary and easy adjustment is to clarify that social enterprises do have access to current services. This will provide social enterprises the same access to government services that are offered to other small and medium sized businesses, including business skills enhancement, business planning support and advice provided by business centres and to loans and guarantees.

3) Make the existing tax credits available to social enterprises

Governments have found that providing tax credits can stimulate economic and employment growth through encouraging investment in certain business sectors, such as film, green, new technology, manufacturing, etc.

A simple regulatory adjustment can make the existing tax credits available to social enterprises, allowing investors to select a social value with their investment and still have access to tax credits they may get with purely financial investment in other business sectors. This isn’t asking for new or added tax credits, just leveling the playing field by adjusting the current rules to make them available for social enterprises. Let the investor decide if social finance is the option for their investment.

4) Add Community Benefit Clauses onto all government purchasing above $100,000 to leverage and ensure increased local economic and employment outcomes

Governments spend billions of dollars on services and products. This existing spending offers an amazing opportunity to leverage local economic and employment benefits.

In the past twenty years, government has realized the need to move toward sustainable purchasing practices through inclusion of environmental impact standards in all purchasing and the subsequent supply chains. Now it is time to recognize that social outcomes are also a component of sustainable purchasing policy and practice.

Government can achieve this objective by requiring a Community Benefit Agreement (CBA) on all purchases, and to make it easy I’ll suggest they start federally above $100,000. It asks all bidders, regardless of where they come from, to include in their bid how they will purchase from and/or hire from the local community. CBAs do not add new costs; they leverage the existing and necessary supply chain to create local economic and employment benefits for both local private sector and social enterprise SMEs. It merely adds one more scoring component to the bid analysis: there is price, quality, environmental impact, and now social impact as well.

The 2010 Olympics successfully experimented with this purchasing policy and framework, and it is now part of all major international games. In Glasgow, they are already seeing the positive impacts on small businesses and social enterprise opportunities as sub-contractors on major government spending projects. In the UK and in Scotland there are government initiatives going through approval process.

5) Work collaboratively on how business models can achieve social value

The key pieces of the economy – private business, government and non-profits – have a tradition of working in silos. There seems to be an assumption that they are not connected to each other. But, in fact, they are all fundamental pieces to the puzzle of creating sustainable economies and healthy communities. And puzzles are completed when the pieces are interconnected and work together. Government can encourage and facilitate the collaboration and cooperation. Government should be the convener of cross sector engagement and solution development. Convening builds social capital, and social capital likely flows to economic relationships and opportunities.

Social enterprise won’t solve all of our social and economic issues; it isn’t the right solution sometimes and isn’t the right course for many non-profits. But as we review the research and we hear the anecdotal stories from so many communities, social enterprise is an undervalued opportunity to use business models to create social value. With a few tweaks to public policy we’ll add important resources and impetus to the current momentum.

David LePage
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David LePage is the program manager of Enterprising Non-Profits, enp, a unique collaboration of funders who provide support for social enterprise development. He is also a member of the Social Enterprise Council of Canada, and the Policy Council for Canadian Community Economic Development (CCEDNet).

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