Paving the Way for a National Social Innovation Strategy

Australia needs a National Social Innovation Strategy which considers all the policy levers at the government’s disposal to support social innovation and enterprise, writes Policy and Research Manager at Philanthropy Australia, Krystian Seibert.

The release of last year’s National Innovation and Science Agenda was as clear statement that the Turnbull Government wants to focus on growing our economy by supporting the development and commercialisation of new ideas and technological solutions.

Although the Agenda is wide-ranging and forward thinking, what it lacked was a focus on social innovation – as pointed out by Rob Koczkar of Social Ventures Australia.

When we think about innovation, we often think of it in terms of “tech startups” but it really is much more than that. Innovation may or may not involve developing new technology, but what is common across all forms of innovation is that it involves doing things in new ways – tackling a problem or approaching an issue from a different angle.

As rightly argued by Koczkar, we do need a focus on social innovation. That’s because the old ways of doing things often just aren’t working. Take long-term unemployment – despite all the efforts and interventions which have been trialled, according to analysis by the Australian Council for Social Service, the number of long-term unemployed is on the rise.

We need to tackle issues such as unemployment from different angles, and indeed that is happening already. Social enterprises such as STREAT and Mission Australia’s Charcoal Lane are transforming the lives of young people who otherwise may not have access to a decent job and the ability to develop skills and experience. Whilst there are many more like them, we still need even more like them.

Which is why we need a National Social Innovation Strategy which considers all the policy levers at the government’s disposal to support social innovation and enterprise – be it tax incentives, social procurement frameworks, legal structures, outcomes based commissioning, and support for capacity building to name just a few levers.

The development of a National Social Innovation Strategy would be no simple task, and in an election year, it may hard to get the necessary breathing space to work through what such a Strategy could include.

So whilst such a Strategy will probably have to wait until after this year’s election to get some attention, there are some things which the Government could do now, quite easily and at no cost to the budget, which will start the ball rolling and pave the way for a National Social Innovation Strategy down the track.

In the second half of last year, Philanthropy Australia was commissioned to undertake a project for the Department of Social Services, to inform the work of the Prime Minister’s Community Business Partnership.

The project examined the Program Related Investments (PRI) framework in the United States, developing a number of options for how such a framework could be implemented in Australia, seeking to ascertain demand for such a framework in Australia within the philanthropic sector, and recommending a model for introducing PRIs in Australia.

PRIs involve investments made by foundations to further their charitable purposes, rather than to generate a return. They typically involve below market rate investments, for example a zero or low interest loan to a charity.

Although a PRI is not a grant, it counts toward a foundation’s minimum annual distribution requirement in the year a disbursement is made. Once repaid, the funds used for a PRI must be distributed again in the following year. In this sense, PRIs could be considered a form of “repayable grant”, which “recycle” the foundation’s funds in order to make more funds available for charities.

PRIs have a number of benefits – they enable foundations to leverage their assets better, and provide a new source of investment for charities and social enterprises. If you’re an innovative social enterprise looking to expand, you may have already benefited from a grant from a foundation. Now that you have an income stream from your trading activities, a low interest loan from a foundation could be what you need to assist with your expansion. That’s the situation Reach Enterprises is in, which is one of the case studies in Philanthropy Australia’s report.

You may ask why a social enterprise would prefer a loan to a grant. Ultimately, it may prefer a grant, but with limited philanthropic funds available for granting, there is an argument for directing those funds to charities whose activities will never be able to generate income to repay a loan. In the case of social enterprise, because it conducts its activities through trading, the availability of PRIs may mean it can access funds more easily than if it were just seeking a grant.

A key finding of the project was that there is very strong support from a broad range of stakeholders for the introduction of a PRI framework in Australia – which indicates that if they are introduced, then they will make a difference.

The best thing about introducing a PRI framework is that it can be done very easily, and at no cost to government. The Australian Treasury recently completed a consultation process regarding proposed amendments to the Private and Public Ancillary Fund Guidelines – all that is needed in order to allow Private and Public Ancillary Funds to make PRIs is making additional amendments to the Guidelines. Philanthropy Australia has gone so far as to suggest the drafting of those amendments in our submission to the Australian Treasury.

Of course, PRIs won’t be for everybody – they are just another tool in the social change and innovation tool box. But they are the kind of simple and inexpensive policy lever which the government could easily introduce now, as a sign that it recognises the importance of social innovation and the need for our taxation and regulatory framework for philanthropy to have the flexibility needed to support this innovation.

In this way, one such small change now could pave the way for a much bolder and broader National Social Innovation Strategy to be developed and implemented down the track.

About the author: Krystian Seibert is the Policy & Research Manager with Philanthropy Australia and tweets at @KSeibertAu.