Victorian State Policy and Social Enterprise 2017 – Part 1

This post is part one of a two part post about the recently released Victorian Social Enterprise Strategy, 2017.

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Social enterprise is perceived as an innovative response to funding challenges that non-profit organisations increasingly face as they attempt to solicit private donations, and government and foundation grants. The concept is used to emphasise the innovative dimensions of projects and the risks that they are taking. A wide variety of organisations are engaged in social enterprise activities: ‘from for-profit businesses engaged in socially beneficial activities (corporate philanthropy) to non-profit organisations engaged in mission-supporting commercial activity’ (Defourny and Nyssens, 2006: 4).

Social enterprises ‘main purpose is not the maximisaton of profit but the attainment of certain economic and social goals’  (Muñoz and Tinsley, 2008: 44).

Introduction

In Australia in recent years, social enterprises have been positioned in many goverrnement, community and business discussions as significant sites for youth engagement, training, and social inclusion. In 2017 the Labour State Government of Victoria released their Social Enterprise Strategy. The policy, in part, states that rates of employment and community engagement among marginalised groups of young people in Australia will be a key indicator used to evaluate social enterprise benefit/outcomes.

The Victorian Government Social Enterprise Strategy (SES) is framed by a concern for the employment opportunities provided to young people entering the workforce. The Minister for Industry and Employment Wade Noonan notes that ‘jobseekers’ are ‘at risk of being left behind’ with young people facing declining opportunities for meaningful participation in the workforce. Noonan suggests that the that the Victorian social enterprise sector has a substantial role to play as government alone can not solve: 

Our most pressing social challenges – including unemployment, homelessness and disadvantage …

Many of our brightest and most innovative people are working tirelessly every day to find new ways to solve these problems. Through the extraordinary efforts of Victoria’s thriving social enterprise sector, we are drawing maximum dividend from our economy and applying business skills to a social mission (SES, 2017: 1).

The new Strategy understands social enterprise aims and goals as mostly financial:

While social entrepreneurs often require financial support or assistance to get their business off the ground, the goal of social enterprises is to become commercially self-sustaining. Sustainable operations are vital to the social enterprise model and international experience demonstrates the ongoing dividend, which is gained from well-targeted policy to assist sustainability (SES, 2017: 2).

 

Social procurement

The State Government supports social enterprise activity by: supporting social enterprise intermediaries, through social procurement initiatives, and through investment in social enterprises.

  • Social enterprise intermediaries

The Victorian Government states that social enterprise intermediaries provide support and guidance to social enterprises in identifying and adopting:

workable business models and legal structures, accessing appropriately experienced mentors, and successfully demonstrating economic and social impact (SES, 2017: 7). 

The majority of Australian social enterprise intermediaries are located in Victoria, and include: Social Ventures Australia (SVA) (which supports SecondBite, Ganbina and STREAT); the Difference Incubator; the Social Enterprise Academy (SEA); and the Australian Centre for Rural Entrepreneurship (ACRE).

Social Traders: Established in 2008, jointly funded by the Dara Foundation and the Victorian State Government, Social Traders has established itself as the leading organisation supporting social enterprise in Australia, providing a diverse range of services to develop and grow the sector.

LaunchVic: A Victorian Government initiative, LaunchVic supports Victoria’s globally recognised, thriving start-up culture, and supports entrepreneurs to develop and grow businesses, including social enterprises.

Problems arise as social intermediaries are now the recipients of more funding than social enterprises themselves and are over-represented in the sector. Most intermediaries don’t provide pro bono support here – but charge social enterprises for this kind of consultancy. As a result they receive funding at both ends, from government and from social enterprises.

  • Social procurement

The Victorian Government social procurement initiative aims to leverage the purchasing power of the state government. It claims that the initiative

adds value by intentionally generating a social outcome when goods or services are purchased, and ensures that wider government goals can be aligned with procurement’ (SES, 2017: 7). 

The social procurement approach has been used by the Victorian Government’s Level Crossing Removal Authority to create New Employment and Exchange Training Centre (NEXT). The Strategy cklaims that NEXT operates as:

a hub for a range of social procurement services, including career and transition advice services. The project is estimated to create 2000 new jobs, with at least 200 being apprentices or graduate engineers. The NEXT centre will provide opportunities to re-skill people from transitioning industries, such as automotive workers, and students from diverse and disadvantaged backgrounds, including indigenous Victorians and migrants (SES, 2017: 7).

Major Victorian government infrastructure delivery agencies, such as the Level Crossing Removal Authority and the Western Distributor Project require a Social Procurement Plan from project delivery partners.

  • Social Impact Investment for Sustainability

Launched in 2016, this Sustainability Victoria initiative provides a combination of grants and low interest loans to investment-ready social enterprises working in the environment space. Investments are designed to create new jobs and training opportunities, respond to climate change, avoid and recover waste and improve resource efficiency in Victorian communities (SES, 2017: 6).

Increasingly government funding is shifting toward this kind of investment, or debt finance, rather than actual funding, which can put further financial stress on nonprofits.  This type of investment is paired here with a Sustainability focus which may exclude a range of social enterprises from applying for funding.

 

The limitations of the Social Enterprise Strategy

In terms of the track record that we bring to this project (see for example, Working in Jamie’s Kitchen: Salvation, Passion and Young Workers), and the significant research undertaken on/with social enterprises (see for example, Art as Enterprise: Social and Economic Engagement in Contemporary Art), we want to suggest that the framing of social enterprise in this Strategy should raise a number of concerns. In the first instance, the Strategy takes a profit-focused approach to social enterprise and does not fully account for hybrid models of social enterprise. This approach runs counter to the reality of the social enterprise sector worldwide, as only 30% of all social enterprises run at a profit. This has the effect of diminishing the value of non-profit yielding social enterprises and increasing the pressure on all social enterprises to turn a profit. The downstream effects of this pressure will be felt by the very participants social enterprises aim to support. Ironically, the strategy begins with a concern for the employment prospects of young people, but in reality may undermine the chances of young people, the quality of social enterprise programs and the functionality of the social enterprise sector. There are further negative implications for those social enterprises working with greater levels of marginalisation and disadvantage who bring together funding as well as self-generated revenues.

Finally, and perhaps most worryingly, the strategy places significant emphasis on supporting intermediaries and business development training (often run through intermediaries) with almost no government funding for social enterprises themselves. The small amount of funding being provided seems to be geared toward debt finance or ‘investment’ rather than actual funding. This continues a pattern of policy-making and funding decisions in the sector that has led to an explosion of intermediaries while social enterprises themselves struggle.

We will take up these and other issues in subsequent posts.

 

Image by Alex Proimos from Sydney, Australia – Recession Hits, CC BY 2.0, https://commons.wikimedia.org/w/index.php?curid=25652544

 

 

 

 

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4 thoughts on “Victorian State Policy and Social Enterprise 2017 – Part 1”

  1. […] In terms of growth and development opportunities, the FASES 2016 data shows a growth in ‘new entrants to the field, with 33.8% of the study’s sample being between two and five years old’. While development opportunities lie in: ‘social procurement; quasi-market development; and opportunities to grow impacts through supply chain development’ (Barraket et al, 2016a: 3). These modes of development are supported by the Victorian Social Enterprise Strategy which gives particular attention to social procurement and the ways in which SEs can contribute to and fit into the market economy. We discussed our concerns with this trend in earlier posts… […]

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