Tim Draimin, Executive Director of Social Innovation Generation (SiG) - Chair, Causeway Social Finance
In November 2009 Statistics Canada reported that the overall value of charitable donations dropped 5.3% in the previous year. These numbers reinforce economic realities that are forcing non-profits to explore innovative ways to finance their work.
New funding models have emerged in a field, now known widely as social enterprise. With support from the business community and with champions in government, adopting these models could result in a more robust, sustainable Canadian non-profit sector. With strong global models to follow, successful implementation will not only be welcomed, it will be cause for much celebration.
According to research by Imagine Canada, the non-profit sector accounts for more than $110 billion of Canada’s revenue, employing 1.5 million people. These numbers clearly reflect the scale of the sector and its vital role contributing to the quality of life in Canadian communities. They also suggest a reality that most Canadians would like to believe; that our efforts can make Canadian society better.
Although many Canadians benefit from the work of non-profits, most would be hard pressed to describe the challenges they face. This is an unfortunate byproduct of more than half a century of insufficient public recognition.
However, innovation cannot wait for recognition. Non-profits that have produced innovative programming in the past, must now apply that same entrepreneurial capability to strengthen and diversify their business models.
Canada’s non-profit sector has been operating with a financial model that is quickly running out of steam. New hybrid business models have emerged in the US and the UK that offer important learning and potential blueprints for adaptation.
The United Kingdom created Community Interest Companies (CICs) and the United States developed Low-profit Limited Liability Companies (L3Cs). These models, led by social entrepreneurs, allow non-profits to generate income and achieve self-sustainability, while still serving vulnerable communities, often in innovative ways.
The opportunity to support non-profits using best practice social finance models has increasing global support. One of the greatest advocates is Bill Gates who refers to social finance as creative capitalism, “The world will make lasting progress on the big inequities that remain if governments and nonprofits do their part by giving more aid and more effective aid. But the improvements will happen faster and last longer if we can channel market forces.” The most visible example of this is micro-finance.
There is a real opportunity to build social finance models in Canada, but we face some major barriers. That’s where the government can step up as an enabler. Our non-profit and charity laws are retrograde. Addressing these hurdles must be part of any Canadian public policy agenda.
The charitable regime has sorely out-dated guidance and rules about charities earning income. The rules must be more flexible and adaptive to the current needs of the non-profit sector. If we are affording them less in donations, we must create an enabling environment for them to adopt enterprising models to sustain themselves.
These new models will permit more innovative programming ideas to meet the needs of disadvantaged communities and allow for greater exploration into innovative ways to address systemic social issues.
There are organizations and enabling institutions that are helping non-profits move towards self-sustainability too. Organizations like MaRS and the Centre for Social Innovation, BC’s Enterprising Non-Profits, and the Carleton Centre for Community Innovation to name just a few.
Late last year, the Social Enterprise Council of Canada hosted its 3rd national conference in Toronto. The conference has become increasingly important for the non-profit sector as established institutions pursue fresh approaches, and a new generation of social entrepreneurs explore opportunities to grow their “big idea.”
Hundreds of people from 8 provinces, all levels of government, the private and non-profit sectors and academe came to collaborate. The conference finished with an in-depth policy workshop and discussion that will inform the development, enrichment and outreach of the social enterprise movement in Canada.
Society’s challenge is to accelerate the process of innovation in and of the non-profit sector and to create institutions and processes to support it. Lessons from the US and UK can provide valuable learning to the Canadian community. We can shorten the adaptation period by taking advantage of this external experience.
Social innovator Jane Jacobs wrote, "Opportunity, not necessity, is the mother of invention." Social enterprise is not just about dollars and cents. More profoundly, it’s the opportunity for Canadians to provide for vulnerable citizens in our own backyard.
Together, non-profit, private and government partners must create the environment that will unleash the pent-up enterprising capacity of the non-profit sector.
