As someone who joined the Board of a local foundation with the loud and proud aim of ‘converting’ the organization from conventional investing to impact investing (only to walk away two years later with a deflated sense of little forward movement), I sure wish I had taken the time to review the wee tome circulated by Rockefeller Philanthropy Advisors. It might have made my conversion mission seem a lot more to my Board like common sense rather than one kooky Board member’s fanatically pitched agenda.

I am convinced that few Canadian foundation leaders, after having taken some time with this publication, would not think twice about shifting some of their assets to more directly impactful investment containers.

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On July 26th, the Canada Revenue Agency released new guidance called Community Economic Development Activities and Charitable Registration, replacing the 1999 guidance entitled Registered Charities: Community Economic Development Programs.

The new guidance seems to establish more enabling parameters, specifically with respect to two common forms of social enterprise, in addition to program related investing. This is also the first piece of CRA guidance that explicitly uses the terms ‘social enterprise’ and ‘social finance’.

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The first time I spotted An Overview of Impact Investing [PDF] by Canadian investment managers Phillips, Hager & North, it took the form of a slick, bound booklet inserted into the information folder for a workshop on Mission Related Investing being offered at the recent conference of the Community Foundations of Canada. It has since crossed my path in its electronic format. I thought that I would take a closer look!

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Over the past year especially, we have witnessed the notion of a separate Canadian legal structure for social enterprise taking root. Recently, in a project led by Simon Fraser University’s Centre for Sustainable Community Development, we at the BC Centre for Social Enterprise had the pleasure of supporting a Canada-wide poll of the social enterprise sector. The survey asked community-based social enterprise operators, and thought leaders on the topic, whether they perceived a need for a separate Canadian legal structure for social enterprise, and if so, what characteristics such a structure should contain.

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Given the growing interest and participation of community organizations in the social enterprise landscape, the BC Centre for Social Enterprise has assisted many to explore the feasibility of their business ideas, and to build business plans on those concepts that have the greatest merit.

Most community-based organizations do not reach the feasibility study stage, for various reasons. Some realize early that social enterprise is not for them, for reasons of capacity, or organizational fit. Others come to the table with a business idea that doesn’t require much research to prove lack of feasibility:

• There may be starkly insufficient demand for the good or service being contemplated;
• The target customer may not be able to afford to pay for the offering;
• The supply side may already be glutted; or
• The costs associated with the venture suggest that the enterprise would not be profitable (and the venture would be an unlikely candidate for ongoing subsidy).

Sometimes, organizations lose a champion of social enterprise, and find that a window of opportunity may have temporarily closed.

Still others are overwhelmed by the research process itself, and put on the brakes.

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In April 2010, the BC Centre for Social Enterprise released a paper by charities lawyer Richard Bridge, called More Reflections on Legal Structures for Community Enterprise. The creation of the paper was supported by the Illahie Foundation and MCC BC.

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At the BC Centre for Social Enterprise, we interface with many community-based organizations seeking to start social enterprises. At our organization’s infancy in 2004, social enterprise was the ‘hammer’ for every ‘nail’ connected to social and environmental inequity. We were so in love with the potential of the social enterprise approach, that we failed to understand its limits. We also failed to recognize that many non-profits and charities are simply not cut out for social enterprise.

One red flag that signals to me that social enterprise is perhaps not the best fit for clients, is when they expect that the enterprise is entitled to be supported entirely by non-repayable grants. My colleague Stacey Crawford undertook some graduate level research that fully shone a spotlight on the tendency for many in the third sector to expect free money for their ventures. In my days as a business counselor for traditional enterprise, this expectation on the part of traditional self-employed folks usually prompted me to suggest that perhaps business wasn’t the best path for them.

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