Greater good

A new breed of busi­ness, the so­cial en­ter­prise, is more in­tent on ben­e­fit­ing the com­mu­nity and pro­tect­ing the en­vi­ron­ment than on max­imis­ing profit.

New Zealand Listener - - CONTENTS - By Sally Blun­dell

A new breed of busi­ness, the so­cial en­ter­prise, is more in­tent on ben­e­fit­ing the com­mu­nity and pro­tect­ing the en­vi­ron­ment than on max­imis­ing profit.

It was a eureka mo­ment, though it played out not in a bath, but in the shower. Univer­sity of Can­ter­bury bi­ol­ogy stu­dent Bri­anne West was wash­ing her hair when the idea struck her: why add to the world’s mass of plas­tic waste sim­ply be­cause sham­poo is so di­luted it needs a plas­tic bot­tle? After all, there was plenty of wa­ter com­ing out of the noz­zle. It was, she says, “one of those light­ning-strike mo­ments”.

That was in 2012. A moun­tain of re­search, a load of ex­per­i­men­ta­tion and a rush of Face­book ad­ver­tis­ing later, rev­enue from West’s Ethique brand of solid-bar sham­poos, cleansers, mois­turis­ers and clean­ers – all in­gre­di­ents, down to the card­board wrap­per, biodegrad­able – is ex­pected to hit $2 mil­lion this year from sales here, in Aus­tralia and the US.

A suc­cess­ful crowd­fund­ing cam­paign in 2015 at­tracted the high­est num­ber of fe­male in­vestors in PledgeMe’s his­tory; a sec­ond in­vest­ment round this year raised $500,000 in less than two hours through crowd­fund­ing and the same amount through whole­sale in­vestors.

“We are in­ter­ested in growth be­cause we want to rid the world of plas­tic bot­tles,” she says. A big ask, she agrees, “but it’s a goal we are com­pletely se­ri­ous about”.

West re­gards the goal of busi­ness as cre­at­ing some­thing that will make peo­ple’s lives bet­ter with­out de­stroy­ing some­thing along the way, so sus­tain­abil­ity is im­por­tant to the bot­tom line. Op­er­at­ing from a new 800sq m lab­o­ra­tory and ware­house in Christchurch, Ethique is cer­ti­fied cli­mate-neu­tral and car­ries the in­ter­na­tional B Cor­po­ra­tion (or B Lab) cer­ti­fi­ca­tion is­sued to for-profit com­pa­nies that meet rig­or­ous stan­dards of so­cial and en­vi­ron­men­tal per­for­mance. There is no child labour in the sup­ply chain, no test­ing on an­i­mals and no waste.

The busi­ness buys its co­conut and co­coa but­ter in­gre­di­ents from co-op­er­a­tives in Samoa and the Do­mini­can Repub­lic re­spec­tively.

“Peo­ple care about what we are try­ing to do,” West says. “They are ­in­ter­ested in a plas­tic-free life­style, in ­com­pa­nies that do good, and they de­mand authen­tic­ity: they will not con­tinue to buy a prod­uct, and we will not change the world, if we ex­pect them to com­pro­mise, be­cause they sim­ply won’t do it.”

Across town, on an in­ner-city cor­ner sec­tion va­cant since the 2011 earth­quake, a pedal-pow­ered trailer of green waste bins col­lected from lo­cal cafes and restau­rants is be­ing un­loaded. Here, as part of an ur­ban gar­den project called ­Cul­ti­vate, the waste will be turned into com­post, which will be used to grow veg­eta­bles, which will in turn be sold back to restau­rants, cafes and the com­mu­nity.

Along the way, says the project’s co-founder Bai­ley Pery­man, young peo­ple are learn­ing how to grow food, the neigh­bour­hood has ac­cess to fresh pro­duce and restau­rants have solved their green-waste prob­lems.

Pery­man says Cul­ti­vate is a sign of a thriv­ing com­mu­nity. “Food is a great way to grow a sense of be­ing in nature.”

SUS­TAIN­ABLE MOD­ELS

West and Pery­man are not lone voices. All over the world, small en­ter­prises are tack­ling so­cial, cul­tural or en­vi­ron­men­tal is­sues: di­vert­ing waste from land­fills, giv­ing jobs to the longterm un­em­ployed, clean­ing up wa­ter­ways

A suc­cess­ful crowd­fund­ing cam­paign in 2015 at­tracted the high­est num­ber of fe­male in­vestors in PledgeMe’s his­tory.

and feed­ing the hun­gry. Peter Hol­brook, the chief ex­ec­u­tive of So­cial En­ter­prise UK, in Christchurch to ad­dress Septem­ber’s So­cial En­ter­prise World Fo­rum (SEWF), says there is grow­ing re­al­i­sa­tion that our eco­nomic mod­els are not sus­tain­able.

So­cial en­ter­prises, Hol­brook says, are part of the so­lu­tion, chang­ing the way char­i­ties raise funds and busi­nesses do busi­ness. They are more dy­namic and more in­no­va­tive than con­ven­tional busi­nesses and fairer to women and eth­nic mi­nori­ties: “This is not just some­thing that deals with mar­ket fail­ure or pub­lic-ser­vice de­liv­ery; it is some­thing that is thriv­ing and dis­rupt­ing mar­kets across the world.”

Ron­ald Co­hen, who chairs the So­cial Im­pact In­vest­ment Task­force of the G8 – the in­dus­tri­alised economies of the world’s major democ­ra­cies – goes fur­ther: so­cial en­ter­prise, he has said, is bring­ing the world to “the brink of a rev­o­lu­tion in how we solve so­ci­ety’s tough­est prob­lems”.

That may be stretch­ing the point a lit­tle too far, says Alex Han­nant, found­ing chief ex­ec­u­tive of the Āk­ina Foun­da­tion, a char­ity whose mis­sion is to ex­pand so­cial en­ter­prise in this coun­try.

“But I think there have been some very ar­ti­fi­cial si­los: a char­i­ta­ble sec­tor rooted in the Vic­to­rian era over here; a post-war wel­fare safety net there; a mas­sive scale-up in busi­ness as a re­sult of tech­nol­ogy and ­glob­al­i­sa­tion over there.”

Now, he says, si­los are be­ing opened up: char­i­ties and not-for-prof­its are step­ping up their trad­ing ac­tiv­i­ties and busi­nesses are re­ar­rang­ing their mis­sion state­ments to in­clude so­cial or en­vi­ron­men­tal goals. Mean­while, Māori de­vel­op­ment is mod­el­ling a new way of do­ing busi­ness. “All are cre­at­ing this mid­dle place, this third way, called so­cial en­ter­prise, where profit-mak­ing en­ti­ties put so­cial, cul­tural or en­vi­ron­men­tal goals at the fore­front of their busi­ness plan.”

The 1600 del­e­gates from 45 coun­tries

In the UK, an es­ti­mated 80,000 so­cial en­ter­prises, from small start-ups to or­gan­i­sa­tions with hun­dreds of em­ploy­ees, are turn­ing over about $48 bil­lion a year.

who at­tended the SEWF, hosted by the Āk­ina Foun­da­tion, needed no con­vinc­ing. And a new gen­er­a­tion of en­trepreneurs is ­grab­bing at the op­por­tu­ni­ties: in the UK, an es­ti­mated 80,000 so­cial en­ter­prises, from small start-ups to or­gan­i­sa­tions with hun­dreds of em­ploy­ees, are turn­ing over about £25 bil­lion ($48 bil­lion) a year. In Scot­land, a coun­try sim­i­lar in pop­u­la­tion to New Zealand, 5000 so­cial en­ter­prises em­ploy more than 112,000 peo­ple and con­trib­ute £1.68 bil­lion to the econ­omy.

Th­ese en­ter­prises are not just sur­viv­ing but thriv­ing, even out­per­form­ing main­stream busi­nesses fi­nan­cially. Sur­veys sug­gest that one in three Bri­tish con­sumers will pay more for prod­ucts that have pos­i­tive so­cial or en­vi­ron­men­tal im­pacts and 60% of mil­len­ni­als want to work for an or­gan­i­sa­tion with a so­cial pur­pose.

A re­port to the Depart­ment of In­ter­nal Af­fairs last year, “So­cial En­ter­prise and So­cial Fi­nance: A Path to Growth”, says the Scot­tish fig­ures sug­gest that by 2025, “with the right sup­ports” New Zealand could have 4000 so­cial en­ter­prises – twice as many as we have now, turn­ing over $2 bil­lion a year.

In the US, the trend is snow­balling, with in­vestors join­ing in. Ac­cord­ing to Forbes mag­a­zine, as­sets un­der man­age­ment in sus­tain­able in­vest­ment funds have in­creased by 135% since 2012 to US$8.72 tril­lion ($12.7 tril­lion).

SOME­THING’S BREW­ING

Lon­don-based Rob Wil­son cham­pi­oned his “de­li­cious and pint-sized” re­sponse to the 900,000 tonnes of fresh bread – more than 40% of the to­tal baked – that goes into land­fills each year in the UK. His Toast Ale, an award-win­ning beer us­ing bread that would oth­er­wise be dumped, is now stocked by Bri­tish su­per­mar­ket chain Tesco and was re­cently launched in the US and South Africa. He has pub­lished his recipe so bak­ers and brew­ers around the world can part­ner up to re­place ex­pen­sive grain with sur­plus bread.

“We are not preachy,” he says. “We are not point­ing the fin­ger. This is a frig­ging beer at the end of the day. But food waste is a re­ally fun­da­men­tal is­sue. We don’t want to be around for­ever, we don’t want to see food waste in the first place, but there is a lot of bread go­ing to waste and we see a so­lu­tion to that in the beer in­dus­try.”

Else­where on the bill at SEWF, An­drea

Chen de­scribed the Pro­pel­ler In­cu­ba­tor, the small en­ter­prise she co-founded in New Or­leans in 2006 to help lo­cal en­trepreneurs es­tab­lish their busi­nesses amid the chaos left by Hur­ri­cane Ka­t­rina. Now it sup­ports more than 50 start-ups and not-for-prof­its deal­ing with poverty and racial in­equal­ity.

The Skill Mill in north Eng­land gives young peo­ple caught up in the jus­tice sys­tem work in en­vi­ron­men­tal projects, where they can ob­tain land man­age­ment qual­i­fi­ca­tions. Javara in In­done­sia pro­tects food bio­di­ver­sity and in­dige­nous knowl­edge by find­ing new mar­kets for ar­ti­san prod­ucts made by lo­cal farm­ers.

In New Zealand, achiev­ing so­cial value through the mar­ket­place is not new. Trade Aid has been us­ing fair terms of trade to support farmer or ar­ti­san groups to break out of poverty since 1973.

For 60 years, Kil­marnock in Christchurch has worked to pro­vide mean­ing­ful em­ploy­ment for peo­ple with dis­abil­i­ties. It has changed from a char­ity to a busi­ness model, com­pet­ing on its own mer­its for com­mer­cial ten­ders.

“We had to turn the mes­sage from ‘please help us’ to ‘this is what we are re­ally good at’,” says chief ex­ec­u­tive Michelle Sharp. “Now, our cus­tomers need us as much as we need them – it is a mu­tu­ally ben­e­fi­cial re­la­tion­ship.”

Al­though 70 of the 100 staff have dis­abil­i­ties, there is no “them and us”, says Sharp, a for­mer telco high-flyer who came to Kil­marnock in 2010 after find­ing a “huge gap” in her life on top of the cor­po­rate lad­der. “We are all just one team try­ing to achieve the same goals and we all bring strengths to the ta­ble.”

In re­cently ex­panded premises, Kil­marnock of­fers food-repack­ing ser­vices, re­cy­cling, de­cant­ing of bulk crushed glass, wooden fur­ni­ture and toys and ad­min­is­tra­tion ser­vices. It has big con­tracts with Fon­terra, the Gough Group and Air New Zealand among oth­ers. Staff have ac­cess to health and safety ad­vice, fit­ness and yoga classes and a new train­ing acad­emy to break the glass ceil­ing for school leavers with dis­abil­i­ties.

As in the UK, how­ever, many so­cial en­ter­prises in this coun­try are rel­a­tively young. In 2010, artist and oc­cu­pa­tional ther­a­pist Juliet Arnott set up ReKin­dle, a ven­ture in Auckland aimed at re­duc­ing wood waste. Fol­low­ing the Can­ter­bury quakes, she moved to Christchurch and set up a work­shop where tim­ber from de­mol­ished houses was fash­ioned into thou­sands of dol­lars worth of fur­ni­ture, jew­ellery and art ob­jects. It re­duced the moun­tain of build­ing ma­te­ri­als go­ing to waste and pro­vided jobs and train­ing for 20 peo­ple.

ReKin­dle now runs work­shops in tra­di­tional craft-mak­ing skills such as whit­tling, weav­ing and carv­ing, us­ing wood or veg­etable fi­bres oth­er­wise des­tined for land­fills. It’s turn­ing noth­ing into some­thing.

Han­nant says that ini­tia­tives such as th­ese are nei­ther fads nor com­mer­cial op­er­a­tions tack­ing a plau­si­ble so­cial or en­vi­ron­men­tal ac­tiv­ity onto a busi­ness-as-usual pro­gramme. “We are talk­ing about or­gan­i­sa­tions that ex­ist pri­mar­ily to meet a so­cial need but are de­liv­er­ing it through a busi­ness model. It is great to see more main­stream busi­nesses find­ing more so­phis­ti­cated ways to cre­ate so­cial value, but when we are talk­ing about so­cial en­ter­prise, we are re­ally ask­ing, ‘Why do you ex­ist in the first place? It is be­cause you ex­ist to de­liver a so­cial or en­vi­ron­men­tal ben­e­fit.’

“It is about the power re­la­tion­ships and democ­racy in­side an or­gan­i­sa­tion. It is about com­mu­nity re­silience, con­nect­ing peo­ple within the com­mu­nity and r­e­ori­ent­ing the econ­omy around them.”

CRAV­ING CON­NEC­TION

Cul­ti­vat­ing a sense of com­mu­nity is the driv­ing force be­hind Crave, a cafe in the in­ner Auckland sub­urb of Morn­ing­side. It’s a hub for food, cof­fee, con­ver­sa­tion, cook­ing classes, quiz nights, ed­u­ca­tion nights and a twice-yearly free street feast. That idea was launched in 2010, when co-founder Blue Bradley un­loaded a dead pig from his car boot. That evening, about 80 lo­cals got to know each other over a free bar­be­cue and a mem­o­rable com­mu­nity ex­pe­ri­ence.

“It’s a neigh­bour­hood thing,” Bradley says. “We’ll fa­cil­i­tate it – we’ll cre­ate a venue, do the PA or the pizza oven, but ev­ery­body helps out. Peo­ple say, ‘You guys are cre­at­ing leg­endary ex­pe­ri­ences our kids will never for­get’, but I think all com­mu­ni­ties should be cre­at­ing leg­endary ex­pe­ri­ences their kids will never for­get.”

Bradley’s point is that ev­ery­body wants to live in a com­mu­nity of their dreams but they don’t just hap­pen by them­selves. Among peo­ple’s prob­lems are lone­li­ness and so­cial poverty. “When we first started the cafe, there was a lot of high-den­sity liv­ing but no so­cial spa­ces where peo­ple could con­nect. It was a bit soul­less, a bit in­dus­trial. But hospitality is some­thing you do with your life, not just the hospitality in­dus­try, but liv­ing lives that are hos­pitable – the cafe is an ex­ten­sion of that.”

Now in its third in­car­na­tion, in big­ger premises and with a staff of 45, Crave is still chan­nelling its ef­forts – and prof­its – into strength­en­ing the lo­cal com­mu­nity.

“It still has to run at a profit,” says Bradley, “but if profit is not your pri­mary rea­son for be­ing in busi­ness, ev­ery­thing is up for grabs.”

To make progress, so­cial en­ter­prises need to break into the main­stream, says Han­nant. This in turn re­quires more Gov­ern­ment ­support and more con­sumers us­ing their buy­ing power to re­ward ini­tia­tives that have a so­cial value.

“It’s push and pull,” Han­nant says. “Con­sumer de­mand can be trig­gered by op­tions be­ing there in the first place, pro­vid­ing more pur­chas­ing or ser­vice op­por­tu­ni­ties for peo­ple to choose from in their ev­ery­day de­ci­sions. But at the same time you are try­ing to build pub­lic aware­ness to cre­ate de­mand. If we want an eth­i­cal pen­sion fund, for ex­am­ple, maybe some­one will cre­ate that op­por­tu­nity.”

In the US, sus­tain­ably in­vested as­sets now ac­count for more than one dol­lar in five, and mil­len­ni­als are twice as likely to in­vest in shares or funds that tar­get spe­cific en­vi­ron­men­tal or so­cial out­comes.

In New Zealand, so­cial en­ter­prise start-ups find re­cep­tive au­di­ences on crowd­fund­ing plat­forms, but high-end, high-im­pact in­vest­ment is still in its in­fancy, says Bill Mur­phy, ex­ec­u­tive di­rec­tor of Tau­ranga-based En­ter­prise An­gels in­vest­ment net­work. Some in­vestors say it’s too risky, but “oth­ers are start­ing to wake up to the fact that we can’t keep go­ing the way we are and they will ame­lio­rate the com­mer­cial way of look­ing at it. They’re say­ing I want my money to make a dif­fer­ence – a cap­i­tal D dif­fer­ence.”

Lo­cal au­thor­i­ties, too, are be­gin­ning to look at how they can make a “cap­i­tal D

There is no “them and us”, says Sharp, a for­mer telco high-flyer who came to Kil­marnock after find­ing a “huge gap” in her life on top of the cor­po­rate lad­der.

dif­fer­ence” through their pro­cure­ment strate­gies. The 2002 Lo­cal Gov­ern­ment Act re­quires re­gional au­thor­i­ties to adopt a sus­tain­able de­vel­op­ment ap­proach to pro­cure­ment prac­tices, tak­ing into ac­count the so­cial, eco­nomic and cul­tural in­ter­ests of their com­mu­ni­ties and the need to en­hance the qual­ity of the en­vi­ron­ment.

Ta­nia Pouwhare is the so­cial “in­trapreneur” for Auckland Coun­cil’s The South­ern Ini­tia­tive (TSI), which aims to in­crease so­cial and com­mu­nity in­no­va­tion in South Auckland. She says that al­though the coun­cil’s size makes it dif­fi­cult to con­nect with smaller busi­nesses and providers, some arms of the “coun­cil fam­ily” are us­ing ten­ders to help so­cial en­ter­prises meet pro­cure­ment and so­cial-out­come goals.

“It is not just the type of nails you are go­ing to use in the deck­ing or the pitch of the roof,” she says. “Those things are there, but we are now buy­ing qual­ity em­ploy­ment out­comes for peo­ple far away from the labour mar­ket, re­duc­tions in car­bon emis­sions and di­ver­sion of waste. So it’s the im­pact we are buy­ing – on lo­cal com­mu­ni­ties, en­vi­ron­men­tal sus­tain­abil­ity and on wider so­cial out­comes.”

Each pur­chase, she says, car­ries dif­fer­ent weight­ings ac­cord­ing to dif­fer­ent criteria: the em­pha­sis may be on gen­der equal­ity, pro­fes­sional de­vel­op­ment, lead­er­ship, wages or, of course, cost, “but we are not about feed­ing the lowwage, low-pro­duc­tiv­ity prob­lem. Our job is to dis­rupt it.”

To help smaller en­ter­prises com­pete in the ten­der­ing process, large projects can be “un­bun­dled” into small pack­ages. When a com­pre­hen­sive creek restora­tion project was planned for Mt Roskill, for ex­am­ple, the prop­a­gat­ing and plant­ing por­tion was awarded to the lo­cal Te Whangai Trust. The trust has since set up a na­tive nurs­ery at Wes­ley In­ter­me­di­ate School, where van­dal­ism has fallen, school­child­ren are learn­ing about na­tive plants and bio­di­ver­sity and un­em­ployed lo­cals get train­ing and qual­i­fi­ca­tions in hor­ti­cul­ture, says Pouwhare.

Ear­lier this year, TSI joined Auckland Trans­port, win­ner of the 2017 New Zealand Pro­cure­ment Ex­cel­lence Awards for its com­mit­ment to so­cial and en­vi­ron­men­tal out­comes in its City Rail Link project, to de­velop Fale Kofi, a cof­fee kiosk at the new

Ōtāhuhu bus-train sta­tion.

The pop-up cafe, run by lo­cal Pa­cific youth agency Af­firm­ing Works, of­fers Māori and Pasi­fika food with a fo­cus on

“One of the prob­lems is lone­li­ness, so­cial poverty; when we first started the cafe, there was a lot of high-den­sity liv­ing but no so­cial spa­ces where peo­ple could con­nect.”

high stan­dards of nu­tri­tion and af­ford­abil­ity. It is staffed by young stu­dents, who fit work around their class timeta­bles, and pro­motes Māori and Pasi­fika iden­tity though food op­tions, bilin­gual sig­nage and a fit-out de­signed by Roots Cre­ative En­trepreneurs made from re­cy­cled and up­cy­cled ma­te­ri­als.

As a pilot so­cial en­ter­prise model, says Pouwhare, it’s a win for all par­ties: the city gets a vi­brant trans­port sta­tion, lo­cal busi­nesses are de­vel­oped and sup­ported, “and vis­i­tors know they are in the largest Poly­ne­sian city in the world”.

NO EASY TASK

“How does the Gov­ern­ment get more value, how do we as tax­pay­ers get more value out of things we would have bought any­way?” says Han­nant.

For cen­tral Gov­ern­ment, that win, ­fa­cil­i­tated by close en­gage­ment with grass roots or­gan­i­sa­tions and com­mu­nity groups, is not so easy to at­tain. Gov­ern­ments have huge buy­ing power: from big con­tracts for so­cial ser­vices to pa­per clips and toi­let pa­per, OECD Gov­ern­ments spend about 15% of GDP on pro­cure­ments. But find­ing ways to use that spend­ing to im­prove so­cial and en­vi­ron­men­tal out­comes has been a slower process.

“So­cial en­ter­prise is part of our think­ing,” says Margaret Pearson, chief ad­viser of pro­cure­ment for the Min­istry of Busi­ness, In­no­va­tion and Em­ploy­ment. “It is not say­ing you have to favour a so­cial en­ter­prise over an­other type of busi­ness. It is about fair­ness to all sup­pli­ers, which links back to our in­ter­na­tional obli­ga­tions, but the prin­ci­ples are flex­i­ble enough to al­low agen­cies to make those bal­anced de­ci­sions and take those other fac­tors into con­sid­er­a­tion.”

Crown agen­cies have a re­spon­si­bil­ity to get the best deal, “but that doesn’t al­ways mean the low­est price – eco­nomic, so­cial and en­vi­ron­men­tal im­pacts should all be con­sid­ered as part of that pro­cure­ment process. Qual­ity of sup­ply, abil­ity to sup­ply, sus­tain­abil­ity – those fac­tors are all taken

“We are not preachy. We are not point­ing the fin­ger. This is a frig­ging beer. But food waste is a re­ally fun­da­men­tal is­sue.”

into con­sid­er­a­tion. It may not be worded ‘so­cial en­ter­prise’, but the rules and prin­ci­ples are flex­i­ble enough to draw those three com­po­nents into con­sid­er­a­tion.”

THE POSTIE COMETH

NZ Post, which is now in its 177th year, has been us­ing that flex­i­bil­ity to support lo­cal com­mu­ni­ties for more than a decade. It en­cour­ages its staff to do vol­un­teer work; it is re­duc­ing its car­bon foot­print through the use of re­cy­cling and elec­tric ve­hi­cles. Now, in part­ner­ship with

Āk­ina, it uses its pro­cure­ment pro­cesses to help so­cial en­ter­prises. For the SEWF it con­trib­uted ­del­e­gate bags made from re­cy­cled bill­boards by Welling­ton so­cial en­ter­prise Spin­ning Top. It also ne­go­ti­ates sub­con­tract­ing pos­si­bil­i­ties with larger sup­pli­ers, and is work­ing with Āk­ina to set up re­gional so­cial en­ter­prise hubs for train­ing and support.

“It is not a ques­tion of spend­ing more,” says NZ Post head of sus­tain­abil­ity Dawn Bag­ga­ley. “We have to man­age our costs be­cause we have to de­liver a re­turn to the Gov­ern­ment and, as with any other pur­chas­ing de­ci­sion, we look at all the criteria – cost, ser­vice de­liv­ery and the ad­di­tional so­cial or en­vi­ron­men­tal value that it adds.

“For us, it is a no-brainer: we are go­ing to buy th­ese goods and ser­vices any­way, so if we can buy them from a so­cial en­ter­prise that can de­liver the same prod­uct or ser­vice and de­liver a pos­i­tive im­pact in so­ci­ety and the en­vi­ron­ment, then that is good for us, for our cus­tomers and the com­mu­nity we op­er­ate in. Why wouldn’t we do it?”

But there are bar­ri­ers. Many small en­ter­prises do not have the busi­ness acu­men to com­pete with large-scale op­er­a­tions; few would have the ten­der-writ­ing teams to seek out lu­cra­tive lo­cal or national gov­ern­ment

pro­cure­ments; some strug­gle to tell their story to win the in­ter­est of con­sumers and in­vestors.

An­other chal­lenge is the ab­sence of a le­gal struc­ture for this new breed of val­ues-based com­mer­cial en­ti­ties. As it is, a so­cial en­ter­prise must op­er­ate ei­ther as a char­ity or a lim­ited li­a­bil­ity com­pany. Nei­ther model, says Christchurch lawyer Steven Moe, works well.

“A char­ity will strug­gle to find in­vestors or busi­ness support be­cause there can­not be any pri­vate ben­e­fit. A com­pany can be profit-mak­ing, but then it is not el­i­gi­ble for pub­lic-sec­tor fund­ing or phil­an­thropic grants.”

Moe is rec­om­mend­ing a mix of the two: a sep­a­rate le­gal struc­ture by which so­cial en­ter­prises must state their pur­pose and re­port on their so­cial ben­e­fit ac­tiv­i­ties. Such an en­tity would be re­quired to put a cap on the level of div­i­dends paid out and would be able to claim tax ex­emp­tion for the parts of the busi­ness that are purely char­i­ta­ble.

As he points out in a new le­gal hand­book on so­cial en­ter­prise, this is be­ing done ­over­seas: Scot­land recog­nises so­cial en­ter­prise through a le­gal “com­mu­nity in­ter­est com­pany” cat­e­gory; Canada and 32 US states give le­gal sta­tus to so­cial-ben­e­fit cor­po­ra­tions and Aus­tralia is look­ing to in­tro­duce some­thing along those lines.

“So we need to take the best of what has been done over­seas and ap­ply it here. A so­cial en­ter­prise com­pany struc­ture would au­to­mat­i­cally mean peo­ple feel com­fort­able that you are try­ing to do some­thing good and act­ing with pur­pose. As well as at­tract­ing in­vestors, it would raise the pro­file of the sec­tor in a way that is not pos­si­ble if we just make do with ex­ist­ing struc­tures.”

Han­nant says a dis­tinct le­gal struc­ture for so­cial en­ter­prise would also make it eas­ier for the Gov­ern­ment to de­velop poli­cies and fi­nan­cial support for those or­gan­i­sa­tions, pro­vide qual­ity as­sur­ance to cus­tomers and in­vestors and re­duce the risk green-wash­ing – peo­ple call­ing them­selves so­cial en­ter­prises be­cause “they feel it is a pop­u­lar thing”.

The Gov­ern­ment is look­ing at new ways to support so­cial en­ter­prise. The re­port to In­ter­nal Af­fairs pro­posed a cross-agency So­cial En­ter­prise Unit to ad­dress pol­icy bar­ri­ers, an in­ter­me­di­ary body to spear­head so­cial en­ter­prise growth through men­tor­ing, tech­ni­cal as­sis­tance and on­line re­sources, and a de­vel­op­ment grant fund for so­cial en­ter­prises in their early stages.

Al­ready mo­men­tum is grow­ing. In 2014, the Rata Foun­da­tion, for­merly the Can­ter­bury Com­mu­nity Trust, al­lo­cated $2.5 mil­lion to a new So­cial En­ter­prise Fund. Last year, the then Com­mu­nity and Vol­un­tary Sec­tor Min­is­ter Jo Good­hew an­nounced a new cross-agency work­ing group to gather more data on so­cial en­ter­prises and ex­plore eth­i­cal in­vest­ment. In July this year, the Gov­ern­ment an­nounced $5.5 mil­lion in fund­ing to boost so­cial en­ter­prise and do re­search into the size, scale and value of the sec­tor over the next 3-4 years.

This year, too, Āk­ina an­nounced its Im­pact En­ter­prise Fund for large-scale in­vestors, and the coun­try’s first so­cial-pro­cure­ment model pri­ori­tis­ing Maori and Pasi­fika ­en­ter­prises in lo­cal gov­ern­ment and cor­po­rate sup­ply chains was launched. NZ Post, mean­while, has com­mit­ted to buy­ing goods and ser­vices from at least

“There have been some very ar­ti­fi­cial si­los: a char­i­ta­ble sec­tor rooted in the Vic­to­rian era over here; a post-war wel­fare safety net there …”

three so­cial en­ter­prises over the next 12 months.

Com­mu­nity and Vol­un­tary Sec­tor Min­is­ter Peeni Henare says the Gov­ern­ment will be look­ing at fur­ther ways to fa­cil­i­tate so­cial en­ter­prise. “It is some­thing that has re­ally come on to the radar over the past decade and we are keen to see it grow more.” But be­fore look­ing at fur­ther fund­ing com­mit­ments, he says, it is im­por­tant to see where any bar­ri­ers to growth might be – whether in leg­is­la­tion, pol­icy “or the mech­a­nisms that al­low busi­nesses and the like to do­nate or con­trib­ute to so­cial en­ter­prise”.

Watch this space, says Han­nant. Fol­low­ing over­seas trends, so­cial en­ter­prise, he says, will raise stan­dards across the econ­omy. Main­stream busi­ness will be ex­pected to cre­ate more value by in­clud­ing so­cial en­ter­prises in their sup­ply chains, and ev­ery­day in­vestors will be de­mand­ing more from their pen­sion funds and sav­ings ac­counts.

“It is im­por­tant we see so­cial en­ter­prise as a tool, but it has to be led by some­thing which has more in­ten­tion around what is the com­mu­nity and the coun­try we want to cre­ate. Then, within that vi­sion, what does busi­ness look like? Rather than see­ing it as a niche thing, it should re­sem­ble what wider so­ci­ety wants.”

In her Christchurch lab­o­ra­tory, Bri­anne West has no in­ten­tion of de­vel­op­ing Ethique as a niche brand.

“When you en­ter a new mar­ket, you have your early adopters – but then hope­fully you branch out be­cause your prod­uct is so good they tell their friends. I want this to be busi­ness as nor­mal – busi­ness should be re­spon­si­ble. It con­cerns me when peo­ple ask why we op­er­ate in this way. Be­cause you should do – it re­ally is that sim­ple.”

Watch this space. Fol­low­ing over­seas trends, so­cial en­ter­prise will raise stan­dards across the econ­omy.

1 & 2. Bri­anne West, who started Ethique after a brain­wave in the shower. 3. An Ethique tan­ning bar in use. 4. Other West prod­ucts.

1, 2 & 4. Rhea Dea­con at work at Christchurch ur­ban gar­den Cul­ti­vate. 3. Cul­ti­vate co-founder Bai­ley Pery­man.

Crave’s Blue Bradley, above. In­set, from left, Crave staff

Chris Dews, Suli­eti Tuli­ma­iau, So­phie Wa­gener, Bradley, Jess An­gove and Louise Giles.

1, 2, 3, 5, & 6. Staff of so­cial en­ter­prise Kil­marnock. 4. CEO Michelle Sharp.

1. A mower op­er­a­tor for so­cial en­ter­prise Step­ping Stones in Rand­wick Park, South Auckland. 2. Staff at Fale Kofi in Ōtāhuhu. 3. Rand­wick

Park re­cip­i­ents of a Mitre 10 Com­mu­nity of the Year award.

Re­cy­cling in ac­tion: in 2015, Christchurch so­cial en­ter­prise ReKin­dle’s whole-house-re­use project in­volved tak­ing tim­ber from a de­con­structed home in the earth­quake red zone and invit­ing 250 peo­ple to turn it into ob­jects “of use and beauty”.

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