Social Enterprise and WE Charity – A Follow Up Blog

To say I was shocked at the amount of traffic and commentary that my WE Charity blog post received is an understatement. It’s approaching 1000 views on our website, receives almost 10% of our website traffic and has now been reprinted﹘at their request﹘by Oakville News (Thanks Nolan) and in Foundation Magazine. (I can’t wait to send my Mom a copy!)

 I was attempting to centre some of the issues raised in the WE Charity scandal into the challenges that charities face in their day to day work: the amount of resources dedicated to donor engagement; the costs of charity administration; and finally what qualifies as a social enterprise. It is the last topic that has generated the most comments and as I indicated, I am sharing this space with those who offered further insights and feedback.  

One of the first people who shared their thoughts was Tim Mueller, who is a Senior Partner at Saybrook Partners and lives locally in Oakville. “The reason why you don’t have answers to the very important questions you outlined is because they have to be answered within the context or liberating constraints of each enterprise. There is no silver bullet; no one-size-fits-all approach (to what qualifies as a social enterprise). Certification would indeed be helpful and reduce the number of players considerably – especially if your benchmark is the very rigorous B Corp certification process.”

I have learned that the ME to We Corporation was a certified “B” Corp,” so, despite the rigidity of the B Corp process, ME to WE met all of the criteria. I also learned that there is another social enterprise certification process at Buy Social Canada. Brent Brodie, the Regional Manager for the GTA reached out to me through e-mail and described Buy Social Canada, as “an organization bringing social value suppliers and purchasers together to build a marketplace through social procurement to create healthy and vibrant communities. In addition, we also have a Canada-wide social enterprise certification that aligns itself with social enterprise movements across the globe. 

 We too believe that the primary goal for any social enterprise is to contribute to its social, environmental or cultural goal it seeks to support/address. When we certify an organization, an applicant must demonstrate this in the following ways:

  1.   The business must generate a significant portion of its revenue through the sale of goods and services
  2. Have their mission clearly identified in founding documents and maintain consistent message throughout its external facing publications
  3.  51% or more of the profits must be reinvested into the social, cultural or environmental mission. The organization must have no or limited distribution to shareholders”

When I spoke with Brent on the phone, I shared with him my skittishness about only 51% of profits being reinvested in the mission. I appreciate that this may be a good benchmark for a for-profit corporation, but is not applicable for a charity which technically has “no profits.” Brent reassures me that Broadly speaking, a social enterprise with charitable status would presumably reinvest any net-profits into their mission.” I did really like the other statement in item number three, regarding the “limited or no distribution to shareholders,” that would temper the issue of the use of the other 49% in the for-profit sector. But again it would have no effect in the charitable space, which technically has no individual shareholders. 

As I delved into the issues of what the requirements of a social enterprise are, the earlier comment by Tim that they have to be answered in the context or the constraints (like incorporation as a for-profit, not for profit or with charitable status) of each enterprise began to ring increasingly true. 

Tim’s points were also reflected in comments shared by Sheridan Professor Michael McNamara who is no stranger to The Foundation and has done considerable research with the Foundation. He has also worked in the community economic development space and shared that, “Social Economy tends to be so regional and I’d be curious to see how proposed standards such as those of Buy Social Canada are interpreted in places like Cape Breton or the West (in addition to Ontario). I think this is a really important conversation for protecting the integrity of the Social Enterprise space and mission in Canada (as your piece clearly suggests).” I agree we are learning of the need for communities to define their own objectives for social enterprise success which can be very different between Black led corporations, to First Nations businesses, to women-led social enterprises. 

With the regional context in mind, I reached out to one of the longest social enterprise initiatives in Canada, the Social Enterprise Fund at the Edmonton Community Foundation, which has placed $55 million in loans to 75 organizations in over a decade. Jane Brisbee, the Executive Director is one of the advisors to the Community Foundation of Canada’s Investment Readiness Program, which the Oakville Community Foundation is participating as the lead regional partner for Brant, Halton and Peel in conjunction with 5 other Community Foundations and EDGE (Entrepreneurial Discovery and Growth Engine) at Sheridan. So I have had the pleasure of learning from Jane on a number of occasions. 

 Jane shared her preferred social enterprise definition from the 2010 Canadian Task Force on Social Finance as, “any organization or business that uses market oriented production and sale of goods and/or services to pursue a public benefit mission.” I agree, it must have a revenue stream from selling goods and or services and my preference is that the long term corporate goal is to be a self-sustaining revenue stream, not subsidized. 

I also have the good fortune of having Ameeta Vijay the CFO of SVX (Social Venture Exchange) as a member of The Foundation Board and the Chair of our Program Related Investment Committee which recommends impact investments to the Foundation.  She is also assisting us in reviewing IRP applications. Ameeta shares my concern that any organization is free to describe itself or its activities as a “social enterprise.” 

She elaborates: On one end of the spectrum, this can include non-profits or charities where 100% of its activities constitute that of a social enterprise while on the other end, it can include for-profit entities that have a social goal to which they donate on an ongoing basis. While I do not agree with the latter classification, I prefer the definition of the Social Enterprise Council of Canada, social enterprises are commercial organizations, for-profit or not-for-profit, “that are directly involved in the production and/or selling of goods and services for the blended purpose of generating income and achieving social, cultural, and/or environmental aims.” While earning profits may not be the primary purpose of a social enterprise, revenue is definitely key to the sustainability of the organization. 

 Social enterprises are essential in helping society tackle some of the most pressing problems including homelessness, food insecurity, climate change etc. These issues negatively affect the economy and with resources becoming increasingly scarce, and organizations, such as charities and not-for-profits, operating with less money but more demand, there is a trend in the private sector to step up and deliver their commercial products and services along with a social benefit. Social purpose organizations and social enterprises are working to tackle some of these long-term social or environmental challenges and need to be supported in using new ideas and approaches including impact investing to mobilize capital and to catalyze new partnerships.”

So the support for a social, cultural or environmental purpose cannot be a “side hustle” through a corporate donation program, it has to be “fully baked” into the organization. I too believe that social enterprises are very important organizations. The challenge is to make sure those that apply the term “social enterprise” are meeting the commitment of social purpose. 

Closer to home, I had a conversation with someone I rely on for supporting social enterprise, Renee Devereaux, the Director of EDGE at Sheridan. She spends all her time thinking about how to make local social enterprises successful and has her own practical experience as a social entrepreneur. We rely on Renee and her colleagues at EDGE to assist our Investment Readiness Program partners to review and identify the not for profit and for profit applications that are “Investment ready.”  

Renee offered this reflection about the state of social enterprise in 2020: “At a time when vulnerabilities in our existing systems have been revealed, social enterprises operate in undefined territory – in the pitfalls of ambiguity. But they also offer the opportunity to create new models that straddle sectors – like for-profit and not-for profit. It is one of the things that we emphasize with students at Sheridan that the future will require them to be flexible and create new models.” So you can see why Renee is my thoughtful go-to on social enterprise and will be my first guest when I join the cast of #TheIssue this fall.

Last week was my first appearance as a Co-host on #TheIssue on Cogeco with Mark Carr. Renee was our guest and we discussed social enterprises. The show was live on October 19th and is repeating throughout the week. Mark is posting it live on #TheIssue Facebook page on Sunday and we will repost for those interested.

Thanks to everyone for their thoughtful contributions and again I look forward to hearing from you and sharing this space.

Here are some other great reads on the issues raised by WE charity, if you haven’t had enough yet.

Mark Blumberg

Yves Savoie