From Charity to Social Enterprise - The first Philanthropy Impact event in The Netherlands
This event report is written by Luuk van Term, Co-Founder of Beter Geven.
Philanthropy Impact would like to thank Van Lanschot for generously hosting this roundtable and our Committee: Jacqueline Detiger, Beter Geven; Andrew Mackay, Van Lanschot; Jasmijn Melse, ABNAMRO MeesPierson for their support in producing this event.
While social enterprises are mainstream in the UK, in The Netherlands’ local organizations, foundations, financial institutions and intermediates are trying to catch up. “Our clients are more and more interested in social investing”, stated CFO Constant Korthout of Van Lanschot Bankers in his introduction. And so around fifty interested people gathered at the beautiful office of Van Lanschot at Lange Voorhout in The Hague to hear more about turning charities into social enterprises. What can the Dutch learn from the British?
What the market needs
In his introduction HRH Prince Constantijn mentioned that the Netherlands is 25th on the list of social ventures worldwide. “It is important to talk about entrepreneurs when addressing global challenges”, he stated. “Regarding migration and refugee policy we need to be more proactive and be more positive. We should look at the abilities of refugees, and involve businesses and cities.”
Prince Constantijn was chairman of the board of The Hague Process on Refugees and Migration, an independent, not-for-profit organization, which brings together stakeholders to seek solutions to migration and refugee challenges. In recent years its activities developed from advocacy to network to acting, because the organization asked itself: what are our assets, are we still thought leaders? “We learned that we should be more concrete. What skills are needed in The Netherlands? How can we use capabilities of migrants in cities? We needed to know what the market wanted.” This switch in mindset brought Prince Constantijn to conclude: “It is a journey that more charities should face: have more impact, be more sustainable and be more scalable. What model is applicable?”
Regarding their activities the managing director of The Hague Process, Nava Hinrichs, saw a vacuum in needs: businesses should have specific skills, migrants need to be educated. Businesses get better matched workers, migrants are placed in jobs and cities have less unemployment and better net economic growth. Hinrichs stressed that the development from charity to social enterprise is still in progress. “In this process, the organization learned that it needed to be very flexible and patient. Funding has to come from foundations, government, and the private sector. So we had to develop a business plan.”
Social investment more crucial
Cliff Prior is CEO of Big Society Capital, a financial institution with a social mission, set up to help grow the social investment market. With a budget of £600 million, its focus is to develop social enterprises. “It is easier to finance the work of charities”, Prior noticed. “However, it is possible to look for other solutions. For instance, to create jobs for people leaving prison a community asset fund was set up. Big Society Capital invested in it and now there are fifty comparable funds for over forty projects. But there should be co-finance.”
Big Society Capital is active in a strong civil society. The UK is third on the list of social entrepreneurs. “The biggest problem we face is that although strong start-up investment is always needed, ‘social angels’ are now needed even harder. But it takes time to create a social enterprise culture. Social investment will become more crucial than institutional investment.”
Impact and profit
Noa Lodeizen told her story about Young in Prison, a project that was initiated because of a failing prison system. It is focussed on integration and active in six countries. People who leave prison get the opportunity to become an entrepreneur. “But the impact is much higher than expected: local villages want these young entrepreneurs.” To further develop an investor is needed that believes in impact first. Business coaching is needed as well.
Helmer Schukken is a business consultant at Social Impact Ventures NL, a new investment fund in The Netherlands. It is € 40 million venture fund for Dutch-based social enterprises in the scale-up phase. Schukken believes in the power of entrepreneurship. “Any business should focus on impact and profit. Profit should not be used for other things: the management should focus on one thing only.” A good example of a charity that grew into a business is 1% Club, an organization that mobilises time and knowledge for do-good projects. They wanted to be less dependent on subsidies and had the ambition to attract capital. So they developed from direct crowdsourcing to corporate/municipal crowdsourcing. One of the lessons learned was that turning into a social enterprise has to make sense. You have to explain it well and should be aware that timing of pivot and attracting investments are fiscally delicate.
Several tools to solve social problems
When asked if The Hague Process is targeted at Europe only, Prince Constantijn replied that that is definitely not the case. “It is about good businesses, wherever in the world. In my opinion development support could be more sustainable if invested in businesses instead of financed through grants.” This triggered Marjan Sax, an experienced philanthropy consultant in The Netherlands. Aren’t we looking down at grants? After all, not all NGO's are able to make money. Schukken admitted that not every issue can be solved in a commercial way. But maybe a hybrid solution can be found and grants can be very useful. “Some businesses start with subsidies”, Prince Constantijn complemented. “But we need to look for other ways to get income.” Prior also cherishes other means: “All tools should together be used to solve social problems: grants, subsidies and investments.”
Laura van Deelen of the Dutch Hearing Foundation gave an example of how knowledge of a charity can be turned into a business model. The production of a digital hearing test was positioned outside the foundation. That way business could be started, but it took a shift in thinking. Fiscal lawyer Ineke Koele claimed that there is no specific legal vehicle for social enterprises. Shouldn't public interest be first and foremost? Cliff Prior responded that the concept of social enterprise works all over the world. You just have to look at the country’s culture what incorporation suits best. Prince Constantijn stressed that public interest is not the same as non-profit interest. “You have to find a mechanism which is profitable for all, as for instance Tesla did. Our mindset is supply driven, but we should think more demand driven: what value do you add for your customers?” And as Nava Hinrichs put it: “You need to step outside your comfort zone.”