B.C. is a leader in righting social wrongs through charitable
business ventures. But as social enterprise emerges as a global trend and non-profits increasingly compete with traditional companies, what’s fair? Do they need special tax advantages?
In theory and practice, what does social enterprise really mean?
It does not feel like a dragon’s den.
Outside the Vancity Theatre in the April evening sunshine, stilt walkers in Elizabethan costumes gently cajole the smartly casual arrivals. Inside, the lobby teems with proud, happy people, some of whom have overcome real adversity. Tables promote clean energy and aboriginal winemaking and woodworking by women. Prosciutto-wrapped asparagus and other fine noshes are elegantly served by Potluck Café & Catering, a company that makes it its mission to hire people who’ve suffered from poverty, mental illness, addiction and sometimes all three.
When the members of Vancouver’s new aristocracy – the people who helped turn organic juice king Gregor Robertson into His Worship, Mayor of Vancouver – have finished the requisite networking, they take their seats in the theatre for the Social Enterprise Dragons event. Four “dragons,” including Vancity CEO Tamara Vrooman and BC Social Venture Partners co-founder Jim Fletcher, will consider pitches from three organizations with a social mission: the Pivot Legal Society, Mission Possible Addiction Rehabilitation Society and the Public Dreams Society. There’s $15,000 on the table for the winner. It’s reality TV for the social-justice set, and it’s damn peculiar.
The MC, Pam Chaloult, the chief operating officer of Joel Solomon and Carol Newell’s Renewal Partners Co., welcomes everyone to traditional Coast Salish territory. “They are the original social entrepreneurs in this area,” she declares.
Well, yes, and they were the region’s first slave traders too. Pretensions and contradictions abound. There’s wealth and need. There’s distrust of business’s agenda and faith in its power to help those it has left behind. There are social-policy theoreticians, and there may even be a person or two serving canapés who would give them a sideways glance and think, “What do you know?”
Once the presentations begin, it’s clear the dragons don’t have much fire. The Pivot Legal Society wants the money for strategic planning and to better brand the low-cost legal services offered by the social-enterprise law firm the society founded; it hopes the firm can provide expertise and ultimately a steady source of business income to assist its anti-poverty advocacy work. Mission Possible wants to improve the marketing of its maintenance and cleaning business, which is staffed by people with “multiple barriers to employment.” Public Dreams wants to improve awareness of its contract event-consulting and -production work, an offshoot of its signature free community-based arts events, such as the annual Illuminares lantern festival.
In between declarations of love and affection come gentle offers of advice about mission creep and legal structure. One dragon says, “I’ve had some mentors who’ve helped me to understand that money can really help you out.”
However, when Public Dreams finishes the last presentation, dragon Alanna Hendren, executive director of the Developmental Disabilities Association, finally remembers she’s supposed to blow a little hot air. “What’s the difference between what you do and what Rogers does when they put on a Christmas parade?” she asks. “One difference is that Rogers pays taxes.”
Public Dreams’ Samantha Jo Simmonds looks completely deflated. Not everyone is quick to see community-based art making as a valuable social good.
WHEN CHARITIES AND NON-PROFITS sell services instead of simply delivering them, the issues are complex, both philosophically and legally. What happens when they compete with traditional businesses? Aren’t paying taxes and employing people social benefits? What sort of social good justifies the tax advantages of non-profit or charitable status?
Revenue Canada defines non-profit groups, which don’t pay business taxes, as being “organized exclusively for social welfare, civic improvement, pleasure, recreation or any other purpose except profit” and generally requires that income not be distributed for the personal benefit of members. Charities, for the additional right to issue tax receipts to donors, must confine themselves to activities that relieve poverty, advance education or religion, or perform “certain other activities” that the courts have deemed charitable, such as providing recreation opportunities and health services.
Of course, you could drive a Trojan volunteer fire department through loopholes as big as “any other purpose except profit” and “certain other activities.” Attesting to that are the reams of government press releases announcing that yet another variation on the Church of Fred has been stripped of its charitable status.
Then there are simple issues of fairness. The member-owned Mountain Equipment Co-op incited the ire of some traditional bicycle businesses in Vancouver last year when it plunged into bicycle sales and repair. Arts groups, which often qualify as charities, regularly find themselves in competition with businesses offering entertainment, such as Rogers, which dresses up its reputation in Vancouver each December with that Santa Claus Parade.
However, regardless of what you call the parade – community engagement, corporate social responsibility or just plain marketing – it doesn’t hold a candle to the magic of a Public Dreams lantern festival. The reason is simple: Public Dreams’ mission is volunteer-driven community engagement, and that mission animates everything it does. For Rogers the Santa Claus Parade doesn’t even show up in its annual report, except perhaps as a cost implicit in the sales budget.
Whatever the model – whether a social enterprise is owned by a society, a charity, a trust, a government, a group of members, its employees or a combination thereof – the key is that the form of ownership and a clear mission ensure that preoccupation with profit, growth and shareholder value doesn’t overwhelm other values.
Just as “corporate social responsibility” is moving from noble aspiration to marketing gimmick, social enterprises are developing a global vogue, and some governments are legislating new corporate structures and tax advantages to foster them. In 2005 Britain passed legislation to allow “community interest companies,” which have a social mission but can also solicit investment and pay capped dividends. In 2008 Vermont became the first state to create a similar legal framework for “low-profit limited liability companies” known as L3Cs. While such ideas aren’t stirring much interest in B.C.’s provincial political power circles, social entrepreneurs around the world turn to our province for examples of business models and support programs that look as good in practice as they do in theory.
“We get to do what’s needed and desirable
for our staff, instead of what someone
is willing to fund.” – Heather O’HaraAT A WINDOW SEAT IN the spotless modern café that fronts Potluck’s catering kitchen at 30 West Hastings, executive director Heather O’Hara, 41, reflects on her society’s enormously successful arc. It began down the block and across the street at the social-enterprise bottle depot United We Can, with an idea for “binner’s dinners.” O’Hara says the objective was simple: “provide better nutrition in our community and employ our residents.”
For a year, dinners were made in the depot, but when the federal employment-program money ran out, Wendy Pedersen and others at United We Can looked for ways to continue the project. Down the street was an underutilized kitchen, in the recently completed Arthur Erickson-designed Portland Hotel, a residential building for the hard-to-house that is run as a social enterprise by the PHS Community Services Society.
In 2001 Potluck was born. The business essentially pays its rent to PHS by preparing more than 30,000 free meals a year for the Portland’s residents. Potluck’s only government grant, $49,000 in gaming money, pays for the program’s food costs. As a registered charity, Potluck also offers food services and life skills training, teaches cooking skills, and promotes the tools it has used to create its own effective social-enterprise business model. It pays for these activities through its operational surpluses (not profits, you must understand) and an annual fundraiser that nets about $20,000.
Potluck hires people with personal difficulties that are often considerable, and it also has a social worker on staff to help them with their housing, their mental health, their medications and their self-esteem. “There’s never funding for that kind of role. We budget for it, and we pay for it.” O’Hara likes it that way. “We get to do what’s needed and desirable for our staff, instead of what someone is willing to fund.”
O’Hara, a graduate of the University of Manitoba’s Israel H. Asper School of Business who has “always been interested in the intersection of business and community,” says Potluck has 30 employees, some full time and some part time. But she won’t say how many of each. She figures Potluck measures success in what people do in the 12 hours they might be slated to work in a given week, because expecting more potentially sets them up for failure: “We intentionally meet people where they’re at, in terms of their capability and job interests. We’re not trying to homogenize people’s diversities and complexities.”
That said, O’Hara adds bluntly that “social enterprise means business, not social services.” Potluck is mainly a catering company – all but $200,000 of its $1.5 million in annual revenue comes from corporate catering – and its success depends on how well it serves clients that range from the City of Vancouver to Shaw Communications Inc., Bell Canada, RBC and SAP AG. “They want a quality caterer,” she says, but as businesspeople they also understand the language of leverage. “They are leveraging their purchasing power to buy more than just good catering.” And they often get more than just the theatre of corporate social responsibility. Shaw now does a volunteer meal program in conjunction with Potluck to facilitate staff team building; European corporate giant SAP has Potluck test driving software the company is developing for the social-enterprise sector.
O’Hara, who started at Potluck in sales and business development in 2006, says business is growing 10 to 20 per cent per year. After April’s Social Enterprise World Forum in San Francisco, which O’Hara attended, some delegates from Scotland stopped by on the way home to look at Potluck’s operation. She sees Vancouver as a world leader in creating successful social enterprises, citing Starworks Packaging & Assembly, which employs people with developmental disabilities; Atira Property Management, which funnels its surpluses into a women’s housing and resource society; and Embers Staffing Solutions, which helps provide an entry point into the workplace for people with barriers to employment.
“Five years ago, this was not as mainstream as it is today,” she says. “It’s a growing trend.”
Can-Do Attitude: In 1995, Ken Lyotier
sparked a unique Downtown Eastside
business by organizing fellow binners into
the still-growing United We Can
recycling depot.SOCIAL ENTERPRISE WAS EVEN LESS mainstream back in the mid-’90s, when Ken Lyotier launched United We Can. Today Lyotier sits in a coffee shop at Main and Cordova, dressed in a stylish polyester shirt, his grey beard neatly trimmed, waxing philosophical about the possibility of God and the dumpster diver’s thrill of the hunt.
In 1995 he wasn’t looking so good. The former binner was an alcoholic with Crohn’s disease, scavenging for the price of his poison. He was also tired of the lack of fairness and respect shown by stores and bottle depots to his fellow scavengers, and he wanted to do something about it. A conversation with a minister from First United Church led to a $1,500 grant to help him bring binners together to draw attention to their issues and create their own alternative.
“It’s important to allow us to stand on our own two feet and be part of society along with everybody else,” he says as we talk on a perfect August morning. “But don’t patronize us,” he adds, very firmly. “Where do people get off telling us they know what’s best for us?”
The establishment of United We Can may have been assisted by a grant, but its success ultimately depended on a free-market first principle. “The reason people come to United We Can is the same as it is anywhere else: cash is moving across the counter,” Lyotier says. “What happens when they’re there is they discover they are not alone; they meet people, they form relationships, they develop a voice. People long for that.”
Because a non-profit society runs the business, those community-building goals are paramount. As with Potluck, surplus revenue (from the premium on the bottles it collects through a program overseen by the provincial government) goes not to some anonymous shareholder or distant owner but back into the community of people that make the joint run.
The 63-year-old Lyotier retired last year from running United We Can, but he still sits on the board of the organization, which has an annual cash flow that tops $2 million. Surplus revenue helped to underwrite the bike shop and computer club next door, where binners can repair their own two-wheeled business vehicles and get free Internet access. United We Can also helped to develop and build soft-tire bicycle trailers, so binners could have a better means of collection than rattling, ripped-off shopping carts. Lately, it’s helped to initiate local community gardens. Its charitable arm is raising money for a new depot and binners’ housing. Mostly, though, United We Can provides employment in the depot to people who simply would not fit in anywhere else.
Few expected that Lyotier’s effort to organize binners would amount to much. Jim Green, the former city councillor and longtime Downtown Eastside activist, wasn’t optimistic, but at Lyotier’s initial one-day Victory Square recycling event, hundreds of people showed up. “I couldn’t believe it,” Green recalls. “But Ken had this dream, he had this energy and this understanding of his constituency.”
WHEN UNITED WE CAN WAS being established, Green says, Lyotier “hired all unemployable people. He broke all the moulds because of his knowledge and his spirit.” The media attention given to the Victory Square event gave Lyotier’s mission some legs, and with a small pot of money he paid binners $10 each to join him and act as “consultants” to the province on reforming rules on bottle deposits. “As a binner, Ken knew exactly what he was talking about,” Green says. “Everyone else was a theorist.”
For Green the theorists can sometimes be a menace. He recalls days past when governments arrived in challenged communities with good intentions and big ideas for “community economic development,” most of which went sideways because projects were imposed from above, with consequences that extended way beyond their own failure: “People said, ‘Why should we be investing in this when you can’t name a project that’s working?’”
David LePage, one of the people behind the annual Social Enterprise Dragons event, also believes solutions have to emerge from the community where the challenge exists. As program manager for Enterprising Non Profits, a provincewide effort funded by a group of foundations, credit unions and government-initiated economic development initiatives, his mission is to give community-based groups the tools to make their solutions real. That means providing money for feasibility studies and business plans, backed by a strong education component. Groups can’t even apply for a grant until they’ve attended a one-day seminar.
LePage believes Enterprising Non Profits along with other engaged sources of seed capital such as the Vancity Community Foundation and BC Social Venture Partners (which marries philanthropy and mentorship) are seen internationally as leaders. Government support is another matter. “Canada, in fact, is behind international models,” he opines, over a coffee near Main and King Edward. “The healthy part of that is that social enterprise grew here as more self-sustaining and less government dependent.”
LePage sees the legal framework that allows Britain’s community interest companies and Vermont’s L3Cs as a useful way to increase the availability of so-called patient capital. And he says he’d also welcome in B.C. programs such as those in Nova Scotia and Manitoba that offer tax credits to social-enterprise-style initiatives. In Nova Scotia, Community Economic Development Funds give a 35 per cent tax credit to people who invest, through venture capital companies, in community-based businesses and co-operatives seeking to address local needs. Provincial governments offer tax credits to the film industry, green businesses and venture capital funds underwriting high-risk, high-return businesses such as biotechnology, and LePage figures social enterprise should receive similar consideration: “If you can use social enterprise to lower costs associated with health care and unemployment, then the province wins.”
Yet despite that, and notwithstanding the perils that face charities and non-profits that stray too far from federal rules, LePage isn’t clamouring for regulatory change. He figures the key priority is to educate existing non-profits, traditional businesses and the public about the ways and means of social enterprise. He also cautions that the model is hardly a cure-all: “It’s not the answer for all non-profits. It’s not the only business model. It’s just one piece.”
However, in a globalizing world where corporations are consolidating and governments are often less able to deliver community services, it’s an important piece. To foster that, LePage wants to put social values, as we’ve done with environmental values, into both the individual and corporate purchasing equation, along with price and quality: “Let it tug away with all the rest. It’s not there right now.”
LePage looks to the 2010 Winter Olympics for an example he’d like more businesses to emulate. When VANOC issued its request for proposals to provide medallist bouquets, he says, it asked bidders to state the social value of their proposal. The contract went to a partnership that included Just Beginnings Flowers, which trains women coming out of prison in the art of flower arranging.
LYOTIER, WHO WAS A TORCHBEARER on the day the Olympics opened, also saw opportunities in the event, but taking advantage of them had to begin with asking the binners what they wanted: “Generally, the boys said, ‘The Olympics are cool.’ The guys on the street were supportive of the opportunity to move the business ahead, make connections and advance things for the future.” United We Can ended up with a contract to handle recycling at the LiveCity sites.
Piece by piece, relationship by relationship, a promising model for doing business differently is slowly being built.
Of course, if the Social Enterprise Dragons event is any measure, there’s still plenty to debate. We still have trouble agreeing on what kind of activity constitutes a social good. While LePage agrees with Alanna Hendren that arts groups need to ensure their mission statements clearly articulate what distinguishes their work from commercial entertainment, he also sees in the arts an example of social enterprise that often goes unacknowledged: “The arts sector is probably the largest unheralded social-enterprise sector that exists.”
That didn’t help Public Dreams when the dragons passed their final judgment; the $15,000 went to the lawyers. But of course, because it was a social-justice event, no group went away empty-handed. The cleaners and the artists were offered some consulting services to help them fulfill their inner potential as well.
It’s closing time at the Potluck Café. After Helen Hill has put away the patio umbrella, she takes a chair in the empty room to talk about what her eight years there have meant to her. The longtime Downtown Eastside resident, 63, spent much of her life being dependent – on her parents or her husband, on welfare and alcohol. She worked briefly at Tradeworks, another social enterprise, before being hired by Potluck.
Hill has a purple daisy behind each ear, under a cap and short-cropped grey hair. “I came here living in fear,” she says. There’s a faint quaver in her voice. “I had a bad marriage. Coming here, I prayed to be here. I prayed for a place to be where I was accepted.”
Hill says she grew up being told by her parents and siblings that she was “a retard,” and little in her life since then had given her confidence that she could do the job: “I wasn’t supposed to last three days.” She was paying a price for being tentative when someone at the café said, “Leave Helen alone; she’s just learning.”
Today, Hill says, “she’s the last person on my mind when I go to sleep.”
Hill allows that while she doesn’t currently drink, she’d certainly like to: “The day I die, I’m going out with Captain Morgan.” Hard drugs have also tempted her. “I’m on my side of the counter,” she insists, “because I’m afraid of needles.”
A little structure and support can help us all with temptation, however, and it’s pretty clear there’s nothing much wrong with Helen Hill, except that she needed a place where she felt she belonged. She is very grateful for the opportunity that Potluck has provided: “I don’t think I would be here if it was any other type of business.”
If not for Potluck, theoretically, where would she be?
Original Article taken from BC Business Online: http://www.bcbusinessonline.ca/bcb/top-stories/2010/10/08/inside-social-enterprise-bc#ixzz11hNMSyag
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