The Case for More Social Entrepreneurship

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Carmen Ruiz, Shannen O'Brian | BCBusiness
Image by: Adam and Kev
Carmen Ruiz y Laza (left) and Shannen O'Brian.

Traditional sources of revenue for charities are drying up, but putting society’s biggest issues in the hands of socially minded entrepreneurs is a tricky business.

On the cheery, yellow walls of the Downtown Eastside’s Potluck Café are the faces of several of its customers, captured in a black-and-white instant. Their complicated eyes and the deep lines in their faces tell sad stories of life on the Downtown Eastside as they preside – surprisingly hospitably – over the current clientele. In the last decade, the café has served 300,000 nutritious, free meals to the area’s residents.

Sitting in the 30-seat café between mealtimes, Heather O’Hara is absentmindedly shuffling a vase of fresh tulips around the table. A prairie import, O’Hara has been executive director of Potluck Café and Catering, the street-front operation of Potluck Café Society, a registered charity, for seven years. “We’re a bit of a backwards animal,” she says with a patient smile, explaining that the busier the café gets, the more it costs to keep it running, a financial burden that’s relieved by revenues from the catering side of the operation.

Potluck’s catering business, which hires Downtown Eastside residents, is booming, growing at 20 to 30 per cent each year by serving up antipasto platters and other tasty foodstuffs to more than 40 corporate clients, including SAP, Bell, Shaw, Vancity, the City of Vancouver and Mountain Equipment Co-op, as well as an increasing number of local weddings. In 2011, the catering business earned $1.2 million in revenues, about $500,000 less than O’Hara’s ideal operating budget for Potluck Café, but enough to keep the café, which she explains serves “a really important community function,” afloat. The business plan is Robin Hood-esque in its vision, digging into deeper pockets to aid those in need.

“Unlike so many charities that are morphing into social enterprises right now, we’ve always been one. There’s always been a business component to this and we’ve always been entrepreneurial, since day one,” says O’Hara.

The social enterprise business model works like this: a community-focused business or service gets the predominant percentage of its revenue via earned income through a market service, while the remaining percentage is generated through more conventional charitable means (such as fundraising, grants and donations). The goal for most social enterprises is to one day be entirely self-sustaining.

Forms of social enterprise have existed for decades. The YWCA, for example, generates revenue to shelter the homeless by running fitness centres. The model has been called by other names (such as philanthrocapitalism or non-profit), but legislative, economic and social changes have increased the urgency with which social enterprises – organizations that apply a business model to the values and missions of the non-profit sector and result in value for both the consumer and the community – are popping up around B.C.

In March this year, changes to the Business Corporations Act were introduced in Victoria that, if passed, will allow for a new, hybrid type of company: the community contribution company, which combines socially beneficial purposes with a restricted ability to distribute profits to shareholders. Effectively another form of social enterprise, the degree of accountability would be higher than for ordinary companies. Corporate reorganizations would be restricted to ensure that payout caps aren’t circumvented and that, upon dissolution, the company would be subject to an “asset lock,” capping dividends on the company shares to further ensure community benefit remains priority number one.

If the act is passed it will be a progressive move for B.C., says Derek Gent, executive director of the Vancity Group of Companies Community Foundation, which Gent describes as a “public charity” created for the purpose of amalgamating community resources that will be poured back into that community.

“Canada’s charity law is based on Elizabethan principles of the alleviation of poverty and the protection of widows and orphans,” comments Gent, “but we’ve moved far beyond that, so there’s a lot of work that needs to be done at federal and provincial levels to catch up with reality and to encourage more of this.”

A community-based organization at its core, Vancity was an early adopter of the social enterprise model. It established its foundation over 20 years ago to better fill the gap between business models that don’t quite meet the need, philanthropy that doesn’t quite meet the need and government funding grants that are drying up. “The more we lean into community and the more we put the needs of people and the planet first, the better we do financially,” says Vancity CEO Tamara Vrooman. “People say to me all the time, ‘It’s a trade-off, it must cost you something to do these things for the community,’ but our experience has been the exact opposite.” She goes on to say that Vancity has just enjoyed its third consecutive year of record earnings. “We attract the best and brightest staff, we’re able to be more creative and innovative and be a market leader, so it’s been a very good strategy for us from a business point of view.”

In October 2011, Vancity established a new philanthropic venture: the $13-million Resilient Fund. Clients make guaranteed, long-term deposits into the fund, which Vancity invests in social entrepreneurs, and social enterprises pursuing a community or environmental mission. The Royal Bank of Canada announced a similar Impact Fund in January, committing to a $20-million investment in social finance, half of which will go to new ideas and projects with social and environmental values (such as environmental sustainability and water resource management), the other half into Socially Responsible Investment funds.

Despite the growing support for social enterprise from government, banks and communities, the specifics of what characterizes a social enterprise still aren’t universally etched in stone. “One of the risk factors is drawing lines around what is a social enterprise and what isn’t, and that’s where the policy folks get interested,” notes Gent. “If they’re going to create incentives or tax it, where do you draw that line?” (He believes that if a social enterprise is generating significant revenues and has to pay taxes, that’s a good problem to have.)

Post-secondary institutions are picking up on the trend, as well, with B.C. universities offering an increasing number of social-enterprise-related programs at both the undergraduate and graduate level. SFU’s Beedie School of Business offers a certificate in Corporate Social Responsibility and, in March, announced a new social venture accelerator program, specifically designed for entrepreneurial students with social impact ideas and an interest in helping others launching social ventures. UBC’s Sauder School of Business has been developing its Social Entrepreneurship 101 program since 2006, a three-week course where students from UBC and Nairobi’s Strathmore University are paired and taught to write business plans and identify funding sources for projects. It claims to have launched several businesses as a result of the program. Though, no school in B.C. has yet committed so completely as Oxford University in the U.K., whose Skoll Centre for Social Entrepreneurship is leading the way in fostering the advancement of social enterprise.


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