Image: Adam and Kev
Carolyn Egri cautions that privatizing essential
services makes them vulnerable to boom-and-bust
Carolyn Egri is the William J.A. Rowe EMBA Alumni professor at SFU’s Beedie School of Business. She has researched and published on corporate, social and environmental responsibility in Canada and internationally since the late ’80s. “You could call B.C. the wild west of social enterprise. Just like any new venture, the definition is going to be shifting all the time,” she says. Traditions of philanthropy, corporate and individual giving are quite different in the U.S. than in Canada, she points out, citing stronger tax incentives, a much larger population and an increased need for private giving driving the States’ charity models. Canada and other western economies, such as Scandinavia, have historically had more government funding for public services, so there’s been less need for private intervention. But that’s changing, says Egri. “We have growing inequality, so there’s a bigger gap and need for more directed social enterprise. One of the trends we’re seeing is more creativity in terms of organizational forms to deal with these issues.” She explains that it’s usually corporate headquarters that make the big commitments to philanthropy, but B.C. is, in large part, a province of branch offices and subsidiaries. However, while we may have a shortage of head-office donors, we at least partially compensate by “trying new and different things and being active environmentally and socially.”
“I’m in the business of philanthropy,” says Carmen Ruiz y Laza, executive account manager of Karma Exchange, a Vancouver-based firm that partners with local merchants to market social causes. Essentially an offshoot adaptation of the social enterprise model, it works in much the same way as RED, the philanthropic AIDS-elimination mission that U2’s Bono has passionately backed for years: a retail outlet sells certain consumer products, and a percentage of that sale goes to the desired charity.
While it has several merchant partners, at the moment Karma’s exclusive charity project is West Vancouver-based non-profit Create Change, which funds the building of wells in small communities in Ghana so that young women are freed from water-fetching duties to attend school. It also funds the girls’ tuition fees. This year, Create Change was chosen by Richard Branson to be a contender in the Virgin Air founder’s international Screw Business As Usual Competition, designed to find businesses around the globe that are flying in the face of a strictly for-profit-at-any-cost model to “give back to the world.” (Unfortunately, while it made the top 10 finalists, Create Change didn’t take home the grand prize.)
Ruiz y Laza cites Create Change founder Shannen O’Brian, saying her dream was to be “the charity-driven Groupon, but you need numbers for that. So we’re using the model of the RED campaign for Vancouver because we don’t need a subscriber base for that; all we need are merchants and local awareness.”
Early Vancouver-based adopters of Karma’s program include chef David Hawksworth’s Bel Café, Vida Spa and the American Cheesesteak Co., which jumped on board for four months offering a percentage of sales from its best-selling sandwich, called the Cowboy. The sandwich costs $12, of which Karma gets $1. “They give us about $1,000 a month, and putting a girl in Ghana through one year of high school is $200, so that money goes a long way. The model works,” says Ruiz y Laza, though she emphasizes that society hasn’t seen the end of the Rockefeller charity model yet.
“Look at Jacqui Cohen. She raises a million bucks a year, but that’s her cronies. They come from L.A. and she’s got the movie stars and that works.” Ruiz y Laza adds that Cohen’s daughter, Kasondra, is doing the same thing for her generation. “They’re a different level of society, right? The rich will always be rich and those kind of events are geared towards them so they can give to charity,” she quips. She goes on to explain that the model based on donating a percentage of retail sales to social causes opens the opportunity to “donate” to a much broader socio-economic spectrum: “Give Mrs. Charity Gala or a regular Joe the opportunity to buy something they already want, whether it’s a cup of tea or a massage, and a portion of that sale goes to charity. It’s no big deal, no big commitment. It’s passive giving.”
Managing a social enterprise comes with unique hurdles, most notably scarce resources. Any money a social enterprise makes is targeted for its community mission first, with such luxuries as new computers or public-relations staff taking second priority. Among other challenges, Potluck’s O’Hara cites older equipment and vehicles, small offices and little-to-no cash for marketing or communication. “It’s a sector that’s sexy and interesting right now, but there’s a shortage in skilled leadership, as well as potential for burnout because it’s a really tedious job,” she says.
Vancity’s Vrooman says that the credit union is responding by taking a comprehensive role among the social enterprises it backs, aiding in everything from advocating for policy and tax changes to sharing its own human-resources staff.
Corporate and private donations are critical for a healthy bottom line at Dress for Success, a Manhattan-based non-profit with a B.C. chapter, which provides interview suits and career development to low-income women. But Deb Twocock, executive director of Vancouver’s Dress for Success branch, says that tapping into a corporation’s expertise as a whole – not just the volunteer hours of its employees, but its business intelligence and space to hold workshops and mock interviews – is becoming increasingly important for her organization’s survival. Twocock is quick to assert that “social enterprise is the wave of the future,” but says that while she’s seeing other charities and non-profits go that route – including some Dress for Success affiliates – she’s hesitant to jump on the bandwagon. “I believe that non-profits must look to social enterprise as at least part of their plan to be self-sustaining. Maybe we should be having our clothing make money for us, but I hate the idea because I know how much work is involved,” she admits.
Going the social enterprise route not only involves more work, but also more risk; the potential for failure is inevitably higher when an organization is considering new business models and filling different niches. “The pressures become different,” explains Vancity’s Gent. “One of the things that can happen is that organizations try to be fiercely protective of what’s called ‘mission creep,’ where you start, perhaps, serving the business objectives more than the original community objectives.”
O’Hara has first-hand experience with the pressure of the balancing act. “There’s a sweet spot in this stuff like any other business,” she says. “There’s the three-to-five-years startup window, then you reach your sales numbers, you get money in the bank and you hope to maintain this level. It’s really hard to do it. You can’t make cuts and just let people go if business is down; you have a legal obligation to accomplish your mission.”
SFU’s Egri believes that overall, social enterprises are a positive addition to society, and that they fill a niche being handled ineffectively by the public sector as society evolves. But she cautions that “when you privatize the provision of these community essential services that’s all fine, but they’re vulnerable. And there are certain basic services that need the continuity that governments can provide. When we’re talking about basic social services, as a society, can we really afford to have these subject to boom-and-bust cycles?”
She adds that critical mass is another key factor. The population density in Vancouver, Victoria and the Lower Mainland can support social enterprises, but what happens in northern B.C.? “There are serious issues up there but you don’t have as many people to support these ventures,” she says, concluding that a combination of public and private is the best solution.
Additionally, the social enterprise model simply doesn’t work for every business. For several years Vancity has held a public event called Social Enterprise Dragons, which sells out to several hundred people. Modelled on the CBC’s Dragons’ Den, it invites budding social enterprises and social entrepreneurs to pitch their business cases to community leaders in hopes of securing a funding grant. Last year the event attracted 40 applicants from academic institutions including UBC, SFU, Emily Carr University of Art + Design and BCIT, each hoping to win one of three $90,000 prizes.
According to Vrooman, the event is “more Puff the Magic Dragon than fire-breathing. But we see, particularly young people, working in the social services sector and saying, ‘This is the way; everything has to go this way.’ Well, not everything has to go that way. We have to be disciplined.”
Regardless, she adds that social enterprise in Vancouver is “growing and expanding.” Certainly the concept is gaining acceptance in the mainstream business sector and the mainstream philanthropy sector. And, combined with the power of social media as an effective and economical marketing tool, social enterprise has the power to effect positive change.
“It’s not a panacea and it’s not a saviour,” O’Hara summarizes. “This said, it can be an advantage, because we’re not trying to make leaps. We’re no longer trying to fit a square peg in a round hole.”