Social Finance and Social Enterprise ... some thoughts from Tonya Surman and David LePage

Social Finance and Social Enterprise

David LePage is the Program Manager for enp

Tonya Surman is with the Centre for Social Innovation in Toronto.

The recent Canadian Social Finance Task Force recommendations are a really valuable addition to the dialogue in Canada about social purpose businesses and social enterprises. The recommendations focus on the need for access to financing, and look at sources for better lending and investment tools for social finance. They have identified a huge gap and opportunity to engage new players in the support of social enterprise.

But we must make certain that that document and ensuing dialogue is not seen as the full financing picture when it comes to social enterprise: enterprises operated by non-profits for the dual purpose of generating income from business activities and achieving a social, cultural or environmental value.

Why grants and not just debt for social enterprises?

The vast majority of social enterprises begin with a mission driven non-profit seeking a means to improve on their mission delivery and/or contribute to their organizational sustainability. The solution is often through creating and operating a business, a social enterprise. But going from that initial point of interest to sustainable operation can be a difficult journey for a non-profit whose culture and operations have been historically dependent solely upon grants and charitable contributions.

Business planning and business skills are not usually the skill set and experience in a non-profit organization. So the move through organizational readiness, enterprise opportunity identification, feasibility and business planning will almost always require a contribution from grants, non-repayable contributions, to provide support and technical assistance along this path, possibly for initial start up costs and operations.

For some social enterprises some form of grant based support is needed throughout their operation as a crucial component to insure their mission delivery success.

We are not advocating to allow social enterprises to act poorly in the marketplace, but since social enterprises base their measurement of success on a blended value of mission and finances, depending on the social costs they incur to deliver on their mission, financial sustainability from sales alone may not be possible. What would the cost of tickets to the Opera cost without some corporate sponsors? Who could train at risk youth in employment skills? Who could provide home care to low-income families without outside support? Like any business, social enterprise requires multiple revenue streams to support its multiple bottom lines.

Yes, we need the full spectrum of social finance, including tax credits for investors, patient capital, new debenture instruments, etc.; but we also cannot leave out the need for sponsorships, contributions and grants for social enterprises if we want to see them grow, flourish and contribute to building healthy communities.