Written below is a letter from our CEO, Tonya Surman, to the Federal Government. Her words express our community’s desire for major shifts in markets and culture across Canada in the face of COVID-19 so that we can build the Next Economy. Not sure what we mean by “Next Economy”? Read on for our definition.
Thursday, June 18, 2020
Dear Members of The Standing Committee on Industry, Science and Technology;
Recommendations for Bouncing Back Better: Unlocking the Next Economy Through the Power of Social Innovation
COVID-19 has magnified these inequalities at every turn and the current shocks to our economy reveal its vulnerability. Now, amid decreasing financial mobility and within the frame of a climate crisis, we are also facing a deep economic recession.
As we look ahead to the long road of recovery and rebuilding our economic and social systems, there is a growing chorus of people and organizations from across sectors who want to Build Back Better.
Of course, there will be many who want to return to our pre-COVID economy. However, in this moment of profound disruption, there is growing support for creating a future that is better for all, not just some. The potential for creating new policies and structures that drive lasting value is unprecedented in our lifetime.
The Next Economy must be one that is regenerative, low carbon, inclusive, equitable, and prosperous for all.
We believe the shift to The Next Economy is urgent and possible, and that applying social innovation principles and practices is essential for identifying, creating, demonstrating, amplifying and scaling the solutions that will be required to create it.
At their best, social innovations address the root causes of problems that have resisted traditional methods and institutions. Social innovation encompasses practitioners using policy (i.e.: laws and institutions), markets (i.e.: business and trade) and culture (i.e.: values and education) to create change. Social enterprise and social finance are part of this broader field of social innovation. Both tend to be involved in market-based strategies, and benefit from collaboration with people working on policy and cultural change.
Canada is stronger in every sense for the work of these social innovators and entrepreneurs. There are an estimated 10,000 social enterprises in Ontario and 25,000 across the country. There are an estimated 170,000 charities and nonprofits in Canada that employ two million people and contribute over eight (8) percent to Canada’s GDP. Like technological and business innovation, social innovations thrive in environments where a rich ecosystem of entrepreneurs and specialized supports drive innovations through each developmental stage. These organizations can and must play a role in creating the Next Economy. To do so, we need to shift key policies, programs, funding and financing that incentivize outcomes that serve and support the Next Economy.
I offer the following set of recommendations in what I intend to be clear, straight entrepreneur-speak.
Eight Recommendations for Building the Next Economy
1. Shift Shareholder Mandate
If you could do one thing… and one thing only, it would be to ensure that every ‘shareholder’ needs to be accountable for ensuring that they operate for people, planet and then profit. There is no longer a rational justification for the maximization of a 20th century definition of “shareholder value” to continue to be the sole measure of successful business… it must include people and planet – as any business is built on the back of the collective infrastructure and benefits from the context that they operate within. Start in Canada and inspire the world!
2. Design Circular Economic Systems
It’s what comes after capitalism and we all learned it in Kindergarten. The circle holds the key to everything. Circles eliminate waste, balance power, show us how to make decisions, include everyone, create virtuous design solutions and ensure that we have the resources and energy to build anew. Every problem can be redesigned to become a solution. Think of the number of JOBS that we could create for marginalized communities doing energy retrofits, converting commercial real estate into affordable housing or building new community energy infrastructure. Imagine if surpluses were truly available to be reinvested in the next generation of local businesses. Evergreen funds are circles. What could a circle teach us about building child care, elder care or data sharing models? Circularism is the design principle of our Next Economy.
3. Shift Taxation to Unlock Public Good and Let Social Innovators Serve That Public Good
We need to incentivize purpose-driven business models such as nonprofits, social enterprise, community land trusts, B corporations, credit unions, community interest companies, ESOP’s, cooperatives and low-profit limited liability companies that have found ways to put purpose first. They are proven but they are significantly marginalized by a system that preferentially recognizes financial profit. Through legal statute, corporate law and tax code reform, establish innovative, socially aligned, for-purpose business models as the preferred and most rewarded models. For example, offer lower corporate taxation and preferred status for government loan programmes, investment and procurement competitions.
Non-profits and charities have an asset lock… we are bound by law to reinvest any surpluses in mission. We are your allies in advancing the public good. Yet the CRA makes us less effective and makes us feel like criminals at every turn. Let us be part of the solution by reforming charitable legislation to recognize that we no longer live in the 1700’s. For example, let’s change the law so that we can “prevent poverty” instead of just treating the symptoms. Let’s allow the public benefit sector to generate revenues to solve and prevent these problems. Let us be fully empowered collaborators to generate solutions in partnership with government to help make our communities more regenerative, equitable and prosperous for all.
4. Level The Playing Field
Give social innovators access to the same programs and services that you would for any emergent sector. CSI had to create a for-profit in order to access SR&ED credits because the assumption is that nonprofits are not innovative. We can do so much better. Make sure that all government programs are evaluated on merit and not legal form. Nonprofits and charities cannot be a part of the solution with government if we are not respected and treated as true partners. Ensure that we have access to any incentive programs that are available to any for-profits.
5. Do All the Things You Said You Were Going to do for Social Enterprise but More! And Faster!
The foundation from the recommendations of the Social Innovation, Social Finance Task Force exists. We can build on it quickly and not go back to the drawing board.
1) Implement the recommendation of the Social Finance Task Force.
2) Invest an additional $150 million over two years into the Investment Readiness Program (IRP), particularly focused on Incubation Grants, supporting critical intermediaries and targeting indigenous, black, women and rural and remote entrepreneurs.
3) Accelerate the deployment of the Social Finance Fund
4) Create a Social Enterprise Youth Employment Program that puts talented young people to work supporting enterprising solutions with purpose.
This means, investing in us as strategically as you would in any other Canadian sector. More important than mining, auto, AI or biotech, social innovators are the best shot you’ve got at shifting capital, shifting power, shifting systems and maybe staving off climate change. We all know that we need our solutions to be circular, resilient and equitable. We all want vibrant communities, but there is some serious work that needs to be started to address the gross inequities of our indigenous, black and vulnerable populations. And maybe, if you create the community resilience funds, tax credits and ecosystem building supports, the Next Economy will deliver the jobs, enterprises, solutions, and quality of life that we all seek.
6. Create A Community Wealth Fund / Act
Modelled after the Community Reinvestment Act in the US, but way more savvy we are recommending that the Federal Government legislate that 20% of the five big banks profits and the reallocation of 20% of police budgets to generate a Community Wealth Fund that would be managed and governed at a neighbourhood and community level with a focus on building solutions including daycares, green jobs, elder care, participatory cities, community energy systems and community economic development to name a few. We need to build Community Wealth models into this community infrastructure so that we are building truly resilient communities capable of ensuring local food resilience, Community Shared Import Substitution and resilient supply chains.
7. Align Government Procurement
The Government must use its own procurement practices to be part of the solution! All government departmental procurement should be aligned and all procurement should meet a triple bottom line. Which is to say, stop working at odds from each other and ensure ‘Institutional Circularity’. Too often one hand of government is contradicting the other hand… for example, hospitals use tons of energy but are not required or supported or incentivized to go green… and so one arm of government is holding back the success of another. Education should be mandated to procure locally grown health food. Government funded research should be held in public hands without the ability to privatize that IP without the government at least getting a percent in the upside. You get the idea.
8. Create an Auditor for Social Innovation
We need to find ways to incentivize innovation inside government. Some early signs like the Prizes & Challenges work and the % for experimentation are great starts. Let’s go further. The Auditor General creates a fear of failing that needs to be balanced by a drive for innovation. In order to get collaboration and systems change inside government, it is first necessary to create the right culture. An Auditor for Social Innovation could become a core part of building a more innovative public service, which then can celebrate its own innovation. The federal government must incentivize social innovation in order for its roots to take strong hold across all markets and sectors.
We must start today in advancing these recommendations, taking this moment in our history and turning it into one where governments, corporations and citizens made bold choices that promoted our collective prosperity and well-being and not at the cost of our planet’s health. Other generations have acted with courage in the face of crisis to build vital social and economic infrastructure. This is our moment.
Chief Executive Officer
Centre for Social Innovation