Balancing the tension of social purpose and commercial viability

In her final Strategy Spotlight, Felicity Green looks at the realities of social enterprise business models.

Australia’s social enterprise sector is blossoming; peak bodies, taskforces, procurement frameworks and certification methods abound.

Consumers are driving the market for more ethical products and the younger generation of employees are seeking purpose embedded in their work. Many who are disillusioned with both not-for-profit and commercial funding models, see social enterprise as an appealing solution.

But running a successful social enterprise is no mean feat.

In this Strategy Spotlight, we interview Sue Boyce, CEO of Ability Works. She shares her candid insights and advice for those taking on the challenge of running a commercially successful mission-led business.

Boyce brings a wealth of experience to her current role, which helps her wear many hats in one day. She assisted Afghan refugees in Pakistan with the United Nations, climbed the corporate ladder in the pharmaceutical industry and started her own greenfield FMCG business which grew to over $20 million in turnover.

Then, in her own words,  she needed a better reason to get out of bed in the morning, and so she took the role of general manager of fundraising and community engagement at Beyond Blue. This mixture of experience across roles and sectors armed Boyce with many of the tools she uses today.

The social mission of Ability Works is to create employment for people with significant barriers to employment. Through her tenure, Boyce has grown the enterprise by both scope and scale. Starting in the 1950’s and 60’s, the organisation has developed programs aligned to the NDIS, and more recently diversified its participants to include people from socially disadvantaged backgrounds. 

Today, the organisation has a range of successful social enterprise businesses. There are light engineering, document digitising and mail sorting services which embrace artificial intelligence to create jobs rather than take them away, by using a robot that reads for those who can’t and a robotic welder. There is an inclusive design service involving input from those with complex needs, which operates on the principle that if you design with complex needs in mind, a better product will result. And they work closely with young people with a disability in the environment they’re in about what they’re good at and match them with a mainstream employment provider. Each of these initiatives are mission-driven and underpinned by a commercial model. 

Boyce’s forward-looking strategy is to establish a new fit-for-purpose facility in a suburb that matches employment need with workforce need. The area has been identified, which has up to a 25 per cent unemployment rate among some communities, with manufacturers crying out for staff and community members wanting to work.

After a co-design with the underemployed communities in this area, conducted in partnership with RMIT, the evidence became clear as to why the unemployment remains at the current rate. In essence, there are a range of barriers to many communities being able to work, including transport, childcare, temporary visas, language and cultural barriers. 

To make this strategy successful, a significant amount of foundational work needs to wrap around the enterprise, such as fast-tracked English lessons, education on subjects such as tax and superannuation, and the communities also calling for an independent community liaison that they could go to with any questions.

This is where traditional for-profit business models and social enterprise models differ. The extra cost associated with employing these communities is estimated to be approximately 30 per cent higher than mainstream employment. Yet if we can solve this place-based market mismatch of workforce shortage and underemployment, the benefits are plenty. The case for ROI is clear, however the upfront funding is often the gap social enterprises cannot cover themselves.

So Boyce’s ask is for funders to recognise this gap, and step in to support in the early stage. Social enterprises generally run on very slim margins, so helping to fund the backbone or initial runway could be the critical success factor for an initiative that can ultimately drive many social, economic and cultural outcomes.

And for social entrepreneurs fighting the good fight, Boyce’s words of advice are:

• If you employ vulnerable communities, your goal needs to be about generating employment, not profit. Not for profits often start a social enterprise employing people from vulnerable backgrounds, believing they will generate profits to fund other parts of their organisation.  The reality is vulnerable communities often have multiple barriers to employment and cost more to employ.  
• Factor in the “additional need” costs to your business model (traditional measures of productivity do not include all the costs associated with providing a workforce with multiple barriers to employment, with all the supervision and support they need, these costs are ignored or assumed to be worn elsewhere in the value chain). Then work with customers that value the social impact you are creating, so you can charge higher than market rates.
• The NDIS firmly enrolled Australians with the right to a life that includes the purpose found in having a job.  These are not just words, but a social commitment to finding purpose through work.  That commitment is central to the Ability Works mission and the Australian community.

Social enterprise is a powerful model which can create great impact, but it can only be sustainable if supported properly at the beginning.