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Social Enterprise Blending Business with ... - Carleton University


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

                   Edward T. Jackson

Prepared for the Faculty of Business, University of Victoria,
                Victoria, October 21, 2005
               Social Enterprise:
Blending Business with Social Justice –
          What’s Possible?
The Short Answer: Not everything, but a lot!
The Long Answer:
  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
      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                              2
                Social Enterprise:
Blending Business with Social Justice –
          What’s Possible?
  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

The Social Enterprise “Zone”

                           Private Sector

           Civil Society

 Social Enterprise: Any business that seriously
   seeks to achieve social or environmental
        as well as commercial objectives
        Types of Social Enterprise
  Body Shop              LARGE
  Ben & Jerry‟s        >$200 M Sales

        Newman‟s Own
                              $100 M Sales
                                             Aarong Crafts


FOR-PROFIT         COOPERATIVE                  NON-PROFIT

  Gariba Development
  Associates (GDA)                               REST

    Horn Afrik Radio
                                             Second-Hand Shops
                             $100 K Sales

                         SMALL               The
                                       “Democracy Arc”
    Capital Markets for Social Enterprise
0   $10K $50K $100K $250K $500K $1M     $2M   $3M $4M    $5M   $6M   $7M

•Governments            • Governments
•Development Agencies   • Regional Agencies

                             Loans / Equity
0   $10K $50K $100K $250K $500K $1M $2M $3M $4M          $5M   $6M   $7M
                 •Credit Unions     •Credit Unions
                 •Business          •Targeted Pension
•Community Loan
                  Development Bank   Investments
                 •Regional Agencies •Regional Agencies
•Credit Unions
                 •Labour Funds      •Labour Funds
•Social Venture

                     Case Study - REST

                                Responsible                - Nonprofit business
    Thai Volunteer
                              Ecological Social            - Three employees
    Service (NGO)
                                Tours - REST
- Environmental
  and anti-poverty
                              Community- Based                       Training and
                                  Tourism                            Consulting in
                        20% to           60% of tour revenues
                     community fund        to communities
 North American              Community Partners
  and European         - Guests stay in villagers‟ homes
     Clients           - Fishermen teach conservation
- Universities         - Cultural interactions; mutual
- Eco-Tours              respect

      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)

     Paul Newman            Newman’s Own
     A.E. Hotchner           (S Corporation)

 Committee to         Salad Dressing,       Newman‟s Own            Partnerships
  Encourage          Spaghetti Sauce,         Organics
   Corporate              Popcorn
                   $100 M in sales (2002)                    McDonald‟s
 Paul Newman,     80 products, 13 factories in US           Give Something Back
  Co-Chair         After-tax profits of $12 M,                (Bay Area)
 100 member        distributed in full to over 200           America‟s Second
  CEOs              charities in the arts, affordable          Harvest (hunger)
                    housing, children, disaster relief,       Care 2 make a Difference
                    education, hunger relief,                  (environment)
                    environment                               Oprah‟s Angel Network

                                             donations, publicity
Reading: Paul Newman and A.E. Hotchner,
Shameless Exploitation in Pursuit of the Common Good
    Social Enterprise: the Business
           School Response
   Harvard Business School – Social Enterprise

       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:
         o Established an SE tenure-track position
         o Engaged over 40 faculty members in SE research and
         o Produced 164 cases and 25 working papers
         o Courses on SE added to the curriculum
         o “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

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

  Social Enterprise: Government’s
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
  Establish the value of social enterprise (establish the
    knowledge base, celebrate achievement, build
    confidence through performance and standards)
    Social Enterprise: Government’s Response

     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:
           o   Capacity Building: $17M over two years (05/06-06/07)
           o   Financing: $100M over five years (05/06 – 10/11)
           o   SSHRC : $15M over five years (05/06-10/11)

    Ten Limits and Contradictions of
           Social Enterprise
   Businesses can fail, jobs and services can be
   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

    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-
   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
   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
                                        Government                 Corporate
                                      Grants/Contracts            Partnerships
                                                               • Home Depot

 Cape Breton                                    New Dawn            BCA Holdings
                       New Dawn                                   • Venture Fund
Association for                                  Holdings
                        Enterprises                                 (Equity, Loans)
    Co-op       1973 (Non-Profit CDC)          • Investment
 Development                                     Firm

Cape Breton      Cape Care                 Highland             New Dawn Guest
 Association    Services Ltd.            Resources Ltd.           Home Ltd.
 for Housing •Home Care Services         Private career       • 30-bed residential
                                          college                care facility
•Real estate
  company for
 affordable housing      Credo      Sydney Senior             Pine Tree Park Estates
                      •Business       Care Home            • revitalized military base
                       processes       Living Ltd
                       outsourcer   •37-bed program
                                                               David Realties
                                                              • Commercial
                                                                landlord              16
          Case Study – Oxfam Hong Kong

 Oxfam International       Funds, Expertise        Funds          Hong Kong and
- 12 Oxfams working
                           $6M                     $52M           Chinese Donors
  in 110 countries

    Project Funds
                      Oxfam Hong Kong
$39M contribution     - $112 M Budget
                                                           $5M contribution

   Special Events        Community            Oxfam Rice China       Two Second-hand
   -Trailwalker        Development and        Development Fund            Stores
    Hike - $21M        Capacity Building      - 120,000 packets      - $2M revenues
                           in China             sold for $3M         - second-hand CDs
   - Other events                                                    - International
     and appeals                                                        crafts
     $18 M                                                           - 100 volunteers
                        “Rural Women
                         Knowing All”
                       - 200,000 copies

                                                - Currency in Hong Kong Dollars
                                                - Reading:
                       Case Study - BRAC

                      (Non-Profit)                  Key Features:
                                                    Critical self-examination,
                • Largest NGO in World              experimentation, opportunism,
                                                    scalable knowledge

     BRAC               BRAC
  Afghanistan         Bangladesh

Microcredit for      Microcredit for     Primary Schools          Health Programs
    Women                Women          • 34,000 schools         • 21,000
                    • $300 M to 4M                                 community Health
• $1M to 11,000
                      members                                      workers
                    • 28,000 staff

   BRAC                 Aarong               Program Support              Vegetable
 University          („Village Fair‟)            Enterprises               Export
                  • Major arts and       • Poultry farms, feed mills,     Business
                    craft retailer in      prawn hatcheries, fish
                    Bangladesh             hatcheries, silk reeling
                  • Exports to Europe      centres, tree nurseries,
                                           bull station, salt factory                 18
                  Case Study - Benetech
   Jim Fruchterman,

- Governments               Beneficent        Beneficent Inc.       Bengineering Inc.
- Foundations
                           Technologies        (Non-Profit)            (For-Profit)
- MacArthur
  Soros, Skoll)            (Non-Profit)
- Corporations
                       • Share leadership, space, financing
                       • Social venture funds to bring inventions/ or technology to market                      Martus                      Social                 Social
 - online library of     - web-enabled tools for              Enterprise             Enterprise
                           human-rights workers to
   10,000 books            manage information on
    in audio/Braille       human-rights abuses                   “If the unit of service for a social
 •Revenue from              •Revenue from server          enterprise is a piece of information or a
  monthly subscriber         maintenance and                technology product, as opposed to an
  fee plus grants for        administration,              hour of human time, then the possibility
  rollout                    customizing software           of going to scale is greatly enhanced.”
                             and training                                          Jim Fruchterman
   Case Study – Social Capital Partners
Bill Young/ Bealight
                                     Social Capital Partners

  Research on SROI/                         Social Venture              Sector and Policy
      Evaluation                               Portfolio                  Engagement
                                         Grants, Loans, Equity

  Renaissance,           Inner City Renovations,                 Social            Social
    Montreal                    Winnipeg                       Enterprise        Enterprise
•$100K equity              •$50 K grant and board
•$100K loan                 involvement
•Used to test new ideas in                                          Investment Decision Steps
 marketing, merchandizing and                                1.   Concept Review
 pricing                                                     2.   Business Plan Review
                  Challenges                                 3.   Due Diligence
   • “Dearth of great social entrepreneurs”                  4.   Alignment and Deal structure
   • Lack of sophisticated business models                   5.   Investment and Ongoing Working
   • Limited sources of social capital                            Relationship
                                                             6.   Monitoring and Reinvestment

Reading: Sean VanDoorselaer, “Venture Capital for Social Enterprise,”
Making Waves, 15(3), 2004, 10-13
    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,
   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

   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

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

   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
1. What current teaching and research activities at UVic,
   inside and outside the Faculty of Business, are related to
   social enterprise?
2. 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?

3. 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?

4. To what extent do possibilities exist for inter-Faculty
   cooperation on social enterprise?

                          Useful Websites
Accountability: Institute of Social and Ethical Accountability
Alliance (magazine promoting philanthropy worldwide)         
Association for Research on Nonprofit Organizations and Voluntary      arnova.orgc
Blended Value Project (tools for social return on investment)
Canadian Business for Social Responsibility                  
Canadian Community Economic Development Network              
Chantier de l‟économie sociale                               
Community Economic Development Technical Assistance Program  
Chronicle of Philanthropy                                    
Civicus (international NGO network)                          
Harvard Business School – Initiative on Social Enterprise     enterprise
International Association of Investors in the Social Economy 
International Society for Third Sector Research              
International Center of Research and Information on the Public,
Social and Cooperative Economy, Belgium
Making Waves (Canadian CED newsletter)                       
NESsT (NGO self-financing in Central Europe and Latin America)
Social Capital Partners (social venture capital)             
Stanford Social Innovation Review                            
Skoll Foundation (grantmaking to social entrepreneurs)       
VanCity Credit Union                                         
Vibrant Communities Project (15 Canadian cities, including Victoria)

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