Growing Social Enterprise – a Big Opportunity for Philanthropy and Government

When it comes to philanthropy, social enterprise ticks a lot of boxes as a strategic investment which addresses systemic disadvantage, and there are signs that philanthropic interest in social enterprise is growing, writes Philanthropy Australia’s Krystian Seibert.

Recently, I was fortunate to hear Carla Javits speak during her visit to Australia as a guest of Social Traders.

Carla is CEO of REDF, a US Not for Profit established through the philanthropy of George R. Roberts, a leading figure in private equity. It supports social enterprises in order to create job opportunities for people with the greatest barriers to work.

Hearing about REDF’s work made me reflect on the big opportunity we have in Australia to grow and foster social enterprise – an opportunity that we currently don’t take full advantage of.

Social enterprise is diverse – many social enterprises, like those REDF supports, focus on “work integration”. However other social enterprises focus on responding to unmet needs by providing goods or services to particular communities, or on revenue generation to direct towards furthering charitable purposes.

In terms of social enterprises which focus on work integration, they have two major attractions as a tool for achieving social change.

Firstly, by trading to achieve their social mission, social enterprises provide an opportunity to build self-sustaining organisations which can provide job opportunities for the disadvantaged. They aren’t a “band aid” solution, but provide a strategic way of addressing barriers to employment which underpin systemic disadvantage.

Secondly, although the phrase “the best form of welfare is a job” is bandied around a lot and unfortunately is sometimes used as an excuse for not providing an adequate social safety net, there is some truth to the statement. Having meaningful work is empowering, and is one of the key elements of building inclusive and cohesive communities. Social enterprise provides that empowerment, which is so essential if we are to address systemic disadvantage.

So when it comes to philanthropy – social enterprise ticks a lot boxes. Supporting social enterprises is a strategic investment which provides sustainable solutions which address systemic disadvantage.

There are signs that philanthropy’s interest in social enterprise is growing. The recently released FASES 2016 research, which is a joint initiative of Social Traders and the Centre for Social Impact Swinburne, showed that between 2010 and 2016, reported philanthropic support for social enterprise grew from 7 per cent to 12 per cent of income.

Whilst this is a large increase in support, it is still a proportionately small amount of the total income of social enterprise – although it’s worth remembering that the aim of social enterprise is to generate income from trading, so this figure will never be too high and nor would we want it to be.

That said, there is a real opportunity to grow philanthropy’s support for social enterprise – it can provide that critical “risk capital” for start-up social enterprises, as well as support innovation by established social enterprises.

When it comes to government – social enterprise also ticks a lot of boxes. Governments of all persuasions are keen to support policy interventions which move people from welfare and into work. This reflects a desire to reduce welfare spending but also an appreciation of the benefits of meaningful work as pointed out above. These policy interventions can unfortunately sometimes be punitive and bureaucratic in nature.

Social enterprise provides a way of creating employment opportunities targeted at those facing the greatest barriers to work – governments should therefore be very interested in supporting it.

So what can we do to grow support for social enterprise from both philanthropy and government?

With regards to philanthropy, raising awareness is important as well as ensuring that the regulatory framework provides philanthropy with the right tools to provide the support.

Philanthropy Australia is keen to raise awareness about the benefits of supporting social enterprise.

Together with the National Australia Bank (NAB), we have announced a $500,000 grant fund to help Not for Profits establish and grow social enterprises. As part of this initiative, NAB will contribute $250,000 and Philanthropy Australia will match this through contributions from its members and other interested organisations and individuals.

By encouraging philanthropic organisations to dip their toe into the water, we can hopefully raise awareness more broadly within philanthropy about the benefits of supporting social enterprise as well as providing important capacity building support from the fund itself.

Social enterprise will also feature prominently at Philanthropy Australia’s National Conference in Sydney in September. In a keynote address, the CEO of the Clinton Foundation’s Clinton Giustra Enterprise Partnership, Mark Gunton, will make the case for Why Every Philanthropist Should Be Investing in Social Enterprise. This will be followed by a panel discussion on day two which will explore the benefits of supporting social enterprise in more depth.

Government can also help unlock philanthropic support for social enterprise – for example, by introducing a “program related investments” framework for ancillary funds. This would enable ancillary funds to more easily use their assets to provide low cost finance for social enterprises.

This was the subject of a previous article of mine for Pro Bono Australia News and a report Philanthropy Australia prepared for the Department of Social Services and Prime Minister’s Community Business Partnership in the second half of 2015.

Recent changes to the public and private ancillary fund guidelines, also a product of Philanthropy Australia’s advocacy, have also introduced new ways for ancillary funds to support social enterprises and other charities – for example, through providing loan guarantees.

These changes all focus on improving access to capital, but it’s also very important to drive demand for the goods and services which social enterprises produce. That’s why the FASES 2016 research underlines the critical role of social procurement as a way for governments, but also larger businesses, to support social enterprise.

This is one area where philanthropy has also stepped into assist – thanks to an initial seed investment from the Ian Potter Foundation, Social Traders recently launched its CONNECT service which is designed to make it easier for both public and private sector buyers to find and source goods and services from social enterprises around Australia.

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