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Monday, March 19, 2012

The "British" Push Social Enterprise Upstream

UK passes the Social Value Bill & British Columbia introduces Community Contribution Company 

 The last several weeks have been successful for the social enterprise movement - both overseas and here in Canada.  Within the past few years there has been a continuous stream of milestones reached, and since the beginning of 2012 its current has flowed faster than ever. 

I've always thought the social enterprise movement needed to be mobilized by the  private sector - I believe government has good intensions but moves too slowly for enough momentum to build.  While this remains true in many regions and sectors, recent progress proved that I was overgeneralizing in my convictions. 

 The UK has been a leader in social business since this idea propelled into action less than a decade ago.  In 2004, the UK authorized legislation for the Community Interest Company (CIC), allowing enterprises to legally share their profits with the community, as opposed to acting solely in the best interest of shareholders.  The CIC is a essentially a new type of legal entity that takes on the principles of a social enterprise.  This was a big step forward. (Click here to read about the UK's progress with social enterprise sector)

Then in 2010, we saw the UK government's implementation of the Social Impact Bond - the first in the world. Another big step. 

MP Chris White
Now in 2012 we see their government looking inward, challenging their own practices. The New Social Value Bill was passed on February 28th, 2012.  Sponsored by Conservative MP Chris White, the bill requires the government to prioritize social enterprises and other community organizations when hiring outside service contracts.  In my opinion, this is a HUGE deal.

For a sector to really grow, it requires more than new companies.  A new sector needs infrastructure - other types of organizations and government support to help build demand and efficiency.  The Social Value Bill is helping to foster that growth by encouraging the use of social enterprises. Currently, the UK government spends hundreds of billions of dollars on commissioning services, and 11% of these contracts are with social enterprises.  When the new bill is implemented,  that proportion will inevitably grow, ultimately expanding the sector. 

I love the way Peter Holbrook, CEO of Social Enterprise UK, describes the impact of this new bill: 
"Our taxes shouldn’t be a vehicle for the upward redistribution of wealth. As a result of this law, public bodies will be the first to showcase what responsible capitalism really looks like." 
I believe leading by example is the most effective form of leadership. It has proven to work in our sector as we've seen other countries begin to replicate the UK's progress.  In 2008, the US instituted the Low-profit Limited Liability Company (L3C), a similar entity to the CIC. I am also pleased to share what is happening here in Canada. Just over a week ago British Columbia followed suit by introducing its first legal social enterprise the new "Community Contribution Company". 

These are exciting times for our sector.  I look forward to the day when my company Better The World can incorporate as a Community Contribution Company. And so the question remains: When will Ontario take the leap? 

The information about the Social Value Bill for this post was taken from this article

Wednesday, February 8, 2012

Financing the Social Sector: RBC Leads the Pack

Why banks play a crucial role in social change.

This is the first in a series of cross-industry CSR analysis.  

Every industry has a role to play in social change - travel, CPG, e-commerce - you name it. I've chosen to focus this post on the financial sector because I believe it has the most potential to drive change in the simplest and most valuable way. 

At my company Better The World, we preach CSR 2.0 - i.e. using innovation and strategy to create shared value between a company and a social mission. 

We start by looking at a business's core strategy and resources. We think about what they have a lot of and what they do best. 

Let's take the financial industry as our first test: Financial institutions have a lot of money. 

And what do they do best with that money?
They manage it. They know how to make a little grow into a lot and the best ways to store it until its ready for use.
Now let's flip sides for a minute. 

There are over 161,000 registered not-for-profit organizations in Canada and thousands more grassroots organizations that are fighting for donations. These organizations spend hours preparing fundraising proposals to corporate and private foundations to receive grants, among other approaches to raising funds. 

If these organizations squeeze through the cracks and do capture a "yes" from a potential donor, it often comes in the form of restricted funding. That means social-purpose organizations are spending more time on getting funding than creating social programs. They are forced to stray from their raison detre to stay afloat, and this is seen as a major barrier in Canada's social sector. 

Financial institutions, specifically the commercial banks, spend millions on their CSR initiatives which typically include a run, walk, or ride for a given cause, a program that supports children, and then various other programs that cover a massive scale of causes. Many of these programs engage customers, employees, and make a real difference in people's lives, so kudos to the banks for their social and environmental stewardship. 
But in their whole diversified portfolio of causes they support, how is there no attention paid to actually financing the social sector? 

Think of the possibilities that could come out of this shift in focus: A new, innovative idea to solve a social problem could get access to early-stage capital investment; A small charity could get a cheaper loan to develop a social enterprise or new program - social purpose organizations could shift back to doing what they do best: filling social and environmental gaps. 

If banks allocated budget toward financial instruments for the social sector, they would be serving two purposes: 
1) They would be helping to build a sustainable social sector; and 
2) They would be serving themselves through the returns on their investments. 

A great synergy is combining what one party does best with what the other party does best. This notion has become overly complex and challenging in the social sector, and it is time to get back to basics. 

I almost finished writing this post on January 23rd, 2012. The next day, I saw this headline in the Globe and Mail: "RBC to Create Impact Fund" 

I guess RBC also noticed the gap. 

Here's what how first sentence read: "Royal Bank of Canada has decided to establish its own impact fund, in what appears to be the first major move by a Canadian financial institution in this space." 

I read on and learned that RBC will invest $20 million in social finance. Half of it will create a $10 million Impact Fund to finance new ideas and projects that have a social and environmental mission. The RBC Foundation will invest the other half into Socially Responsible Investment funds. Learn more details.  

RBC has set the stage for a new wave in the social sector - I predict we'll soon hear about more financial institutions doing the same. The significance of this initiative is huge, and summed up perfectly by RBC's president and CEO Gord Nixon:
"We've been waiting for the right moment to launch a program of this nature, and the moment is now. We are confident that our initial investment of $10 million in the RBC Impact Fund will not only spark entrepreneurship and innovation in Canada, but also catalyze similar investments from others in the business community."