Social Enterprise: Blending Business with Social Justice Whats Possible

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Social Enterprise Blending Business with Social
Justice Whats Possible?
Edward T. Jackson

• Prepared for the Faculty of Business, University
  of Victoria, Victoria, October 21, 2005

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Social Enterprise
Blending Business with Social Justice Whats
Possible?

• 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

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Social Enterprise
Blending Business with Social Justice Whats
Possible?

• 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

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The Social Enterprise Zone

Government
Private Sector
Civil Society
Social Enterprise Any business that seriously
seeks to achieve social or environmental as well
as commercial objectives
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Types of Social Enterprise
LARGE
Body Shop Ben Jerrys
200 M Sales
Newmans Own
100 M Sales
Aarong Crafts (BRAC)
FOR-PROFIT
NON-PROFIT
COOPERATIVE
Gariba Development Associates (GDA)
REST
Oxfam-HK Second-Hand Shops
Horn Afrik Radio
100 K Sales
The Democracy Arc
SMALL
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Capital Markets for Social Enterprise
Grants

• Governments
• Development Agencies
• Foundations
• Corporations

• Governments
• Regional Agencies

Loans / Equity

• 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

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Case Study - REST
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Case Study Newmans 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

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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

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Social Enterprise Governments 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
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Social Enterprise Governments 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
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Social Enterprise Governments 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)

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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

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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!

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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

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Case Study New Dawn Enterprises
Cape Breton Association for Co-op Development
New Dawn Enterprises (Non-Profit CDC)
1973

• 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

Reading newdawn.ca
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Case Study Oxfam Hong Kong
Oxfam International - 12 Oxfams working in
110 countries
Funds 52M
Funds, Expertise 6M
Hong Kong and Chinese Donors
39M contribution
5M contribution

• 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

• Two Second-hand Stores
• - 2M revenues
• second-hand CDs
• International crafts
• 100 volunteers

Rural Women Knowing All - 200,000 copies
- Currency in Hong Kong Dollars - Reading
Oxfam.org.hk
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Case Study - BRAC
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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
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Case Study Social Capital Partners
Bill Young/ Bealight Foundation
Social Capital Partners
Social Venture Portfolio
Sector and Policy Engagement
Research on SROI/Evaluation
Grants, Loans, Equity
Renaissance, Montreal
Inner City Renovations, Winnipeg
Social Enterprise
Social Enterprise

• 50 K grant and board involvement

• 100K equity
• 100K loan
• Used to test new ideas in marketing,
  merchandizing and pricing

• Investment Decision Steps
• Concept Review
• Business Plan Review
• Due Diligence
• Alignment and Deal structure
• Investment and Ongoing Working Relationship
• Monitoring and Reinvestment

• Challenges
• Dearth of great social entrepreneurs
• Lack of sophisticated business models
• Limited sources of social capital

Reading Sean VanDoorselaer, Venture Capital for
Social Enterprise, Making Waves, 15(3), 2004,
10-13
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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 SEthroughCSR models be effectively
  sustained, replicated and scaled?

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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?

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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)

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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?

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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?

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Useful Websites