How does Social Enterprise translate to the charitable sector?

publication date: Nov 12, 2014
 | 
author/source: David Oyler

David OylerThis is the fourth of a series of excerpts from David Oyler’s feature article “How Does Social Enterprise Translate to the Charitable Sector?” The entire article will be posted on his website, after the final instalment in Hilborn Charity eNews.

The common characterization of Social Enterprise (SE) - the marketplace sale of goods and services by a non-profit - brings frequent mention of charity and the activities of registered charities in SE narrative and resources usually under one of three premises:

  1. Charity is portrayed as a ‘handout’ and unsustainable given its reliance on grants and donations and is cited as a reason to engage in purportedly sustainable SE activity.  This depiction is often placed at the beginning of Organization Spectrums and Business Model Continuums.
  2. Activities operated by registered charities are used as examples of SE seemingly giving credibility to its existence and equating its social impact the same as charities.  Examples include fundraising, fee-for-service and employment-based programs, and related businesses.  Unrelated businesses, separate taxable corporations established by charities, are also mentioned.  Goodwill Industries, Girl Guide cookie sales and YMCA memberships are provided as evidence of SE being around for a long time in the charitable sector.
  3. SE promoters suggest that CRA policy for registered charities is not enabling for SE due to its constraints on business activity. 

Clarifying the misperceptions of Social Enterprise

Put together, these references appear to be contradictory.  On the one hand the charitable sector would appear to be, if not the home or origin of SE, certainly a welcome host.  On the other hand the sector is viewed as not enabling for SE due to regulations or not conducive to the sustainable nature of SE activity. 

I believe this apparent paradox is a combination of the ambiguous defining and interpretation of SE and the lack of awareness and understanding by SE promoters of the different of types of activities that charities are allowed to carry out, specifically ones that include sales of goods and services.  Some common misunderstandings seem to be:

  • any kind of sale of a good or service automatically opens the door to unrestricted revenue and unlimited capital
  • selling a good or service in a charitable manner, e.g. to cover costs, is not sustainable and limiting
  • restrictions on business activity are tax-related rather than born from the philosophical and legal foundation of charity

Where do we go from here?

Parts 5 through 8 will examine the four types of activities that include the sale of a good or service, the context in which these goods and services are produced and sold, and how charitable outcomes could be compromised without limitations. 

It is also important to preface content on any registered charity activity by emphasizing that a registered charity’s purposes must be exclusively and legally charitable, and must be established for the benefit of the public or a sufficient segment of the public.

Also needed is clarity around the concept of ‘marketplace’ and ‘market’.  Even though they are referenced often in SE definitions and narrative, I have not found specific definitions for either term or any indication that there are marketplaces or markets that that are specific to SEs.  I believe it is reasonable to assume a marketplace or market is where goods and services are sold for profit in an open and unrestricted environment.

Oyler Consulting works with registered charities and non-profit organizations to increase their effectiveness and capacity to deliver their programs and services. Services include practical guidance on Canada Revenue Agency policy for registered charities, helping organizations build successful fundraising programs, program and service development, and social enterprise. Visit www.oylerconsulting.ca; contact David Oyler by email.



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