An introduction to the social enterprise space in Ontario, Canada context.

1. Social Enterprise: The Signals Not
the Noise
Moderator: Bruce McAdam
Lead Presenter: Petra Kassun-Mutch
Panelists: Keddy Chandran, Acumen-Toronto
Ryan Locke .

2. This evening
• What is a Social Enterprise?
• Where did the idea come from?
• Why Now?
• Today’s Social Enterprise Landscape
• Why we need a new legal Social
Enterprise Form
• Where to next?

3. What is a Social Enterprise

10. What is a Social Enterprise?
• Social Mission/Purpose
• Generates revenues to achieve that
purpose
• Can be profit or non-profit
• Creates Stakeholder Value
• Is that it???

11. Approaches to Understanding SE
• Charities/NFP inherently SE’s
• Any organization that balances social and
economic goals
• Develops social capital
• For profit/not for profit hybrid forms of
organization
• The purpose of a project or activity
• Has potential to develop in all sectors of the
economy

12. Where did this idea come from?

13. A MISSION FIRST, FINANCIALLY
SUSTAINABLE ORGANIZATION THAT
CAN EFFECTIVELY ATTRACT
CAPITAL AND HARNESS THE
POWER OF MARKET BASED
SOLUTIONS TO AFFECT POSITIVE
SOCIAL AND ENVIRONMENTAL
CHANGE

14. Where did this idea come from?
Social
Media
CRISIS
CHG in
Values
Movement
New
Solution
UK, US, and
now B.C......
Social Enterprise

15. “There is one and only one social
responsibility of business — to use
its resources and engage in
activities designed to increase its
profits so long as it … engages in
open and free competition, without
deception or fraud.”2

16. 4 Pillars of Civil Society

22. Meanwhile....SOCIAL MEDIA

30. Social Enterprise

31. 4 PHASES OF CAPITALISM
Co-ops!
1800-1929 1930-1985 1986-2008 2009-
• Govt BAD • Govt GOOD • Gov Bad
• Bus GOOD • Bus BAD • Bus Good
Bus Good
Govt Good

33. 33

35. MOVEMENTS IN THE PRIVATE SECTOR
CO-OP MOVEMENT (1920’s) SOCIAL ENTERPRISE (2000’s)
New legally recognized organizational New legally recognized organizational
forms form
Born out of a movement that Born out of a movement that
developed in response to concerns developed in response corporate
about control over capital and corruption, environmental
concentration of power/ownership. degradation and mounting social
unrest.

36. The Spectrum of Options

37. SPECTRUM
Opportunity
Grant Funded Non-
Revenue
Profits Traditional Business
Generating NFPs
(Charity)
Social Financial
RETURN
(Charitable) (Commercial)
This sector looking for This sector looking new
access to new funds in license to operate
face of declining
Government funding
37

38. Another View
The Social Finance Census: Ontario Non-Profit Network and the
Social Venture Exchange, 2010
http://www.theonn.ca/social-finance-census-2010/

39. Harnessing the Power of Business to Change
The World: The Spectrum
CSR Corp
Social Enterprises: The Target Range Philanthropy
Grant Funded Social
Revenue Social Ventures Traditional
Non-Profits Purpose
Generating NFPs Business
(Charity) Business
Social Financial
RETURN
(Charitable) (Commercial)
B Corporations
Honey Bee
Network
39

41. WHY NEW ORGANIZATIONAL FORM?
• ENGENDER PUBLIC TRUST
– Not a traditional business
• PUT IN PLACE THE RIGHT CHECKS AND BALANCES
– Surplus distribution, reporting, asset locks, capped dividends etc to
curb effects of sudden greed.
– Legal protection for stakeholders/shareholders.
• COMPETE FOR/ATTRACT CAPITAL TO THIS TYPE OF ENTERPRISE
– Tax incentives
– Risk Management
– Sustainability of enterprise=sustainability of capital

42. More “why”
• Allows government to stimulate social enterprises specifically,
through policy initiatives and incentives such as favourable tax
treatment;
• Offering clarity on limits of activity for investors, consumers
• The capacity of private sector businesses now practicing
‘more than Corporate Social Responsibility’ to further
distinguish themselves from competition as authentic
multiple bottom line enterprises;

43. Characteristics?
• Are led by an economic, social, cultural, or
environmental mission consistent with a public or
community benefit;
• Trade to fulfil their mission;
• Derive a substantial portion of their income from
trade; and
• Reinvest the majority of their profit/surplus in the
fulfilment of their mission
www.SocialTraders.au.com

44. And what else?
• Social mission/stakeholder mandate in bylaws
• Stakeholders interests count
• Distribution of income or surpluses defined
• % of net profits assigned to community
• Asset locks
• Mission preservation in sale/transfer (Bylaws)
• 3rd Party Audit
• Integrated Report (Financial/ Social Mission)
• Reporting transparency
• Tax treatment (Enterprise, investors in Enterprise)

45. New Organizational Forms
Community BENEFIT L3C CCC
FORM Interest CORPORATION
Company (CIC)
Country UK (2005) 7 States/USA 9 States/USA B.C Canada
(2008) (2008) (2012)
# 3572 (2010) 519 0
Key Features Investment Investment Eligible for Assist
Meet Community Articles of Incorp PIR/Foundation communities with
Interest Test chg to recognize Funding social issues
Cannot be a Stakeholders Must devote
charity Reporting portion of profits
Asset Lock % to charity to community
Asset lock
Favorable Tax? No No No No
Private/Public Yes Yes Yes Yes
Pay Dividends Yes but capped Yes Yes Yes but capped

46. Certifications?

47. And what about New Model/Social
Entrepreneurs?
Social entrepreneurs play the role of change agents in the social sector, by:
• Adopting a mission to create and sustain social value (not just private
value),
• Recognizing and relentlessly pursuing new opportunities to serve that
mission,
• Engaging in a process of continuous innovation, adaptation, and
learning,
• Acting boldly without being limited by resources currently in hand, and
• Exhibiting a heightened sense of accountability to the constituencies
served and for the outcomes created.
• But there is are also three other factors that Dr. Dees misses in his
definition. And that is: 1) Higher tolerance for risk and failure and 2)
Understanding that efforts will not likely generate personal wealth 3)
Ability secure capital investment.

48. Ecology of New Business Form & Stage of Development
Govt
Policy
Accounting
Principles
R&D
Social
Entrepren
eur
Culture Educators
Associatioms Certific
/Advocacy ations
Groups
Legal Social
Consumers
Finance
Micro
Financi

49. Government
Tax incentives to investors in SEs
• Any Legal themselves Charity)
& SE’s form (except
• Public orReporting Principles Defined
Basic
Private
Amend Incorporations Act to
• Keyinclude new legal form… of Incorporation.
Differentiator: Articles
– Social Mission & Purpose in Articles of Incorporation
Educators
There are unique operational and
– leadership challenges related to SEs that Dispute Resolution,
Differentiated Bylaws (Governance,
Dissolution. Reporting etc)
need to be researched and taught.
– Surplus (Profit) Distribution
Financial Services Industry Defined
– Special Loan categories (RBC)
Board Composition
SEC Reporting Requirements (if
– Integrated Reporting (based on GAP and SE industry
public)
reporting standards)
Legal/Incorporations Act-
– Std SE articles of incorporation (asset lock etc)
Mission transfer and preservation
• TaxTransition services
Code Differentiated
Case Law around mission
• 3rd preservation upon sale/exit
Party Certification or Audits

50. Social Enterprise: The signals not the noise
• ITS ABOUT CHANNELING CAPTIAL AND HARNESSING THE
POWER OF BUSINESS TO BETTER OUR WORLD.
• That said, ll sectors will shift values in response to the
movement towards greater responsibility to enviroment and
society.
• SE need to be distinct organizational form to work—and for
the sector to grow—just like Co-ops have....
• Rest of Canada needs to get going....we do have 53 companies
so far who have made transition without legal recognition.

51. “Social Benefit” Built into DNA

52. Questions