Community Economic Development: Understanding the New Zealand Context
Di Jennings Project Manager CEDNZ Research
CED Research Commissioned by CEDNZ Trust Funded by Lotteries Community Sector Research Committee Principal Researcher: Di Jennings Research Assistant: Dorte Wray Research Supervisor: Ken Simpson, Unitec Research Mentor: Ingrid Burkett: Knode, Australia SOCANZ Conference 15 - 16 August, 2012
Research Aims 1. Identify key success factors and barriers 2. Determine to what extent key success factors are being met 3. Explore best practice for CED and social enterprise developments 4. Explore how to collectively build an ecosystem that will help CED and SE to grow and thrive SOCANZ Conference 15 - 16 August, 2012
Methodology • Literature Review • Five Focus Groups • 97 Interviews • Data Analysis • Seven Case Studies • Final Report
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Social Enterprise - what is it? Involves an organisation Social enterprises operate in markets, but trade for the benefit of people and the planet. The “asset lock� requires that profits and assets be principally retained for community benefit - is the defining element of a social enterprise which marks a boundary with private enterprise. SOCANZ Conference 15 - 16 August, 2012
Community Economic Development Involves the wider community CED grows local economies and is inherently rooted in local communities and includes: • • • • • •
social enterprise community asset ownership community exchange initiatives (e.g. timebanking) co-operatives small, local, privately owned value-led businesses Etc… SOCANZ Conference 15 - 16 August, 2012
Drivers for CED and SE are: Complex and intractable social problems Growing inequalities in health, wealth and opportunity Resource depletion and environmental degradation Financial uncertainty and a decreasing funding pool Desire for independence
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FINDINGS SOCANZ Conference 15 - 16 August, 2012
Enterprising NFPs versus Start-up SEs There is an important distinction to be made between: Enterprising “not-for-profit” organisations …and Organisations that have been operating as social enterprises from start up. SOCANZ Conference 15 - 16 August, 2012
Legal Structures
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Legal Structures There are many options. Deciding the right legal structure can be a complex matter. Development of a specific legal structure for social enterprise is not a priority at this time, but it may be in the future.
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Value of Shared Vision Developing and maintaining a shared vision that is understood and owned by key stakeholders emerged as a significant strength. A shared vision that is based on shared values, usually leads to efficient and effective governance. SOCANZ Conference 15 - 16 August, 2012
Effective Governance A mix of both community and business skills best for governance CED and social enterprise organisations tend to have more inclusive, flatter, democratic and non-hierarchical governance and management structures than traditional not for profits and commercial businesses SOCANZ Conference 15 - 16 August, 2012
Risk Management Most practitioners are confident that they have rigorous processes to manage and mitigate for risk. Governance tends to be more risk averse than management What is lacking is an acceptance that there will be some failures, and that these are opportunities for learning. SOCANZ Conference 15 - 16 August, 2012
Types of Trading Activities
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How Surpluses are Distributed
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FINANCE AND INVESTMENT FINDINGS SOCANZ Conference 15 - 16 August, 2012
Investment Language The term “social investment” is increasingly being used to replace “grant dependent” funding language. “Social investment” distinguishes all social finance from project grant funds, and indicates that all investment in social enterprise aims to provide either a social or a financial return on SOCANZ Conference investment. 15 - 16 August, 2012
Current Sources of Investment
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Lack of Finance is Stopping‌
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Right Kind of Finance – at Right Time
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Burkett, 2010
Start-Up Investment “Money for start-up is the biggest hurdle. We wouldn’t have got off the ground without getting $10,000 plus cheap rent from our council – and now we are self sufficient.” “We need seed funding to get the idea off the ground. We are confident we have a market, but need funds to get to start-up. There is a lack of money – especially for feasibility work.” SOCANZ Conference 15 - 16 August, 2012
Social Loans
• 15% of organisations say that they have access to social loans
• A social loan requires repayment plus interest usually on softer terms than mainstream
• Attitudes to taking loans are variable - reluctance is due to risk and/or a philosophical reluctance to pay interest to commercial bankers SOCANZ Conference 15 - 16 August, 2012
CAPABILITY BUILDING FINDINGS SOCANZ Conference 15 - 16 August, 2012
Summary of Capability Findings There is considerable capability at an operational level, although this can be lacking at a strategic or longer term perspective. Relations with external partners could be better utilised. Organisations are generally poor at measuring the effectiveness of what they do, especially social impact.
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What Kind of Support is Needed? Practitioners seek support that combines business acumen with social, environmental and cultural orientations. “We need more connections to people with the expertise and resources. We need to develop business relationships, and it needs to be a win/win situation.” “There
is a dis-connect between what businesses want to offer and practical ways to engage with social enterprises. There is a lack of trust and understanding between the community and private sector- a lack of understanding of win/win possibilities.” SOCANZ Conference 15 - 16 August, 2012
Social Enterprise Hubs and Peer Exchange Peer exchange is especially valued by practitioners. Social Enterprise Hubs are co-working spaces where social entrepreneurs readily exchange information, skills and ideas For example, Enspiral in Wellington. “We need a Social Enterprise Centre to test ideas out against what other peoples experience is.� SOCANZ Conference 15 - 16 August, 2012
EMPLOYMENT FINDINGS SOCANZ Conference 15 - 16 August, 2012
SEs are Good Employers The average number of people employed by participating organisations is 30. “We recognise that getting a job is the fastest route out of poverty. Creating sustainable local employment is a main driver. We create “real jobs in real businesses” - in an area with 48% unemployment for young people. We are continually working towards improving terms and conditions for our 80 full time staff.” “
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Employing Marginalised People A “social firm� is a distinct kind of social enterprise set up specifically to create good quality jobs for people who are disadvantaged in the labour market
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Pacific and Ethnic Peoples • For Pacific and Ethnic communities integration into the mainstream labour market is problematic due to discrimination, language abilities and skill deficiencies. • Social enterprise offers potential to these communities, especially in terms of the potential for employment generation. SOCANZ Conference 15 - 16 August, 2012
… and Youth “We see our social enterprise as an answer to support dysfunctional youth - help them into meaningful employment. They develop life skills and work skills that can transition them to mainstream employment.” “We re-employed one young man six or seven times before he became a good reliable employee, because his home environment is so tough. We’re passionate about helping people to see their lives differently, and real jobs help do this.” SOCANZ Conference 15 - 16 August, 2012
… and Offenders “We now provide on-going placement for offenders on community work sentences. Some offenders really respond to the opportunity and a few have even gone on to become team leaders, motivating others to do a good job. Community work can be a meaningful way to ensure offenders make up for their offending while learning new skills that can help them to access future employment.”
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Local and Regional Unemployment 55% of social enterprises are situated locally, as opposed to regionally, nationally or internationally. CED is creating jobs, particularly in rural and isolated areas where unemployment rates are high. (DIA Survey, 2012)
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MĀORI ENTERPRISE SOCANZ Conference 15 - 16 August, 2012
Māori Enterprise - Social Enterprise “Māori enterprise tends to inherently be social enterprise due to the collective cultural context.” “Māori enterprises exist in a complex and dynamic operating environment. Many Māori organisations have multiple purposes. This means that they are not set up just to make a profit. Many have to balance being financially viable with the social and cultural aspirations of the owners as their core purposes. (Te Puni Kōkiri website, undated). SOCANZ Conference 15 - 16 August, 2012
Different types of Māori Enterprise Māori participants were keen to make the distinction between: • iwi organisations and • non-iwi, Māori-led, community based organisations. Iwi organisations are bound by Treaty of Waitangi Legislation, tend to be large scale, and their distribution arm is usually separated from their enterprise arm. Māori - led community based organisations are smaller, more inclined to be community led, and generally not as well-resourced. SOCANZ Conference 15 - 16 August, 2012
Iwi Enterprise and Long Term Gain
“We (Iwi) are juggling short versus long term gain. Sometimes it looks like there's not enough trickle through to whanau, but we might be holding on to it for the longer term pay-offs.�
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Similarities: SE and Māori Enterprise Māori enterprise and social enterprises face similar challenges: •
Both balance social, environmental and cultural mission with trading activities
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Both are underpinned by collective, caring values
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In both worlds it is easier for large enterprises to access finance and support than small enterprises
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Both balance running a successful enterprise with staying connected to local people in communities
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Collective ownership – a cultural norm for Māori, and a growing phenomenon in the CED space, constitutes challengesSOCANZ for access to Conference 15 - 16 August, 2012 capital
DEMONSTRATING IMPACT SOCANZ Conference 15 - 16 August, 2012
Demonstrating Impact Triple Bottom Line accounting is regarded as extremely important, but is a challenging area that is not widely understood or practised. Culture and context are important elements of impact, so a quadruple bottom line (QBL) framework is preferred by some, especially SOCANZ Conference 15 - 16 August, 2012 MÄ ori.
Social Impact Demonstration of social impact is particularly challenging - and effective practice in this area is patchy, with little agreement about the most effective methodologies Yet demonstration of social impact is important to potential investors in this space. “Social value is not recognised or understood. A modern economy needs to recognise social capital.� SOCANZ Conference 15 - 16 August, 2012
An Audit Culture? Concerns were raised about a top-down driven “audit culture” that has little relevance for practitioners. “Pressure for attracting investment is what's driving the use of inappropriate auditing. I am nervous – contracts can force people into measuring the easy stuff, not the valuable stuff.” “Both researchers and practitioners suggest that joint approaches with financiers are needed”. (McNeill, SOCANZ Conference 15 - 16 August, 2012 2010)
CASE STUDIES SOCANZ Conference 15 - 16 August, 2012
Research Hypothesis The case studies were selected through propositions developed from the interview phase – that indicated that there are five key attributes successful CED initiatives demonstrate: 1. Creating strong and effective governance 2. Building close linkages to other complementary CED and SE initiatives 3. Delivering services in partnership with service users and purchasing organisations, rather than at arm’s length 4. Establishing a future-oriented internal culture 5. Establishing an effective system of quadruple bottom line impact assessment.
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Case Studies 1. Awhi Credit Union (Rotorua) 2. Community Business and Environment Centre (Kaitaia) 3. McLaren Park Henderson South Community Initiative (Auckland) 4. Oamaru Whitestone Civic Trust 5. Project Lyttelton 6. Taranaki Arts Festival Trust 7. Trees for Canterbury (Christchurch)
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Community Business and Environment Centre (Kaitaia) www.cbec.co.nz
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Legal Entity and Structure • CBEC operates as a Cooperative Society, with limited purpose • They have charitable status • CBEC has community “shareholders” who have voting rights, but no dividends are paid
Project Lyttelton: The Soul of a Sustainable Community lyttelton.net.nz
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Legal Entity and Structure PL is an Incorporated Society that umbrellas several initiatives, each with an advisory group. The PL Manager links to all projects.
Research Recommendations SOCANZ Conference 15 - 16 August, 2012
What is Missing? The space is fragmented – connection and cohesion are missing An ecosystem of support and infrastructure is needed Participants want a movement that is practitioner- led whilst working with partners SOCANZ Conference from other sectors 15 - 16 August, 2012
Stakeholders Unique Roles The Research Report makes recommendations for: • • • • • •
CED and Social Enterprise Leadership Local Government Central Government Philanthropics and Financiers Private Sector Academic Sector SOCANZ Conference 15 - 16 August, 2012
CED and Social Enterprise Leadership
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Flying under the Radar “There is plenty happening in our community – but it mainly flies under the radar of mainstream society.” “There is lots of good will and desire to make a difference, but lack of resources is a problem. There needs to be more awareness raising about the potential.”
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A National Intermediary
“We are flying blind without a national body. It would bring co-ordination and integrity to enhance our work. It would need local chapters and needs to be bottom up - participatory and collaborative. Not dictated from on high.�
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Main Roles for the Intermediary 1. Build an engaged community of practitioners 2. Raise awareness with stakeholders and the media 2. Increase business acumen and enhance market opportunities 3. Assist with access to capital and demonstration of impact 4. Make connections to MÄ ori enterprise leaders 5. Advocate for the needs of the sector
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Financing an Intermediary • This is the challenge! Overseas experience suggests a mix of self funding, plus investment from government, philanthropics and business sector • The government has made a recent contribution to the Hikurangi Foundation to help them to build capability, it is a good start…
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How Central Government Can Help SOCANZ Conference 15 - 16 August, 2012
How Central Government Can Help Governments around the world are actively supporting CED and social enterprise. In Australia, the federal government, together with social finance providers, recently invested $40 million to stimulate the sector. In Scotland and the UK, significant government investment, that includes support for enterprises and intermediaries has been integral to progress. SOCANZ Conference 15 - 16 August, 2012
Slow Momentum Here In New Zealand, in the 1980s and 1990s, the Community Employment Group (CEG) provided significant support - but was disbanded for political reasons. In 2012, Visiting US Fullbright scholar States, MJ Kaplan said: “My greatest surprise during my fellowship was central government’s disinterest in social enterprise. This reticence was not shared by local leaders. Why isn’t central government analysing opportunities to catalyse social entrepreneurship and innovation in New Zealand? I continue to be perplexed by the lack of openness to promising opportunities.”
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A New Era? In February 2014, Community and Voluntary Sector Minister, Jo Goodhew: 1. Made a Government Position Statement on Social Enterprise 2. Announced $1.27 million investment in the development of a solid support infrastructure for emerging social enterprises SOCANZ Conference 15 - 16 August, 2012
Government Position Statement
“The Government, through its agencies, commits to identify any policy barriers to social enterprise growth and to work collaboratively to create an enabling, supportive environment where more social enterprises can grow and attract investment.�
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Priority Areas for Government 1. Remove identified barriers (legislative/compliance) 2. Establish Ministerial responsibility for social enterprise (distinct from the Minister for Communities portfolio) 5. Position social enterprise within a lead agency - that links to other relevant agencies 4. Develop an enabling, supportive and effective policy framework, with associated budgets and action plans SOCANZ Conference 15 - 16 August, 2012
Priority Areas for Government ctd‌ 5. Develop a strategic partnerships programme to
enable social enterprises to work with government 6. Develop social procurement policy and practice 7. Establish a social enterprise investment fund – for enterprises and intermediaries 8. Include CED and social enterprise education in the school and tertiary curriculum SOCANZ Conference 15 - 16 August, 2012
HOW LOCAL GOVERNMENT CAN HELP
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Local Government – a Mixed Bag! Understanding and awareness of CED and social enterprise in councils around New Zealand is very varied. In some councils, individual officers are creating opportunities, but there is generally a lack of any cohesive policy framework and/or staff allocation to CED and social enterprise Silos of operation and lack of communication between departments tends to be an impediment to progress. SOCANZ Conference 15 - 16 August, 2012
Priority Areas for Local Government 1. Establish a supportive and effective policy framework – with associated budgets and action plans 2. Establish social procurement policy and tendering practices that value localism, social and environmental impact 3. Offer long term leases to organisations in council owned buildings and/or asset transfer of land and buildings to community organisations 4. Assist with capability building
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Social Procurement – an opportunity A number of community enterprises have lost business and momentum due to short term tendering processes that do not acknowledge social and environmental impact. Social procurement development is an area that could substantially grow markets for social enterprise, with little or no added cost involved for councils. SOCANZ Conference 15 - 16 August, 2012
Transformational Shift “I think the transformational shift is for government and local council’s to start identifying themselves as a customer of social innovation. Who can we buy the results we want to see from, rather than thinking of the community as the customer of our services. This is the new middle option between privatisation of services and welfare. It is contracting out – but it is contracting to community.” SOCANZ Conference 15 - 16 August, 2012
HOW PRIVATE SECTOR CAN HELP
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Paradigm Shift CED practitioners seek: Values-based collaborations and joint ventures based on mutual understandings and benefits - a paradigm shift from the traditional “begging bowl� relationship. Businesses that develop social procurement policies that lead them to purchase from social enterprises Closer connections with the private sector (and many businesses would like to be involved in the social enterprise space) Investment in a brokering role is needed to link and create opportunities between businesses and social enterprises. SOCANZ Conference 15 - 16 August, 2012
HOW ACADEMIC SECTOR CAN HELP
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Training Mentoring and Research • CED and social enterprise courses and training programmes • talented students with incubation, support and mentoring to initiate new social ventures • access to cross disciplinary teams • research and academic papers in the area
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HOW FINANCE SECTOR CAN HELP
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Through Demand-led Finance • the provision of specialist financial institutions, banks and instruments • that provide a mix of start-up investment and affordable loans that are specifically geared to social enterprises SOCANZ Conference 15 - 16 August, 2012
Through Philanthropics and Community Trusts that: • encourage trading - and do not penalise organisations for making surpluses • offer non-returnable seed investment for early development and community loans or loan guarantee schemes for growth • provide support and capability building alongside investment • work with the social enterprise sector to develop SOCANZ Conference accountability tools that can measure the blended-value 15 - 16 August, 2012 mission of social enterprises
Final thoughts... The role of community organisations continues to change – embracing an entrepreneurial spirit alongside social, environmental and cultural mission There are opportunities for central/local government to shift from being a mere deliverer of services - to an enabler of communities and promoter of community cohesion and self determination The role of business and financiers is also changing – to embrace social, environmental and cultural value alongside profit SOCANZ Conference 15 - 16 August, 2012
Through pulling together‌ the possibilities are greater than we can ever imagine
To see the report online go to www.ced.org.nz
Di Jennings Project Manager CEDNZ Research