What is a Social Enterprise?• Social Mission/Purpose• Generates revenues to achieve that purpose• Can be profit or non-profit• Creates Stakeholder Value• Is that it???
Approaches to Understanding SE• Charities/NFP inherently SE’s• Any organization that balances social and economic goals• Develops social capital• For profit/not for profit hybrid forms of organization• The purpose of a project or activity• Has potential to develop in all sectors of the economy
A MISSION FIRST, FINANCIALLYSUSTAINABLE ORGANIZATION THAT CAN EFFECTIVELY ATTRACT CAPITAL AND HARNESS THE POWER OF MARKET BASED SOLUTIONS TO AFFECT POSITIVE SOCIAL AND ENVIRONMENTAL CHANGE
Where did this idea come from? Social Media CRISIS CHG in Values Movement New Solution UK, US, and now B.C...... Social Enterprise
“There is one and only one socialresponsibility of business — to useits resources and engage inactivities designed to increase itsprofits so long as it … engages inopen and free competition, withoutdeception or fraud.”2
MOVEMENTS IN THE PRIVATE SECTORCO-OP MOVEMENT (1920’s) SOCIAL ENTERPRISE (2000’s)New legally recognized organizational New legally recognized organizationalforms formBorn out of a movement that Born out of a movement thatdeveloped in response to concerns developed in response corporateabout control over capital and corruption, environmentalconcentration of power/ownership. degradation and mounting social unrest.
SPECTRUM OpportunityGrant Funded Non- Revenue Profits Traditional Business Generating NFPs (Charity) Social Financial RETURN (Charitable) (Commercial)This sector looking for This sector looking newaccess to new funds in license to operateface of decliningGovernment funding 37
Another ViewThe Social Finance Census: Ontario Non-Profit Network and theSocial Venture Exchange, 2010http://www.theonn.ca/social-finance-census-2010/
Harnessing the Power of Business to Change The World: The Spectrum CSR Corp Social Enterprises: The Target Range PhilanthropyGrant Funded Social Revenue Social Ventures Traditional Non-Profits Purpose Generating NFPs Business (Charity) Business Social Financial RETURN (Charitable) (Commercial) B Corporations Honey Bee Network 39
WHY NEW ORGANIZATIONAL FORM?• ENGENDER PUBLIC TRUST – Not a traditional business• PUT IN PLACE THE RIGHT CHECKS AND BALANCES – Surplus distribution, reporting, asset locks, capped dividends etc to curb effects of sudden greed. – Legal protection for stakeholders/shareholders.• COMPETE FOR/ATTRACT CAPITAL TO THIS TYPE OF ENTERPRISE – Tax incentives – Risk Management – Sustainability of enterprise=sustainability of capital
More “why”• Allows government to stimulate social enterprises specifically, through policy initiatives and incentives such as favourable tax treatment;• Offering clarity on limits of activity for investors, consumers• The capacity of private sector businesses now practicing ‘more than Corporate Social Responsibility’ to further distinguish themselves from competition as authentic multiple bottom line enterprises;
Characteristics?• Are led by an economic, social, cultural, or environmental mission consistent with a public or community benefit;• Trade to fulfil their mission;• Derive a substantial portion of their income from trade; and• Reinvest the majority of their profit/surplus in the fulfilment of their missionwww.SocialTraders.au.com
And what else?• Social mission/stakeholder mandate in bylaws• Stakeholders interests count• Distribution of income or surpluses defined• % of net profits assigned to community• Asset locks• Mission preservation in sale/transfer (Bylaws)• 3rd Party Audit• Integrated Report (Financial/ Social Mission)• Reporting transparency• Tax treatment (Enterprise, investors in Enterprise)
New Organizational Forms Community BENEFIT L3C CCCFORM Interest CORPORATION Company (CIC)Country UK (2005) 7 States/USA 9 States/USA B.C Canada (2008) (2008) (2012)# 3572 (2010) 519 0Key Features Investment Investment Eligible for Assist Meet Community Articles of Incorp PIR/Foundation communities with Interest Test chg to recognize Funding social issues Cannot be a Stakeholders Must devote charity Reporting portion of profits Asset Lock % to charity to community Asset lockFavorable Tax? No No No NoPrivate/Public Yes Yes Yes YesPay Dividends Yes but capped Yes Yes Yes but capped
And what about New Model/Social Entrepreneurs?Social entrepreneurs play the role of change agents in the social sector, by:• Adopting a mission to create and sustain social value (not just private value),• Recognizing and relentlessly pursuing new opportunities to serve that mission,• Engaging in a process of continuous innovation, adaptation, and learning,• Acting boldly without being limited by resources currently in hand, and• Exhibiting a heightened sense of accountability to the constituencies served and for the outcomes created.• But there is are also three other factors that Dr. Dees misses in his definition. And that is: 1) Higher tolerance for risk and failure and 2) Understanding that efforts will not likely generate personal wealth 3) Ability secure capital investment.
Ecology of New Business Form & Stage of Development Govt Policy Accounting Principles R&D Social Entrepren eur Culture EducatorsAssociatioms Certific /Advocacy ations Groups Legal Social Consumers Finance Micro Financi
Government Tax incentives to investors in SEs• Any Legal themselves Charity) & SE’s form (except• Public orReporting Principles Defined Basic Private Amend Incorporations Act to• Keyinclude new legal form… of Incorporation. Differentiator: Articles – Social Mission & Purpose in Articles of Incorporation Educators There are unique operational and – leadership challenges related to SEs that Dispute Resolution, Differentiated Bylaws (Governance, Dissolution. Reporting etc) need to be researched and taught. – Surplus (Profit) Distribution Financial Services Industry Defined – Special Loan categories (RBC) Board Composition SEC Reporting Requirements (if – Integrated Reporting (based on GAP and SE industry public) reporting standards) Legal/Incorporations Act- – Std SE articles of incorporation (asset lock etc) Mission transfer and preservation• TaxTransition services Code Differentiated Case Law around mission• 3rd preservation upon sale/exit Party Certification or Audits
Social Enterprise: The signals not the noise• ITS ABOUT CHANNELING CAPTIAL AND HARNESSING THE POWER OF BUSINESS TO BETTER OUR WORLD.• That said, ll sectors will shift values in response to the movement towards greater responsibility to enviroment and society.• SE need to be distinct organizational form to work—and for the sector to grow—just like Co-ops have....• Rest of Canada needs to get going....we do have 53 companies so far who have made transition without legal recognition.