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Social Enterprise

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James Magnus-Johnston

on 4 April 2017

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Transcript of Social Enterprise

What market-provided goods and services do you access on a daily basis?
Think outside the box for a moment! What goods/services do you access that are not provided by the market?

(hint: they generally provided by nature, by the government, or another third party organization)
A market problem
A market failure
The "market" = a place where buyers and sellers trade goods
A product or service that can
solve a problem in the marketplace;
entrepreneurs can offer a "value
proposition" that improves lives

Examples?
A problem where the buying and selling of goods/services cannot be leveraged to improve lives

Examples?
Markets
"utilize individual self-interest
to efficiently allocate resources (means)
among alternative ends via the pricing
mechanism" - Daly & Farley
Under what conditions do markets fail?
1. Inefficient allocation of resources to competing ends
Reasons for market failures
"Allocation"

A market good or service must be:

(a)
Rival
-- One for which its use by one person prohibits its use by another person (eg. food, clothing, cars, homes).
"if people are unwilling to pay for a good,
there will be no profit in its production"
(see other slideshow: 176)
(why do some have more than others)
"The capacity of a system, be it an individual, a forest, a city or an economy, to deal with change and continue to develop. It is about the capacity to use shocks and disturbances like financial crises or climate change to spur renewal and innovative thinking..."
Resilience
- Lewis & Conaty, 2012
- Argue for a major SEE (Social, Ecological, Economic) change
Is the "resilience imperative" compatible with the principles of business? Can one achieve a profit while meeting social and ecological ends?
Daly & Farley argue that "if people are unwilling to pay for a good, there will be no profit in its production" -- in other words, business requires profit
Give some examples why/not using the terms
"market problem" and "market failure." Find examples in your text
The authors present a comprehensive series of strategic questions with a focus on legal and business structures in the following subject areas:
Be prepared to challenge deeply embedded cultural assumptions.

At the same time, each section of this text is complemented by case studies of pioneering community initiatives rounded out by a discussion and reflections.


What's the difference between
poverty
and
inequality
?
Inequality
: Refers to the distribution of resources and wealth among people

Poverty
: Refers to the inability of individuals to meet basic needs
A response to three broad and ubiquitous issues in the industrialized world:

1) Climate Change
What do Lewis & Conaty argue cause inequality?
1 of 23 financial crises in the last century occurred prior to 1970.
Refer to:

"Minsky
Instability
Hypothesis"

Low interest rates
High levels of debt
The government "prints money"

Community responses to inequality

"Wealth vs. Commonwealth"
What are basic forms of wealth redistribution?
Reciprocity: social capital
Consolidation of land ownership
What are some alternatives to debt-based banking?
Marty Donkervoort
-
held senior positions
in private corporations, public sector, social economy
- founded
Away Express
, a social enterprise courier service in Toronto
- mentored
The Big Carrot worker co-op
in the retail health food business
-
founded and managed Inner City Renovation
, a construction sector SE
-
taught courses
at Ryerson University, the University of Winnipeg
- a
past director of the Canadian Worker Co-op Federation
, the Worker Owner Development, and the Social Enterprise Council of Canada, among others
-
has an MBA and BSc
in timber engineering
1. 100% Debt-free



2. Cooperative finance



3. Public Banks
"if interest must be charged, why not allow more public ownership of banks" (Canada 1938-1971)

Why Keynes' policies worked!

eg. North Dakota
Historically set up in protest to usury and debt-based banking

eg. "Building Societies" (UK, 1775) = mutual savings
eg. "Credit Unions" (1930s)
eg. "Negative Interest"

"Social Enterprises"

Silvio Gesell (1890s)
Decentralized
currency
Tried in:
- Minneapolis
- Iowa
Jord Arbete Kapital
(Land Labour Capital)
1930s: Expanded to 1.5 of Danish money supply
1935: Successfully used debt-free banking

Was shut down, and re-started recently with
great success in Sweden and Denmark
Big proponents: Henry Ford

"do you appreciate that 80 cents of every dollar raised by taxation is spent in the payment of interest?"
Used by
Early Romans
Early Americans

Frederick

Soddy

(Nobel Prize-winning chemist)
Currency must be bound by thermodynamic physics
Energy Efficiency
vs.
Energy Sufficiency
What's the distinction?
In Manitoba, what requires the use of fossil fuels?
Almost everything requires fossil fuel!
Courtesy
50x'30


Increase
renewable
energy mix
50% by 2030
Why do we need to reduce our energy use?

Potentially catastrophic climate change
What are some examples of innovative social enterprises/initiatives to reduce fossil fuel dependence?
Fossil Free Kristianstad:
municipality wanted to be fossil-fuel free


Yorkshire YES program
: actions of private citizens
UK
Denmark
Providence University College


1. Jobs -- "the best social program is a job"


BUILD
"for every million dollars
public agencies invested in the energy efficiency of low-income households, over $20 million is returned in societal benefits – a ratio of 20:1. By contrast, investments in manufacturing generated a 10:1 societal return"
What's the economic argument in favour of
green social entrepreneurship?



2. Savings: four groups to benefit from utility bill reductions


1. 100,000 low-income Manitobans
2. Government of Manitoba
3. Federal government and CMHC
4. Manitoba Hydro

Shaun Loney, p. 52
3. Economic resilience*
1. Solar thermal
2. Solar PV
2. Wind
3. Ground source heat pumps

*Protects against
fossil fuel price
volatility
Summarize one initiative that could improve our efficiency or reduce demand in Manitoba (50by30.org)
Reflecting on initiatives in Denmark and the UK, Who were the catalysts for change in these cases?

(see "Transition factors, in Ch. 5)

How did these initiatives increase resilience?

(see "resilience reflections" Ch. 5)

(GHGs)
2013:
2014:
Province announces it will set up a new "efficiency" utility such as "Efficiency Vermont"
What opportunities are there in energy efficiency
or demand side management (sufficiency) in Manitoba?

1. Energy efficiency:
A reduction in energy used per unit of service (eg. heat, light)

2. Energy sufficiency:
An aggregate reduction in the demand and use of energy

(see website)


1. minimal capital cost
2. minimal need for government involvement
Best of all:
But first, the "market rules" have to be favourable
What is its

(a) structure
(b) mission
The jobs and money stay in Manitoba
1. Biomass


2. Wind


3. Solar


4. Geothermal

400,000 acres
of straw is burned/yr
Creates smoke
and clogs emergency rooms
MB Examples:


Some biomass currently being shipped to Europe
due to policy shifts there
5x more benefits
to local economies
More expensive but more reliable
Perfect for community ownership/finance in SW MB
Act outdated

originally encouraged consumption of electricity!

Energy use increased
1000 MW since 1992
Energy for export

Could be leveraged
for energy reduction!
"My uncle is no environmentalist. He likes to rant about timber stumpage fees and the cost of diesel to operate his trucks. Why does he have solar power feeding into the grid, in Emo, Ontario, and we have none in Manitoba? ...
Why do large utilities not favour small, decentralized projects despite their benefits for resilience and jobs?
Not "dispatchable"

1. Solar Thermal

2. Photovoltaic
Why does Loney argue this is a great resource for First Nations?
100 tanker truck loads of diesel
trek over winter roads to these communities every year

Very high costs:
($0.60 and $0.67 per kilowatt hour vs. $0.062 per kilowatt hour): 37 times higher
- use public lands for renewables

See: MB Hydro programs
See: RISE/BUILD
Land

reform

- and -
Access to assets
Why would providing access to assets such as land and housing reduce poverty and inequality
SEs can leverage tools like community land trusts to reduce the cost of cooperative home ownership
What is the role of SEs in providing access to assets?
"As soon as the land of any country has
all become private property, the landlords,
like all other man, love to reap where
they have never sowed, and demand a rent even
for its natural produce"

- Adam Smith, The Wealth of Nations
Why do thousands of Americans and Britons owe more on their house than it is worth?

("negative equity")

How have banks been able to foreclose on homes and then rent them out at high monthly rates?

- (Lewis & Conaty, Loc 2037)
How many of you are renting?

How many of you want to own homes?
avg. first-time home-buyer now 35
affordable shelter harder to procure
vacancy rate in Winnipeg < 1%
would be fine if incomes (or life expectancy) were rising
Generation squeeze?
Rent increases harm the marginalized
less money for food as expenses increase
less money for transportation as fossil fuel prices increase
cannot access credit for a mortgage
What if we could...

...increase access to ownership
...cut out up to 50% of the interest!
The Community Land Trust!
How has the CLT

improved access to assets?
fostered a sense of community?
fostered local economic development?
secured a resilient pattern of development?
Who owns land and why?

Can you own something you do not create?
(Rousseau)
Historically, land has been consolidated in the hands of fewer and fewer landowners until the system becomes exploitative

18th C Europe
19th C Russia
21st C America (Credit crisis and ongoing structural change)
Pattern of development emerging in Canada?
The Community Land Trust
separates land price from building price
Case 1: US Community Land Trust (1967)
Swann, Borsodi, and King (cousin of ML King)
Supported by Jimmy Carter
Enabled African American sharecroppers and land tenants ownership of land
Ultimately debt service on land still too high
The Community Land Trust
USES

agriculture
workspaces
parks
housing
BY

community/municipality
business
non-profits
co-operatives
Effectively
removes
predatory
rent-seeking
features
of market
Case 2: Champlain Housing Trust
Burlington, VT
Effectively an SE
Better than govt programs?

Study by Burlington Associates:

more cost effective
more affordable
return on public subsidies
still provided return to owners
Other Case Studies
Irvine, California (2006)
UK: First Garden City, Ltd. (1903-1995)
Scotland: Isle of Eigg Heritage Trust (1997)
CLTs popular in Scotland, England, Wales
From
Exclusive
Home
Ownership...
..to
Mutual
Home
Ownership

(UK, Sweden)
large co-op
finances smaller co-ops
CLT owns the land
tailored to income
benefits those without equity (you)
financing is the first hurdle
LILAC
Reference "transition factors" in your text.

What are some social, cultural, and economic barriers to the institution of more CLTs in Canada/Winnipeg?
How can the CLT be used to improve
small-scale agriculture and improve resilience?
How can we make our food system
more resilient to climate change,
fossil fuel depletion
and economic volatility?
GMOs?
Critique of industrial food system
- ownership consolidated in few corporate hands
- patents on seeds?
- monoculture depletes productivity of soils
- destroys traditional livelihoods
- shipped from far away

2009: 5% of food consumed
on Vancouver Island produced there
World: 40% of employment
US: 2% of employment
Price of cheap food
- oil as our "servant"
- oil for fertilizers, pesticides
- machinery for water use
- machinery for packaging
- GHG emissions and climate change
- interference with global
nitrogen cycle
1 barrel = 25,000 hrs of human labour
(12.5 years of FT work)
Julien Tromeur
dreamstime.com
EROEI:

10-15:1 calories
20 barrels of oil for each person/year
- ends up in rivers, lakes, oceans
- destroys oxygen ("hypoxia")

9% of global carbon
37% of methane (23x more global warming potential)
65% of nitrous oxide (296x GWP)
80 yrs ago in US, accounted for 25% of disposable income, now accounts for <10%

Industrial farmers often do not earn a living wage
2-3 companies control

- nitrogen supply
- chemical supply
- seeds
What happens
when land
becomes less productive?
Drought:
China
S. America
USA

One solution:
Seikatsu model
- consumer co-operative
Known in N. America as
"Community Supported Agriculture" (CSA)
- farmers raise captial without debt from shareholders
- urban or rural-based (reclaimed land in Burlington)
The Land Trust
- Protects farmlandrst CLT an
- Indian Line Farm (MA) first CLT/CSA in USA
- Intervale (Burlington) a CLT
- land transferred to a trust; co-operatives administer land
- BC passed law to "protect farmland"
Indian Line Farm

-

provides 99 yr lease and requires sound farming practices
- next-gen farmers only lease structures
- retains option to repurchase land
- management fee provided to EF Schumacher Society
What are some reasons
why local development is critical to fostering a resilient society?

“the amount of change a system can undergo…
and essentially retain the same functions”

- Lewis & Conaty

SOCIAL -- ENVIRONMENTAL -- FINANCIAL
“People do not live globally… people spend most of their life time at one place. There they work, live, and develop themselves as well as their environment. An economy that pays attention to these facts, would organise itself more locally and with the people in the centre of all its processes.”

- Norbert Frost in Lewis & Conaty

In what ways are our lives global?

In what ways are our lives local?
Are there big solutions to global problems or are there lots of little solutions to big problems?

(ie. US: 27% income growth since 1979, but 33% of gains to top 1%; bottom 60% making less)
Some responses:




- Manufacturing and production jobs

- High capital mobility/flight

- No/limited control over investment and development (“dependency”)

- Fuels inequality

- Social capital networks profoundly local

- High energy (personal; fossil) to maintain global networks
- 90% of all trade is local (Ghemawat, 2007)
Community Economic Development
- Rebuild marginalized economies
- Community-specific social/economic goals
- Citizen-led
- Includes non-monetized economic system
- Place-shaping (“price of place”)

- Eg. Seikatsu food model (local, fair, just, resilient)
- Eg. Kristianstaad (identified renewable potential/needs)

Theological implications: increased fulfillment and connection to community

How are CED and SE paradigms complementary?
- Community-led

- Includes cross-section of voluntary organizations, faith-based groups, citizens, business leaders

- Democratically owned and operated

Core Functions of CED Lens
1. Equity and local ownership

Equity = asset value from ownership
Cannot be built without local ownership
Why democratizing ownership critical




2. Credit

Credit can be used to leverage equity
Banks may deny loans to small enterprises
(growth vs. risk)




3. Human Resources

Stagnation = no skills
How to build capacity?
How to leverage technical, financial support?
Particularly important in frontier economies
Also requires education, inspiration




4. Infrastructure

Often purview of fed/prov
Sometimes necessary
First Nations, frontier regions
Social economy makes an excellent partner




5. Planning, Research, Advocacy

Priorities established through research
Gather intelligence
See examples in action




6. Building Strategic Partnerships

Equity = who has access to ownership?
Credit = who is willing to lend?
Human Development = who knows how to help?

1. Education

Profound influence on life
Inner-city, rural, urban, etc.



2. Safety and Security

Risk/perceptions of risk influences business
Influences community spirit



3. Social Supports

Mutual support is fundamental to trust



4. Housing

Influences quality of life
Determines ability to meet needs
Cornerstone of health
Can be source of individual equity



5. Culture and Recreation

Leisure often undervalued
Creates sense of common purpose

What happens when one of these elements is not considered?

Elements of success?
Urban Example:
RESO:
Regroupement économique et social du Sud-Ouest (RESO)

“Transforming Montreal’s Poorest Neighbourhoods”


Why did it start?

- Caught in cycle of decline c. 1950s
- 60% of population left
- 1986: 43% below poverty line; 17% unemployed; 25% on welfare

To achieve its mission, RESO offers services:

To the unemployed
To future entrepreneurs
To businesses in the Sud-Ouest
To young adults (Carrefour jeunesse-emploi du Sud-Ouest de Montréal)
To community organizations and enterprises




Turn around: pre-RESO

- Consumer co-op and housing service established
- 23 Housing Co-ops formed
- 300 homes built
- Residents concerned about gentrification
- YMCA funds two community organizers



- Partnership of 9 organizations


- conflict resolution for workplaces
Challenges:

- gentrification still happening somewhat
- how to ensure enough earned revenue


Rural Example
Coastal Enterprises (Maine)
- Backing from state and local faith-based groups
- 1.8 B in private/public capital



- Co-founded “Triple Bottom Line Collaborative”

- Economy – jobs retained/created
- Environment – positive/negative effects
- Equity – providing capital/assistance to those in need



- As much about bridging divides as it is about development
- RESO redefined community and authority
- Not defined by government
- Models of “associational democracy”

Is CED a form of governance?
Is it a strategic enabler?
Is it an alternative to big vs. small gov't?



“Tipping points” can be local or global
Take a moment to with your neighbour to think of
a social enterprise
or initiative that undertakes some work with themes similar to Coastal Industries (Maine) or RESO.

Criteria
:

- re-localize the economy
- foster social/ecological resilience
BUILD Inc.
Building
Urban
Industries (for)
Local
Development


training program
for people who face
barriers to employment
- retrofit homes with insulation
- high-efficiency toilets
- water-and-energy-saving devices (showerheads, etc).

Services
- lowers utility bills
- employs local people
- cuts crime
- decreases GHGs
Benefits
Inner-City Renovation
BUILD Inc.
Aki Energy
Manitoba Green Retrofit
Imaginability
Diversity Foods
Manitoba Green Retrofit
- non-profit social enterprise
- energy efficiency retrofits
- residential renovations
- bed bug treatments
- employed locally
- affordable
- meaningful employment
- more affordable housing
- stronger communities
Benefits of MGR
For consumers:

- market rates
- ripple effect
- returns money to community
- removes barriers
- supports Social Purchasing Portal
- online marketing and collaboration tool
- small local businesses
- active practice of Community Economic Development (CED) - Winnipeg-based
Aki Energy
- links First Nations to green economy
- FN spend huge sums of money on energy
- money leaves community
- no employment


- lowers utility bills
- uses renewable systems
- creates jobs
Services/Benefits
5. Pollock's Hardware Co-op
- longtime owners couldn’t find a buyer for retirement
- local residents spearheaded consumer co-op
- purchased business/building
- supports MB-based trades-related social enterprises


Manitoba's Social Enterprise Centre
- 32,000 sq feet
- bought by trades-related SEs
- business park
- also Canadian CED Network - Winnipeg
Imaginability
- employs more than 300 Winnipeg residents
- living with disabilities
- packaging for local companies
Diversity Foods
- took over cafeteria at the University of Winnipeg
- hire new Canadians and inner city residents
- work with sustainable farmers
Project Funding model - vs. -Social Enterprise model
Average government contract
- do not hire FN workers specifically
- high earnings through the work
- access to the tendering/request for proposal process?


- 375 insulation jobs and 2,000 water retrofits
- every 12 months
- 1.7 million each year
Government returns:
Could a traditional trading model access this 1.7 million?
SE access to tenders
based on value-added argument


- usually a point system used
- private contractors sometimes do the minimum
- SEs may not do complex work

Precedent in the private sector
- Boeing Inc. works with the Neeginan Centre (CAHRD)
- train new hires for its Winnipeg operations
Why is it important in Winnipeg to be inclusive?
- moral argument
- large dependent population not sustainable
- $1.2 for Urban Circle vs. Police budget ($80 M +) over 6 years

Community finance
Mobilizing money for Social Enterprise


- Muhammed Yunus, Grameen Bank

“In the future the question will not be
‘are people credit-worthy?’ but rather,
‘are banks people-worthy?’”
“convivial tools are those which
give each person who uses them
the greatest opportunity to enrich
the environment with the fruits
of his or her vision”

- Ivan Illich, Tools for Conviviality
If it ain't broke --
actually, it's broke.
The Cash Economy

- payment systems serve those with credit/debit cards
- the poor do not have access to cards; accounts
- predatory lenders cash cheques (pawn; money mart)
- 8.4 M American households with no banking service

Relationship-based banking (1970s)

- Banks used to thrive on relationships (manager-customer)
- Evaluation of character/potential
Today’s banking decisions

- Automated credit score
- No evaluation of character
Score based upon income/spending patterns
- now also on social media habits and profiling
Remnants of relationship-based banking

- "the 1%" have special branches
- Social enterprises need to look elsewhere, because they defy tidy risk categorization

Special Branches:
JP Morgan
Citibank
HSBC
Barclays
Back to the future
New (old?) tools for an “ecology of finance”

- Gifts + endowments
Community banking partnership (CBP)

- US/Canada: Credit Union driven
- UK: “Building Society” driven
- Link up education/financial services

Problems with plastic money
for the working poor

- Energy: pay-as-you-go costs more
- Food: cannot buy in bulk


- Community groups/need-focused
- New Economy Foundation
- Money Advice and Budgeting Service

One CBP example:
“Fair Finance”

- 6 non-profit housing groups
- 5000 people access credit
Consumer Proposals and Bankruptcy

- Eliminates the debt
- Pay back a proportion of what you owe
- Go through a financial counselling program

An American Example
The Neighbourhood Trust

- Community development credit union
- Non-profit anti-poverty organization

Community Development CUs

- 235 in US now
What benefits and challenges
can you tease out from this approach (so far)?

“Beyond Microcredit”

- 3B people self-employed globally
- Largest sector
- 80-90% in some countries in G. South

Integrated solutions

- Eg. SEWA Bank (Ghandi-inspired)
- Fair pay, bulk purchasing, pensions
- Legal advice

For whom?

- Non-union protected workers
- Agricultural labourers
- Casual workers
- Homeworkers
- Tenant farmers


London Rebuilding Society

- Finance for SEs and ethical businesses
- No access to conventional sources

Mutual Aid Funds

- Similar to African savings-and-loan systems
- Each MAF group designs loan products
- Meets needs of different communities
- Personal loans also considered

For the self-employed (NEF research)

- Marketing opportunities
- Tax advice

SEED Winnipeg

http://seedwinnipeg.ca/programs

Equity Angels (France)

- 400 social investment angels since 1983
- 3M approach: monies, management, marketing
- Strengthens social capital
- Integrates know-how with equity

BCA Holdings (NS)

- Fed up with banks’ lack of interest
- Negotiated a no-interest loan from Province
- Matched by Cape Bretoners
- Better than stock market return

Check out

VESTED.org



Cooperative Capital

- Non-profits have no share capital
- Require grants/loans
- UK: Community Interest Companies (didn’t work)
- Withdrawable share capital
- Similar to deliberate corporation
- Facilitate self-build and transition projects

As an aside:

JS Mill pioneered legislation in 1852
Withdraw capital under certain provisions

Other Structures
Web-Based P2P Banking
- Zopa (http://www.zopa.com/)
- Kiva (http://www.kiva.org/)

Repayable grant funds
- Micro-loans from municipalities
- Shared home improvements (Wpg)

Revolving loan funds (no interest)
- Habitat for Humanity
- Can CLTs use this approach?

Social/Ecological Banks
- Triodos “expand social economy”
- Based on philosophy of social economy
- Rooted in Goethe’s urge to prevent separation of arts/sciences
- Caisse d’economie solidaire Desjardins

What’s unique
about this sector?

Securing gains
for the long haul

We have reviewed many models and initiatives that have successfully laid foundations for a more resilient society.

What are some ways in which community-building SEs can coordinate long-term change and ensure optimum effectiveness? Is long-term co-ordination necessary?

Change established through partnership
Examples:

- RESO
- Kristianstad
- Social Cooperatives
Share a vision of a more positive future
not rooted in deregulation and growth:

- solve local problems
- concerns about poverty
- concerns about environment
Is there a way of
"federating" change agents?

- broad-based, multi-layered alternative networks
Arthur Penty's guilds (1906)

- artisans, small business people, tradesmen
- worker self-management movements across Europe
Lewis & Conaty call for a "congress" including:
Guilds in the mid 20th century
- clothing
- furnishing
- construction
- farming

Opposition in Europe
- Mussolini arrested/killed leaders of 8000 co-operative societies
- dissolved co-operative league
Do you see opportunities
for coordinating action
among like-minded ogranizatios?
Which businesses?
Who?

- artisans
- disabled
- minorities

What?

- food?

What infrastructure?
Who?

- community development corps

What?

- technical assistance
- communications


What capital?
Who?

- organizations, labour
- FIs

What?

- labour
- financial resources


Whose ideas?
Who?

- universities
- non-profits

What?

- experience
- knowledge


Precedent
Chantier d'economie sociale
- Quebec-based
- Bouchard convened business/government
- Comprised of many CEDs (rural, urban)
- Inclusive models

Sectors in QC's federated social economy
- recycling
- childcare
- culture/media
- forestry
- manufacturing

- agriculture
- transport
- health
- technology
- eco-tourism
Planning and acvocacy
- local development centres
- community futures development corporations
- technical assistance organizations

RISQ: Reseau d'investissement social du Quebec
- dedicated to making capital accessible for SE
- $10 M loan came from investments (labour, private)
- outcome of 1996 Bouchard Summit
- another "fiducie" ("trust") fund established
- feducie also measures outcomes
- feducie offers "15-yr capital repayment moratorium"
Loose affiliation
- university profs
- government workers
- independent researchers
Results
- kept cost of childcare low
- advances well-documented alternative solutions
- language of "economics" changing ("third sector")

Quality of Life
Improvement for Workers

Economic Democracy and
Workplace Inclusivity

Why are inclusive decision-making structures important to improving well-being for workers?

What are some pros and cons of more inclusive,
democratic workplace structures?

"Economic democracy"
"Quality of life"
"Freedom"
- Erich Fromm's "freedom to" (positive) rather than "freedom from" (negative)

- freedom to "be" rather than to "have"
- freedom from want
- freedom to self-actualize (individually, cooperatively)
- freedom from government restriction, etc
Rand: "virtue of greed"
Through a process that is inherently collective
Positive gains accessed through work for all
Mondragon
- a "guild of guilds"
- started by a priest, Father Jose Arizmendi
- began with:
Questions:

Why was the model successful?
Will it work in today's context?
Will it would in Manitoba?
- 256 enterprises
- 83,859 workers
- $20 Billion in annual revenues

By the numbers:
Equality (max/min income):

1:3 wage ratio
Social support for workers
Democratizing social care in Italy
Co-ops in Italy

- accounts for 25% of growth in employment (1990s-early 2000s)
- strategy to build co-ops dates back to 1970s
- "stay small and network"

- Established broad partnerships to strengthen resilience in a comprehensive way
- Think-tank, network of co-ops, business, local service centres
Type A (59%)
Type B (33%)
- health
- educational services
- workers/volunteers
- govt's can contract out for services
- low taxes
- loans/bonds
- integrate disadvantaged
- must be at least 30%
- workers/ volunteers
- family members
- tax exempt
- loans/bonds
"relational goods"
copied in Belgium and Poland
Tom
Jack
Clarence
Archie
- trouble with the law
- 5 kids
- assaulted seriously
- ICR set up a fund to help
- posted bail for him
- would be provided advances for rent
- gangs courting his sons
- sometimes does not report for work
- often resists assistance from ICR
- had several children with various partners
- CFS had taken two youngest into care
- received education through ICR
- tried to establish stability with partner
- CFS took new child away; returned
- successful in stabilizing life
- helped him get up in the morning
- alcoholic
- helped him build skills
- transitioned to a better job
"Life in Winnipeg's inner city is tough. Before I started working with IRC I felt useless. Oh, I had worked but each time I would get overwhelmed and then quit... ICR offered me more than a job"
- assisting with tragedies
- helping exit from prison
- intellectual disabilities
- opportunity for women
- escape from gangs

Idea-jamming:
Describe your SE case study:

- how/does it build resilience?
Social Enterprise
Theory and Practice

James Magnus-Johnston
"Pedagogy of Transition"
to a more Resilient Society
S =
social
E =
economic
E
= ecological
}
Resilience
Climate Change:

- atmospheric carbon at 400 PPM
Global Finance:
- volatile oil prices not driving innovation
- shale boom more like a shale bust
- groundwater depletion costs not internalized
- carbon = stranded asset?
Find one example of a social enterprise applying one these seven principles.
Explain how one of the seven
principles of resilience
are enacted through your SE
Reclaiming the commons
Relatively recent human inventions:

- Private property (privatization of otherwise free things)
- Ownership and control has some benefits/drawbacks
- eg. Fisheries (only 10-40% of catches have value)
- Forests, oil fields, etc.
(what are "the commons?")
Elinor Ostrom (09 Nobel Prize Winner)
Studied where "commons" have been managed successfully
- formal, multinational control structurally fail to protect commons
- centralized, distant, unaccountable
Putting it it context:

The transition to a steady-state economy?
Baumol's disease:

- labour productivity up 2.7% yr (1980-1995), 3% decline in working hours
- now increasing by 1.4% yr with an 8% increase in working hours
- decline in manufacturing, increase in "services"
- should we invest in people and climate adaptation instead?
Developing a methodology
for anayzing social enterprises
See: ENP, Chapter 2.
1. What was your initial vision / were your objectives?
What market problem
does your SE address?
Non-profit transitions
to social enterprise
• basic organizational readiness
• social enterprise readiness
• business readiness (most fail <3 yrs)
Culture: for-profit (vs) non-profit?
What are some differences?
Who are non-profits
accountable to?
- multiple stakeholders
- clients/customers
- community members

Problem or solution?
separate the business from non-profit operations
Example: Green Action Centre
1. Review of mission
GA: Social Enterprise Readiness
1. What is a SE? Does the board get it?
Strengths -- Weaknesses -- Opportunities -- Threats
Business experience
1. Board: accountant, lawyer ("business advisory")
"Do we need a consultant?"
or, the fallacy
of the perfect
business plan
Identifying the interrelated social
benefits of social enterprises
The social multiplier
SEs can be assets to government
- reduce government expenditures
- jails (@ $87,655/yr); healthcare, welfare
- help realize goals in ways that governments cannot
- certain flexibility compared with government programs
- provides a model of "justice in action"

How can governments support SE efforts?
Europe
- UK, Italy have developed social economies
- UK has related government department
- policies to support social economy
- legislation soon followed
Canada
- Social Economy "priority area" in 2004 Fed Throne speech
- allocated $132 million for initiatives for funding/research
- achieved in Quebec, withdrawn in Anglophone Canada
- SME services set up
- MB and NS have tax credit programs for CED
Job Creation
- Small businesses (5-100 employees) key
- 98% of all businesses
- 48.3% of Canada's workforce
- 42% of Canada's GDP (2005)
- more cost effective mode of job creation?
Costs between $7,676 and $88,155 to "create a job"

eg. ON paid Samsung $437 M to create 16,000 factory jobs over 25 years ($27,312/job)

A job with ICR costs < $17,000.00 to start (not including social returns)
Social Service Delivery
Internal
External
- provide a social service in the community
- traditional services by government
- home care
- child welfare
- foreign aid
- Winnipeg: RAY
- holistic
- health benefits
- social inclusion
- social support
- skills/apprenticeship training
- ($5,000/trainee for ICR)
- trainees can go on to formal education
- can use grants for private enterprises
- BUILD has multi-year training grant
To what extent should
government fund
social enterprises?

What are some
arguments for/against?
Against:


- disguised gov't programs
- hard sector to "cost"

For:
- positive financial impact
- higher gov't return
- pays CPP/GST and income tax

Annual savings for one person, previously unemployed, with three dependents: $21,668.00

Annual savings for one person, multi-year (generational) assistance, multiple dependents: $23,490.00

Social Return on Investment (SCP)
- ICR evaluates financial/social performance annually
- independent auditor reviews/analyzes the financial performance
- prepares financial statements for Revenue Canada
- find out previous habits/patterns for each employee
How does ICR relate to private sector?
- small size
- delivers a needed service
- competes in private sector
- a "truly public-private partnership?"
SE speed-dating
- explain your SE research
- identify the structure and mission
- can its deliverables be measured?
- does it offer any savings to government?
Measuring outcomes
How can you assess the
performance of your social enterprise?
Business Planning
- are social/ecological metrics part of bookkeeping?
- to what extent is it ethical to market the benefits?
What are some reasons to measure outcomes?
Confirmation that the enterprise is on the right track
The "Demonstrating Value" approach
demonstratingvalue.org >> templates


1. Focus on the few critical aspects of performance

2. Explain how these particular aspects have been chosen

3. State the goals and expectations you are seeking
Canadian Comprehensive Auditing Foundation
Key principles for guiding org performance:
Business analysis:
Are you exceeding customer expectations about products and/or service quality?

Do you have a diversified customer base so you are not reliant on a few key customers?

Are you paying expenses in a timely manner?
Organizational sustainability
In which direction does cash flow? To your enterprise or to your organization? (GA)

What skills have been added to your parent organization as a result of your enterprise? (or are needed)

Has the enterprise directly or indirectly resulted in more referrals (or more effective referrals) of clients in need of services?
Operational
What type of reporting do you need to support management and staff in the decisions they make day-to-day?
Three kinds of information:
Legal Structures


- non-profit/charitable (not taxed)
- for-profit (taxed)
(considered at the outset)
Do you know the legal structure of your SE?
Why did they chose that particular structure?
When does CRA allow
a charity to conduct 'business'?
*It must advance the mission of the charity*

Criteria:

- The intended course of action
- The potential to show a profit
- The existence of a profit
- The expertise and experience
If not applicable, a separate business may need to be set up
2. Absence of competition
3. The inherent characteristics of particular resources
4. Inefficient distribution of resources to people
2) Peak Oil
3) The Casino Economy ("the debt burden")
... each of which have serious social implications.
In groups, can you explain to one another what each of these terms refer to? Be sure to use citations from Chapters 1 and 2 in your text.
(b)
Excludable
-- One for which ownership is possible
with property rights
.

If a good is not excludable, someone can use it regardless of whether or not it is owned! Therefore, it cannot be allocated (eg. cars, homes).
Many non-excludable goods are provided by nature (eg. fish in the sea).
- Replacing the paradigm of limitless economic growth (sufficiency/resilience)
- A decentralized, cooperative, steady-state economy
- Provides a sense of purpose and focus for Social Entrepreneurship
Are we facing limits?
Lewis & Conaty
- Integration of theological stewardship / cosmological religiosity
- Energy sufficiency (incentives and co-ops)
- Local food systems (CSA shares, land trusts)
- Low-cost financing (gov't, private, credit union)
- Affordable housing and land reform (land trusts)
- Democratic ownership and sustainability (worker ownership)
+ room for "innovation"
Hyman Minsky
- predicted 2008 crash
- economies temporarily boom
- leverage assets to make easy money
- ie. real estate securities ("derivatives")
- periods of deregulation
Predictions grounded in reality?
biological
landscape
social
economic
independently
operating
components
(not "efficient")
social resilience
trust among neighbours
nurturing connections
"change/adaptation"
informed experimentation
creative problem-solving
"redundancy"
common/private property
messy
bottom-up
maintain communication
learn
(feeding into adaptation)

consider planet
cost-benefit systems
"reclaiming the commons" (ie. for self-sufficiency)
"associative democracy" (ie. for collective action)


The ascendency of the corporation


A shift toward debt-based banking
Why?
Redistribution: governance/charity
Regulated markets:
governance/local approaches
1690 First paper money
"Massachusetts Bay Province"
(sound familiar?)
UK imposed payment by coin only
Physical wealth is subject to physics (decays over time); money must reflect this reality rather than appreciate without limit
Compound interest is physically impossible!
put people
to work
during
the depression
Currently:
- Brixton
http://www.cbc.ca/news/business/rocco-galati-challenges-bank-of-canada-to-offer-interest-free-loans-1.3065650
Home sizes increasing
in Manitoba in spite of
efficiency gains
Rural district spread out over 25 towns/villages
Kristianstad Energy Ltd. began to replace oil with biofuel (wood) in 1980s
Many job opportunities
- install PV and solar thermal technology
- dramatic energy-conservation and carbon reductions
Kirklees Energy Services
:
- 2080 energy saving measures
- 1,455 households over three years (home retrofits, better energy options)
- reputable installers
- customer care
- loan program and rebates
- accessed municipal capital

Transition Initiatives:
Generally volunteer-based; also many SEs
500,000 tonnes of straw worth $50/tonne
or $25 million
Could heat 100,000 homes
Displaces coal/natural gas
Why not?
Coal's downstream costs are not internalized
Manitoba introduced tax
in January 1, 2012 ($14/tonne)
eg. 1,000 investors involved
Each own $7,000 in wind project shares
constant revenue stream
One big idea
Manitoba Hydro purchase the wind farm up front
Sell back through utility bill ($100/mo)
Community ownership achieved in less than 8 yrs
Manitoba expertise could be put to work
Large aerospace industry means we could attempt to scale up local production
...Well the answer is very much the same as in the Minnesota/North Dakota wind story. In Ontario, the government has told the utility to support solar power." - Loney, p. 134
agriculture --> land can be rented out
rolls land into a non-profit governed by a board
community can participate
structure owned by buyer
inspired by "Gramdan" (Ghandi)
replicated in the US during civil rights movement
also promoted by Tolstoy in Russia
Henry George (US economist) promoted "tax on land"
largest CLT in US
extended a LOC from city pension fund
resale-restricted
help with down-payments
members pool funds for leverage ;)
nursery, SE centre, legal advice, business incubator
money goes a long way
Slate.com
~560 homes
~ 2100 rental units
can be purchased through a conventional realtor
7.6 % of Burlington's housing stock
“We don’t understand why housing isn’t done this way everywhere,” says Robbins, who says the cheaper mortgage allowed his family to save money for college and retirement that otherwise would have gone toward housing.

“It’s just such a logical thing to have land owned by a community and the house be your private property to do with as you wish. We’ve just had a terrific life here so far because of it.”
http://www.slate.com/articles/business/metropolis/2016/01/bernie_sanders_made_burlington_s_land_trust_possible_it_s_still_an_innovative.html
- 1948 Japan: concerned about imported food
- purchasing an "ethical responsibility"
- cut out the middle man; social capital built
- farm-to-table approach; returnable packages
- 11 million members in Japan today ($1.1 B)
- inspired "Indian Line Farm" (MA)
- average age of farmers is going up
- "Food Hubs" help with packaging, storage problems
- 'global history' and 'global studies heralded new generation of tolerant global citizens
- now witnessing rise of right-wing nationalism (to what extent?)
- emphasis on networks and integration
"Global history is another Anglospheric invention to integrate the Other into a cosmopolitan narrative on our terms, in our tongues"
Jeremy Adelman, PhD Princeton University
Aims:
(+procurement)
1. Combine action among many
2. Use local resources

3. Draw upon outside resources
4. Funding
5. Provide clout to help remove barriers
6. Technical assistance
7. Long-term thinking
Community Development Corporation
- 140 individuals; 13 businesses
- Business assistance
- Local relocation planning
- Management consultation
- Expansion space
- Direct financial assistance and on-the-job training
- Tension between business-broad coalition
Eventually:
- convener of big-idea projects
- identified opportunities to localize supply chain
- provided good on-the-ground information for investment
- layoff undereducated vs. re-education
- developed a capital fund (business, union, gov’t)
- elected board includes health, educational, cultural institutions
- candidates forwarded from stakeholder constituencies
Financing
- Stemmed decline in fishing
Achievement
- looked for “value added” enterprises
- improvement of natural resource base
- local ownership/products and equitable distribution
- minimize risk (environmental, economic)
Purpose
Integrating Sustainability
Summary:
- Most non-profits use project funding
- high administration costs
- Non-profit = "cost to govt"
- Wages kept low
- Redirect labour to services rather than admin
- see governments as large buyers
Could SEs provide more fee-for service work to governments?
Manitoba Housing and BUILD
- buy materials, pay apprentices
- 30% training funding
- 70% market
- $450,000 a year in bill reductions
- Poverty reduction
- Trades apprenticeship
- Renewed city
- Tax revenue rather than support
- Environmental benefits
- Low administration/risk
- Neeginan secures Federal funding
- Boeing supports Neeginan instructors to set curriculum
- Boeing hires graduates
- Contextual
- Movement away in Global North
- Movement toward in Global South (micro-loans)
- Doesn’t provide access to credit for those without
- Bank mangers focus on top 1%
- Self-reinforcing cycle (big earners – big credit)
- Does not drive innovation
Where can SEs can find capital?
- Tax rebates/credits
- Seed capital from individuals
- Share capital from shareholders
- Debt structures from lenders
(deduction from
tax owing for
investors)
Sole Proprietorship
Partnership
Corporation
Cooperative
extension of the
person
when “two or more people carry on business
in common, with a view to profit” (s. 3 of The
Partnership Act);
file articles of
incorporation to become a “legal person” and register
name
incorporated under The Cooperatives Act and have the word “cooperative” or
“coop” in its name
Creation
Decision-making
her/his own
(faster)
majority
(faster)
shareholders
(faster)
one member,
one vote (slower)
Financing options
debt/personal
equity
debt/personal
equity
equity from sale
of shares, debt,
gov't programs
equity from sale of
memberships, debt,
government programs
Selling
assets only
agreement
shares/assets
shares/assets
Implications re: winding down...
protection from contractual debt
potential tax benefits
more options for raising capital
7 principles:
- Voluntary and Open Membership
- Democratic Member Control
- Member Economic Participation
- Autonomy and Independence
- Education, Training and Information
- Cooperation among Cooperatives
- Concern for Community
https://www.gov.mb.ca/jec/coop/pdf/comparison_of_business_forms.pdf
- Phone charges
- Appliances: retail credit more expensive
- Ceilings on interest rates? – not in the UK
- 2000 debt repayment plans
- 1000 people saved from eviction
- Each eviction costs $6,000 in court fees
- Provides mediation (also cheaper than litigation)
- Provides legal representation to households facing debt action
What kinds of financial services
can improve lives for the "working poor?"
- Serves 300,000
- Shift away from pawnbrokers and payday lenders
- 11 B in combined assets
- 1.7 million members
- Local; creative
- Share technical systems and infrastructure
Similarities to growing
western 'underclass' (?)

"Precariat" = no occupational identity or narrative to give to lives
What are some SE
responses to this trend?

Some financing options for social enterprises...
- Two categories: investors and borrowers
- Distributes small loans

- Guarantees loans
- $4 loans for every $1 guarantee

- Financial services expertise
- Peer support

- Bulk purchasing
- Legal/professional help

BEWARE
Similar supports
may be set up
through CEER

What kinds of returns are earned?
Can you name any other alternative finance tools?
1. Consider your case study.

2. Is more than one business structure suitable to you?

3. Where can you go to access capital?

4. What do you have to be aware of in case of failure?

- training school
- social services cooperative
- regional cooperative development bank

- 10% donated to charitable pursuits
- 40% to research and development
- 50% to owner-worker pensions
- only one co-op failure
1:9 today
400:1 in fortune 500
Some of the highest wages
in the EU
- Social care co-ops = families, volunteers, paid staff
- Brought about in part by high level of tax avoidance
Inner City Renovation
Winnipeg-based social enterprise
Provides training and support for workers

Founded in 2002 by Community Ownership Solutions - a community development corporation and registered charity with a mandate to create quality jobs for low income people in Winnipeg’s inner city
Hawken: "narcissistic fanaticism" vs.
"genuine breakthroughs"
- excluded "rentiers" (stockbrokers, bankers, landowners)
- inspired worker ownership
eg. CCEDNET
- small business
- small producers
- citizens' associations
- happened leading to WWI
- eg. Transition Network

- analogies to early Christiandom

- guilds an historical example
- similar problem in Germany, Spain, Austria, Russia
- movement towards central planning
face high transaction costs
constant tension surrounding mission/focus
2. Buy-in: will donors/funders still support you?
3. Competitors? Allies?

4. Can staff set aside time to participate?
2. Champion: single individual
3. Financial/information systems?
4. Capital to launch: grants/loans
5. Human/other resources?
Would the lean start-up model work
in a non-profit setting?

Why/not?
- irreversible CC at 450 PPM
- must be reduced to 350 PPM
- 2008 recession = emissions down 1.9 %; 2010 = up 5.9%
Seven Principles:

1.
Diversity
: sustain diversity in all forms
2.
Modularity
: components that operate independently
3.
Social Capital
: trust, social networks, leadership
4.
Innovation
: learning, experimenting, changing
5.
Overlap
: redundancy and dispersion (not efficiency)
6.
Tight feedback loops
: information/money circulated
7.
Ecosystem services
: improve ecological outcomes
the capacity of our socio-economic system to absorb disruption and re-organize while retaining similar function and structure
shared resources in which each stakeholder has an equal interest (gifts of nature such as air, oceans and wildlife as well as shared social creations such as libraries, public spaces, scientific research and creative works)
- rooted in "associative democracy" - collaboration, leadership
- shaping markets locally (not "individual responsibility")
"subsidiarity" = matters ought to be handled by the smallest, lowest or least centralized competent authority. Political decisions should be taken at a local level if possible, rather than by a central authority
Enacted through collective action: community development, engaged democracy
2. Set impact goals: who is being helped? How?
3. Set financial goals: how will you make money?
4. What capital/resources are/were available?
5. How will you measure social/ecological outcomes?
6. What was the pre-feasibility process?
7. Was a feasibility study necessary? (see Food Hub FS)
8. Was a business plan necessary?
9. How did you launch?
10. How did you adapt?
2. Strategic Plan: SWOT Analysis
3. Internal Change
4. Internal Conflict: for-profit/non-profit
5. Financial Management: Risk averse
6. Cost Effectiveness
7. Personnel
8. Culture of Learning
How would you test a "minimum viable product?"
(cheapest "hacks" to test your ideas)
Mass market?
Niche?

What problem
are you solving?
What impact
are you making?
Design/brand
Your mission is not enough to drive success
Sales
Usage fees
Subscriptions
Advertising
Who will
work with
you?
National Training Laboratories
ntl.org
(a) give up
(b) find a way to suck carbon out of the atmosphere
Responses
"Vision"
"How will you make money"
Gov't?
Capital/
set-up/
staffing
Monetary benefit to government?
Jobs created?
Footprint reduction?
Other benefits?
Recidivism reduction?
Adjust and improve planning (adaptation/tight feedback loops)
Improving day-to-day operations
Building and maintaining support of outsiders (social capital)
Contributing to the field of social enterprise
Being prepared for demands for facts
- Designed by social enterprise practitioners (collaboration of funders and stakeholders)
- Each SE mission is unique
- Developed out of an in-depth pilot study involving diverse environment
- Provides detailed specific tools to be used
- Designed to inspire improved performance
- Integrates assessment of social performance with business performance
Generic "key performance indicator" snapshot
http://demonstratingvalue.org/snapshots/quarterly-kpi-report-template-social-enterprise
Potluck cafe (food-based enterprise)
http://demonstratingvalue.org/snapshots/potluck-caf%C3%A9-and-catering
Comox Valley Farmers' Market
How does Comox Valley
demonstrate impact?
How would Cleaning Solutions measure impact?
How would it demonstrate impact?
http://demonstratingvalue.org/snapshots/cleaning-solution
Clear Sky Grasslands
http://demonstratingvalue.org/sites/default/files/resource-files/DVclearSkyGrasslandsSept2013.pdf
Global Alliance for Banking on Values
- provides a framework to think about triple bottom line banking
http://www.gabv.org/about-us/our-principles
http://annualreport.assiniboine.mb.ca/Non-financials.html
Patagonia
http://www.patagonia.com/on/demandware.static/Sites-patagonia-us-Site/Library-Sites-PatagoniaShared/en_US/PDF-US/patagonia-enviro-initiatives-2015.pdf
What if you turn the business-impact
relationship upside down?
(What?)
The Social Impact Bond
- a financial tool where investors pay for interventions to improve a social outcome
- if the social outcome improves, the government body pays the investors for their initial investment plus a return for the financial risks they took
- if the social outcomes are not achieved, the investors lose
http://www.socialfinance.org.uk/database/
How will you demonstrate
that you're making an impact?

4. Relate the results achieved to these stated goals and performance expectations

5. Put the results in their proper context by:
» relating results achieved to capacity
» understanding key risks
» describing other key performance factors
6. Recognize and explain the important links between financial and non-financial information

7. Compare current to earlier performance

8. Compare performance to that of similar entities (benchmark)

9. State why you are confident that the performance information being reported is reliable
Do you have products and/or services which provide an adequate profit margin?

Are you expanding the number of customers, while maintaining your current customer base?
Do you deliver products and services on time and on budget?

How is your operational efficiency? Can it be improved through better scheduling, use of equipment, or team work?
Other questions:

• Perception: how does the community you serve view your enterprise and the motivations of the organization operating it?

• Have there been controversies or problems that affect your organization’s ability to attract clients or funding?

• Has your board’s level of skill increased?
Strategic
What type of reporting do you need to support strategic decisions that are often made by a governance body
Accountability

What reporting do you need to show that you take accountability as a serious matter?
Full transcript