Funding social enterprise for systems change

“These are places all around the world where people are coming together to plant seeds for a positive future. We may not be able to change the whole system all at once. But we can create positive changes locally. And when those local changes are connected together through networks – when they are coordinated, learn from one another, and reinforce one another – change can happen at larger and larger scales.” - David Ehlichman talks about “Pockets of Possibility” in Impact Networks.?

Funding social enterprises is like investing in these “Pockets of Possibility” as they are the gardeners who are planting the seeds for a positive future. They have deep knowledge of the complex social issues they are seeking to address, are entrepreneurial and innovative in their approach, and are highly relational and hardwired to build trusting relationships in communities, as well as across sectors.???

Last week I shared an article about these collaborative “superpowers” of social enterprises, based on early?insights from a multi-year action research study on how work integration social enterprises (WISE) scale?impact through cross-sector collaboration. So what then is the potential for social enterprises to drive?systems change??

The Australian philanthropic sector has increasingly been drawn to social enterprises as a tool to create sustainable social change. Organisations such as STREAT have demonstrated the efficacy of their social enterprise model to support and transition hundreds of young people at risk into sustainable employment through their portfolio of hospitality enterprises.??

However, although a model like STREAT’s creates a ripple effect of local change, it is not enough to address the large scale change required to fix the broader employment system which is broken for many young people in Australia. As Ehlichman infers, we need to connect these local social enterprises, like STREAT, through networks that collaborate, learn from each other and shift mindsets to create systemic change.??

At the recent Philanthropy Australia Conference, a range of social enterprises, academics, funders and Social Enterprise Australia came together to explore these issues in a session called “Funding Social Enterprise for Systems Change”.??

Key themes from the discussion included: the need to fund innovation and experimentation; help build the collaborative capacity of social enterprises; invest in building networks across the sector; and the importance of shifting mindsets, power dynamics and ways of working as funders.?

1. Fund the “social innovation” engine of social enterprise??

Developing solutions to complex social issues such as unemployment is not a simple cause and effect model.? The very nature of complex problems is that they are dynamic, non-linear and emergent. Social entrepreneurs are experimenting through identifying particular leverage points where they can focus their efforts to create change in a system, but it is experimental and requires constant trial and error. To fund the “social innovation” engine of enterprises we need to realise that it requires a different risk appetite.?

“Most of us when we come to funders, we're having to keep showing lots of shiny things and then we pitch loud to you the possibilities, but then we whisper when things don't go right because it affects our future capability to get more funding from you. We want to be able to say that stuff may fail and we want to have those conversations and know that this is all a learning environment.” - Bec Scott Co-Founder and CEO of STREAT?

?2. Fund the collaborative capacity of social enterprise?

?Despite the relational superpowers of social enterprise, many lack the collaborative “bandwidth” due to the complexity of their care and business models.??

Not only are they supporting vulnerable beneficiaries and managing precarious business models but they face many system barriers to scale, such as not being funded by government for the impressive social outcomes they create.???

Creating capacity for collaboration requires addressing some of these barriers, such as advocating for payment by outcomes approaches which is a key focus for social enterprise intermediary White Box Enterprises.???

In the short term - beyond funding the core costs of social enterprises to engage in collaboration – we need to invest in the collaboration itself.?

“We need to resource collaboration to be effective because people will not participate in a collaboration if that collaboration cannot achieve its goals. We have to properly invest in collaboration and pay what it takes.”- Jess Moore, CEO of Social Enterprise Australia?

3. Invest in social enterprise networks??

Rather than just investing in building sustainable business models we need to invest in enabling social enterprises to build impact networks and cross-sector collaborations.??

?As Bec Scott, Co-Founder and CEO of STREAT shared, “Scale isn’t about looking around and seeing lots and lots of high rises with single organisations in them - it is about building at a community level and neighbourhood level. Most of us are scaling our social change through social capital, not financial capital.”?

Jess Moore, CEO of Social Enterprise Australia agreed, “We need to create infrastructure for knowledge and learning so that we not only learn individually within our organisations but also share learning from our organisations and learn together as a sector.”?

Ultimately, we need to think beyond “organisational” boundaries and “hub and spoke” models of intermediation to supporting the development of impact networks and communities of practice to share knowledge effectively.?

4. Shift our mindsets and ways of working?

A new report, Systems mindsets & Practice for Social Enterprise, by Griffith University’s Yunus Centre, states: “Priority for the social enterprise sector over the coming years will be to ensure that development strategies include a focus on the infrastructures that nurture relationships between enterprises, between enterprises and other stakeholders, and between the social enterprise sector and other sectors working to shift the major systemic challenges of our times.”?

In practical terms for funders, taking a systems view must go beyond funding the elements (social enterprises) and relationships (networks) in a system.? We need to gain a deeper understanding of our role as funders in the social enterprise ecosystem to contribute to a more collaborative (not competitive) sector.?

The best way to do this is to fund together and in partnership with social enterprises, as it is through working alongside social enterprise and others in the system that we learn new perspectives, ways of working and are able to align our collective efforts for lasting change.??

Catalyst 2030 have developed a list of funding practices for systems change that reinforce these insights and include:?

• Give multi-year, unrestricted funding?
• Invest in capacity building?
• Fund networks?
• Build and share power?
• Collaborate with other funders?

So if social enterprises are the gardeners who are planting the seeds for a positive future let’s all get practiced at getting our own hands dirty at the grassroots level of change, but also zoom out together to understand the broader ecosystem and interrelationships and how we can work better together to ensure a healthy and productive environment for positive change.?

-----------------------------------------------------------------------------------------------------------

Sally McGeoch is a scholar-practitioner passionate about the role of Work Integration Social Enterprises (WISE) in creating a more inclusive and sustainable society.?She is a Senior Advisor at Westpac Foundation, a philanthropic organisation with a mission to help WISEs create 10,000 jobs for vulnerable Australians by 2030.

In the past few years, the Foundation has increasingly focused on not only funding WISEs to grow and scale but has also sought to build the collaborative capacity and evidence base within the sector to help address systems barriers to scale.?Sally is also a practice-based PhD candidate at the Centre for Social Impact Swinburne, researching the role of cross-sector collaboration in supporting WISEs to scale.?

She is presenting insights from her early PhD research insights at the Social Enterprise World Forum’s?Academic Symposium on September 27.???