Ian Portsmouth: I David LePage: D

Ian: Welcome to the Business Coach Podcast, an advice-oriented series that tackles the top issues and opportunities facing Canada’s small businesses. I’m your host, Ian Portsmouth, the Editor of PROFIT Magazine. We’ve developed this podcast in cooperation with BMO Bank of Montreal.

Corporate philanthropy has been practiced for about as long as there have been corporations to speak of; but the notion that companies can do well by doing good has really crystallized only in the last couple of decades. Nowadays business and philanthropy have come even closer together in the social enterprise. An organization that exists to advance social causes but employs many of the same principles and practices as a for profit business.

Whether you run a social enterprise or want your business to adopt a social cause this episode of the Business Coach Podcast is for you. And that’s because my guest is David Lepage, a 30-year veteran of the non-profit sector in Canada and the U.S. Presently he is program manager at Enterprising Non-profits which provides grants and technical assistance to non-profits in support of their social enterprises. Enterprising Non-profits is based in Vancouver, and that’s where we find David LePage today joining me by phone. David, welcome to the Business Coach Podcast.

David: Thanks Ian. Glad to be with you.

Ian: So exactly what is a social enterprise? I don’t know if I quite hit the nail on the head with my definition.

David: I think you were really close. A social enterprise is a business which means it’s selling a product or a service to customers. It’s a business that’s owned and operated by a non-profit corporation which means it actually has a dual purpose, one it generates income from sales, but it also achieves the social, cultural, or environmental purpose as well. So it’s a business operated by a non-profit which means there’s no distribution of profits. Any profits go back into the social purpose or serve the community.

Ian: How does a social enterprise differ from a charity?

David: Well, a non-profit is a corporation. Charity is a status that Canada Revenue puts on a specific group of non-profits who serve community benefits and they can give tax receipts. So a charity is a recognition of a certain portion of the non-profit sector. So social enterprise operated by a non-profit would include non-profit cooperatives. It would include non-profit societies incorporated provincially or federally. And some of those might be charitable as well.

Ian: David, can you provide a sampling of social enterprises in Canada? What kinds of initiatives have you seen social enterprises taking on?

David: Well I think the social enterprise sector is all kinds of businesses across all kinds of purposes. Some of them are created to fill a need in the market; often times maybe it’s around creating employment opportunities for marginalized community members or members of the disability community. So you have groups like the Cleaning Solution in Vancouver, a commercial janitorial service that employs people who suffer and deal with mental health issues. You’ve got groups like the Toronto Enterprise Fund which has a portfolio of 17 social enterprises that primarily work with creating employment for people facing homelessness or youth at risk.

You’ve got an entire range across Canada of cultural social enterprises, and when we think about the fact that most of our theatre and arts groups are in fact non-profits that are operating as businesses, we sort of look at those as key to the social enterprise sector, and a key component to what social enterprises can do for communities. And then there’s some that are in the environmental sector that are doing environmental education, or like Brick Works in Toronto runs as a social enterprise to promote environmental issues.

So we see a whole gammit of social enterprises started by non-profits either to fill the need in the market, or to further their mission using a business model. And some of them actually use social enterprise to actually generate income to support the charitable or the cultural or social issues they’re dealing with.

Ian: Do you see a lot of for-profit entrepreneurs, people who have backgrounds in business ownerships starting social enterprises?

David: We actually see it much more the other way. The traditional non-profit making a transition from being based solely on contracts and grants to looking at how can we start to use a business model to be more effective and more efficient at what we’re doing. So there is a few people in the private sector moving to the social enterprise side, but we’re seeing much more of the dominance probably well over 90 percent are the traditional non-profits moving to using business strategy to enhance what they do.

Ian: Now if someone were to want to start a social enterprise, what would be their two or three most important considerations?

David: There’s really two key things. One of them is the cultural shift. It’s a real difference to be operating in a business model with consideration of things like sales and customers and market and profits as opposed to the traditional model of grants and service, so often times a cultural shift. And the other need is real good business planning and business skills because often times the non-profits have all the passion and they understand the mission, and they understand the social components, but they really need some support and ability to gain the business models and to do the business planning. So what they’re doing is really going into this business with really sound business and market analysis.

Ian: Now in the private sector we tend to evaluate success as a function of growth, as a function of profitability and taking a good close look at the bottom line. How do social enterprises measure success?

David: We refer to the measurement of success with social enterprises looking at it from a blended value return on investment. So when we look at how do we measure success in a social enterprise we look at three components. We definitely look at how is the business doing as a business? So the business has to be successful in terms of sales and cash flow and generating income, but in a social enterprise blended with that is also what is the mission purpose of that business? Is it creating employment? So are we successful at that? Or is it creating cultural activity? Are we successful at that?

And then the third component is many social enterprises are actually started to serve the function of what we refer to as a parent organization or the non-profit that starts the social enterprise. So we look at blending these three things. How is it doing as a business? How is it doing delivering on its mission? And how is it contributing to the sustainability of the parent organization?

And we try to use the term blended as opposed to triple bottom line, or double bottom line because blending really has a context of when you put these pieces together they’re not separable, they’re one again. So when we’re making decisions whether it’s a mission decision, or a business decision, we’re not looking at mission or business, we’re looking at mission and business.

Ian: That’s an interesting distinction. When you see companies that do well on that blended scorecard, what are some of the hallmarks of those companies and how they’re managed? For instance, do they have things like boards of advisers and directors? Are they good at innovation, that kind of thing?

David: Well, I think first of all those that are successful are good at being businesses. They provide a really good product at a competitive price and they care about their customers and their product. And they also are concerned about the social value. But they can’t be successful delivering on the social value if they aren’t successful delivering on the business value. So if you’re a catering company you’ve got to be as a social enterprise, you have to be delivering quality food at a competitive price with all the other components that a customer would want. And you’re also then able to offer a social value. But bad product doesn’t make up for social value, and social value has to be a component of a good business. So when we look at it, it’s critical that they’re running as a good business. To do that it gets to your point then, they have to start to include people on their board of directors or on their staff who have those skills that understand the social mission and understand the critical piece that that plays in the social enterprise, but also that they can make good business decisions as well. So we’re finding that the successful ones are recruiting people who have a passion for what they’re trying to do, but actually have really good business skills as well. Or they’re bringing the people in as advisors from the private sector.

Ian: Now most people who listen to the Business Coach Podcast are business owners. They’re from the private sector. So if you could tell us one thing that social enterprises can teach for-profit businesses David, what would that thing be?

David: I think that the private sector businesses can teach a lot to the social enterprises in terms of good business practices, but I think what the social enterprises can actually show and help the private sector with, and we’re seeing much more of this shared knowledge and shared skills, is the social enterprises have an understanding of how to incorporate social purpose right into the business practices.

So in the private sector we often see corporate social responsibility or CSR as a separate activity. You know like you have volunteerism; we write a cheque to local charities. Whereas when we start to talk about a blended value whether it’s private sector or social enterprise we actually see the CSR objectives actually integrated into the supply chain.

So as an example you see a private sector business being able to say oh, well, like with KPMG they get some of their printing done with Even Phoenix in Toronto which trains youth at risk in the printing business. Or SAP, the software company in Vancouver buying their catering from a social enterprise. So it’s that ability, how do we integrate on the social enterprise side, good business practices into social mission and on the private sector side, how do we integrate social value into our ongoing everyday activities.

Ian: David, social enterprise is certainly an intriguing subject and I thank you for telling us a little bit more about it.

David: Oh, you’re welcome Ian. Thank you.

Ian: David LePage is program manager at Enterprising Non-profits in Vancouver.

That’s it for another episode of the Business Coach Podcast. Be sure to check out other episodes which you can download from BMO.com/coach, profitguide.com and iTunes. For other tools to help you build your business, visit the small business resources section on BMO.com. Until next time, I am Ian Portsmouth, the Editor of PROFITMagazine, wishing you continued success.

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