Social Enterprises as a Way to Achieve Sustainability

7/30/2019 Social Enterprises as a Way to Achieve Sustainability

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www.nesst.org

Social Enterprises as a Way toAchieve Sustainability

Andreja Rosandi

Tbilisi, 15 16 May 2013

[email protected]
mailto:[email protected]:[email protected]:[email protected]:[email protected]


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ORGANIZATIONAL SUSTAINABILITY

short-term project cycles limited, competitive pool of donor

resources difficulty securing core operating

resources shifting donor priorities

Typical NGO Financing:The Short-Run Approach


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More Sustainable NGO FinancingThe Long-Run Approach

diverse funding sources, decreaseddependence

more steady flow of secured income more unrestricted income ability to think and plan more long-term


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Organizational Sustainability

Financial Sustainability

Self-Financing

Organizational sustainability is notstrictly a financial consideration.Financial sustainability is but one

of several factors contributing to anorganizations overall sustainability.Likewise, self-financing is but onefactor contributing to the overallfinancial sustainability of anorganization.



Self-Financing

Financial sustainability is but one ofseveral factors contributing to anOrganizations overall

sustainability.



Self-Financing

Self-financing is but one of severalstrategies that nonprofits can useto generate income and diversify

their financing mix.

Organizational Sustainability Financial Sustainability Self-Financing


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WHAT IS SELF-FINANCING & SOCIAL ENTERPRISE?

What is self-financing?

Diverse strategies that CSOs use to generate their own revenues

Self-financing strategies can be mission or non-mission related


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METHODS OF SELF-FINANCING

Like sale of services, the costs of making theproduct are difficult to recover (if oneincludes labor) and they are therefore oftensubsidized by grants.

Your nonprofit sells its publications orproducts produced by your constituents aspart of an employment generation program.

Product Sales

Selling products produced by or for thenonprofits constituents; reselling donated

products; or producing and selling newProducts.

The true profitability of services is oftendifficult to calculate as many are subsidizedby donations/grants. Pricing structuresmay be such that paying clients subsidizenonpaying or lower-paying clients (i.e.,cross-subsidy). Services are often the mosttime consuming strategy but potentiallylucrative.

Your nonprofit provides consultationservices to individuals, businesses orgovernment agencies.

Fees for Services

Fees charged by the nonprofit in exchangefor a provided service, oftentimes a servicecapitalizing on some existing skill orexpertise of the staff.

Membership dues can resemble anindividual donation. The differencebetween a donation and a membership feeis that the nonprofit provides something(product/service) in return. This is oftenthe least time consuming, lucrative andrisky of methods.

Your nonprofit provides a magazine tomembers and/or offers other membershipservices or products.

Membership Dues

A fee collected from nonprofit members orconstituents in exchange for some kind ofproduct or service or

other benefit.

PROFITABILITY/RISKEXAMPLEMETHOD


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Few nonprofits have reserves or excessincome, but some invest program funds notcurrently in use on a short-term basis.Stock-market investment can be highlyrisky, but maximizing income frominterest-bearing accounts can be low risk.

Your nonprofit invests its savings in high-yield interest bearing accounts or mutualfunds.

Investment Dividends

Dividends from active or passiveinvestments of financial resources (e.g.,savings, endowments, reserve funds, etc.).

Use of soft assets can be lucrative but canbe highly risky, particularly for thenonprofits organizations reputation and

public image.

Your nonprofit endorses a product of acorporation, lending your name inexchange for a royalty fee.

Use of Soft Assets

Generating income from nonprofit-heldpatents, licensing agreements, royalties forintellectual property, or endorsements.

Hard assets can provide a stream ofrevenues while also appreciating in value(although they can also depreciate). Hardassets can also pose some risk as they mustbe maintained from wear and misuse.

Your nonprofit rents out its conference

room space for trainings, workshops ormeetings.

Use of Hard AssetsRenting out real estate, space/facilities,equipment, etc. when not in use formission-related activities.

PROFITABILITY/RISKEXAMPLEMETHOD

METHODS OF SELF-FINANCING - continued


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WHAT IS A SOCIAL ENTERPRISE

An entrepreneurial activity designedto solve a critical social issue in aninnovative way through the ongoingand professional provision of productsand/or services.

Its primary objective is to achieve significant social impactin asustainable manner, while it also aims to strengthen the financialsustainability of the parent organization (CSO).


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CHARACTERISTICS OF SOCIAL ENTERPRISES

1. Sustainability and social impact are incorporated in all aspects of their operation:

Social impact the enterprise is creating long-lasting change in thecommunities where it operates, targeting marginalized groups.

Financial the business must be commercially viable over the long run,covering its costs or generating profits to be re-invested in the enterprise;

Operational business practices must adhere to the highest standards ofethics and transparency; and

Environmental the business is committed to mitigating the environmentalimpact of its operations or to creating a positive impact on the environment.

2. They pursue a balance between social and business goals.

3. They grow to increase social impact.


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FRUIT OF CARE, HUNGARY

In Hungary, only one out of ten people living withdisabilities is employed, compared with four out of ten inthe European Union overall. They face discrimination andlack job skills and training to enter the labor market,preventing them from earning an income to improve theirlivelihoods.

Fruit of Care is a NESsT Enterprise thatpromotessustainable employment for people with disabilities bydeveloping, designing and marketing premium productsmanufactured by them.

Fruit ofCares Impactand Success Supported the employment and fair wages of over 150

intellectually disabled employees working in eightsheltered workshops.

Brought the message of its social enterprise to over18,000 customers.

Tripled its annual income in one year.


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FUNDATIA CARTEA CALATOARE, ROMANIA

FCC is a NESsT enterprise that produces audio booksin DAISY (Digital Accessible Information System)format to allow visually-impaired citizens to enjoyreading at their local libraries just like any otherindependent person. The enterprise is now expandingits feature-rich and user-friendly options.

FCC Impact and Success Goals: Over 150 titles produced in DAISY format.

700 DAISY books readers reached by the socialenterprise.


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Tolerance and acceptance are hot topics in Hungary today, butthey are not emphasized in the educational system.Distribution of literary works is centralized and streamlined,and high quality children books can only be found in Budapest,and not in more remote regions of Hungary.

Csimota is a NESsT Enterprisein Budapest, Hungary: aninnovative, dynamic and adventurous publishing house thatspecializes in progressive childrens books. The topics they

address as well as the format, language and design that theyuse appeals and caters to a progressive community ofHungarian parents.

Csimota Impact and Success Goals:(planned for their first year of incubation) Number of Beneficiaries: 10.000 Annual Income of the Social Enterprise: US$ 110,000 Growth Rate of the Social Enterprise: 120% Percentage of Income from the Social Enterprise: 90%

CSIMOTA, HUNGARY


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RODA, CROATIA

Through education and awareness campaigns, RODAworks to bring widespread change in Croatianmaternal care and increase parental involvement inchildrens lives.

RODA is a NESsT Enterprisethat designs andmarkets a line of trendy and easy-to-use cloth diapersand accessories, delivering clients health,environmental and social value through an eco-friendly, affordable and high-quality alternative todisposable diapers. Additionally, they have begun todiversify their product line.

RODA Impact and Success Goals: Support for 4 job placements in sheltered

workshop in city ofVaradin. 40% of income comes from social enterprise. Social enterprise offer alternative to disposable

diapers thus increasing health care andenvironment protection.


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Embedded Integrated Complementary

Source: Alter, Kim, Social Enterprise Typography. The Inter-American Development Bank, Washington, DC, 2003.

SocialPrograms

+EnterpriseActivities

SocialPrograms

Enterprise

Activities$

$

SocialPrograms

Enterprise

Activities

SOCIAL ENTERPRISE ARCHETYPES


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1. Provides a solution to a critical socialproblem Social enterprise can directly solve critical social issues, for example byproviding employment or opportunities for income generation formarginalized communities

2. Increased income If/when a social enterprise venture is profitable.

3. Diversified revenues Social enterprise can help diversity your funding base and help reducedependence on fluctuating funding sources.

4. Greater flexibility Unlike many grant sources, social enterprise income is unrestricted.

5. Improved overall organizationalperformance

Financial and managerial discipline required for social enterprise canalso improve overall nonprofit efficiency, planning and systems

6. Positive impression on donors Many donors like to see that a nonprofit is making a concerted effort togenerate some of its own resources and diversify income.

7. Strengthened board Social enterprise can help engage board members and make use oftheir experience and skills in the business world.

8. Increased visibility Marketing for social enterprise can also help reach new audiences forthe nonprofit and its mission.

9. Increased self-confidence Nonprofit leaders and staff gain confidence from the realizing theyhave the ability to generate income for their mission

BENEFITS OF SOCIAL ENTERPRISES


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1. Not appropriate for all nonprofits For whatever reason (financial, ideological, capacity, etc)social enterprise may not be appropriate for you.

2. Its not easy If making a profit were easy, everyone would already bedoing

3. Not for nonprofits that are in a financial crisis Social enterprise requires a certain level of financialstability and expertise that not all nonprofits have.

4. Not a way to get quick money Social enterprise is a long-term financing strategy; it maytake several years before a financial return is realized

5. Not risk free Any kind of business activity is vulnerable to economicconditions, market fluctuations, etc.; and, if not wellmanaged can place at risk a nonprofit's reputationand/or financial integrity.

6. There is no recipe Social enterprise is very specific to each nonprofitscapacity, expertise, mission, skills, etc. There is noformula for success;

7. Can cause internal conflicts Social enterprise activities can cause a variety of internalorganizational cultural dilemmas and or ideologicalconflicts with your mission.

LIMITATIONS OF SOCIAL ENTERPRISES


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MISSION, VALUES & VISION

Are we clear on our mission, values and vision?

LEADERSHIP AND ENTREPRENEURIAL CAPACITY

Assessing whether we have the necessary knowledge, experienceand capacity to launch or to develop our social enterprise.

ORGANIZATIONAL SUPPORT

Assessing if we have the necessary support (organizational, keystakeholders) to launch a social enterprise

FINANCIAL READINESS

Assessing if we have the necessary financial stability, financingmeans or ability to attract funding.

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ENTREPRENEURIALREADINESS


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SUCCESSFUL SOCIAL ENTERPRISE MODEL
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DEFINING GOAL FOR SOCIAL ENTERPRISE

GOALS (use concrete and measurableindicators)

PRIORITY Examples

Mission related goals (how would you likethe social enterprise to further your missioneither directly or indirectly?)

Provide permanent employment/ requalificationtraining, etc. to at least 5 beneficiaries 1: high priority

reach/inform/involve at least 150 new stakeholdersper year on the issue 2: medium priority

increase visibility of organization (2 more articles per

year) 3: lower priority

Financial Goals (what tangible financialresults would you like the social enterpriseto attain for the organization?)

increase self-generated, untied revenues to 25% oftotal budget 2

provide at least annual profit of 5 000 USD - 1

generate enough income to cover the overheadexpenses of our organization -1

triple our self-generated revenues within 3 years 3

After setting the goals, prioritize them on a scale from 1 to 3 (1=very high priority - 3=lower priority, stillimportant). Prioritizing will help you see which goals to focus on more intently, as well as assist you in planninga timeline for your enterprise you may want to achieve more important goals faster.


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VIABLE SOCIAL ENTERPRISE IDEA

Mission,

values &

vision

Our criteria

Potential to

reach social

goals

Financial

situation and

opportunities

Organizational

capacities


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ASSESSMENT OF THE IDEA

Social enterprise

ideas

Compliance factors

Matching

with mission,

values &

vision?

Matching with

organizational

capacities?

Matching with

financial

situation and

financing

opportunities?

Matching

with our set

criteria?

Potential to

reach our

social goals?

1.

2.

3.

Scoring: 0: weak; 1:moderate; 2: strong; X: I dont know


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VIABLE SOCIAL ENTERPRISE IDEA

Marketable Competitive

Potential to

reach financial

goals

ProfitableImplementable


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WHAT DO THESE MEAN?

Marketable: it fulfills an existing or potential customer need,for which repetitive and solvent demand can be anticipated.

Competitive: even though there are other actors in the samefield, we will be able to sell, because we can compete with themeither in quality, price (or costs), or other aspect that isimportant for our customer.

Implementable: the enterprise is able to manufacture theproduct or to provide the service in a way that it matches thecustomers needs (quantity, quality, deadline, etc.).

Profitable: with current or potential resources the enterprisewill make profit.


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ASSESSMENT OF THE IDEA

Social enterpise

ideas

Viability criteria

Marketable CompetitiveImplement-

ableProfitable

Potential

to reach

our

financial

goals?

1.

2.

3.

Scoring: 0: weak; 1:moderate; 2: strong; X: I dont know


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QUESTIONS?

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Social Enterprises as a Way to Achieve Sustainability