Human Resources Committee on Nov. 21st, 2006

[The Chair, Conservative, Dean Allison]

Pursuant to Standing Order 108(2), our study on the social economy initiative will commence.

I just want to take this time to thank our witnesses for being here today as we have a meeting on this important issue.

We're going to move through some of the working groups first, and we're going to go to the department last.

Ms. Mennie, I know you have to leave at noon. I'll just mention that to the other members. In case they want to question you, they can try to get that into the first round, if that sounds okay.

I do want to welcome Mr. LePage out in Edmonton, and thank him for joining us via teleconference today.

You'll have seven minutes each to present, and then we'll have one round of seven minutes, followed by other rounds of five minutes of questions and answers. We'll try to keep to those limits, because we have five groups that have to present. Do your best, and if you can't get it all in, hopefully we'll cover it in the questions.

We're going to start with Ms. Neamtan.

[Nancy Neamtan, President and Chief Executive Officer, Social Economy Working Group]

I have some documents to distribute.

[The Chair, Conservative, Dean Allison]

We'll have the clerk pick those up and distribute them.

[Nancy Neamtan]

I will be making my presentation in French. Is that all right?

Thank you for your invitation.

First, I will be talking about the social economy in Quebec, which is growing quickly not only in Quebec and Canada but in other parts of the world as well. Last week, we organized the Sommet de l'économie sociale et solidaire, a summit on the social economy, which drew 650 leaders from all the regions of Quebec, along with people from 20 different countries, representing every continent. The social economy is a notion quickly taking hold in Europe, Latin America, Africa, Asia and Australia.

The Chantier de l'économie sociale, the organization I represent is a coalition of networks working together to promote the social economy, encourage its development and ensure the collaboration and representation of collective entrepreneurship. The social economy is not a new concept. People familiar with Quebec history will remember that, 100 years ago, Alphonse et Dorimène Desjardins founded the first caisse populaire, or credit union. At the time, they were part of Montreal's social economy.

Today, the social economy has a place in many of Quebec's industries, including tourism, culture, housing, agriculture, integration into the workplace, adapted businesses that hire disabled people, daycare, homecare for seniors, recycling, new technologies, fair trade, community media and many more.

What are the characteristics of a social economy enterprise? It is an enterprise that emerges from a collective process and is rooted in the economy. In other words, it is a cooperative or non-profit business, a value-added business that considers people and sustainable development to have primacy over capital, and that is financially viable but also socially profitable. Lastly, a social economy enterprise — and there are many in our society — that provides an environment conducive to social innovation.

In Quebec, the economic power of collective enterprises is a key factor in the economy. There are over 6,500 collective enterprises, excluding large financial and agricultural cooperatives as well as community organizations in the non-commercial sector, which the rest of Canada calls the volunteer sector. In all, those enterprises generate $4.3 billion in annual sales.

They are also businesses that last. Investment experience in social economy enterprises, as well as a number of studies, have shown that social economy enterprises have a 65 % five-year survival rate, compared to 35 % for private businesses.

Why do social economy enterprises last longer than traditional small and medium-sized enterprises? Because they have deep roots in the community, and because they are established as networks and thus have support. Moreover, over the years, public policy has adapted to the realities of the social economy.

It is important for elected officials and for all stakeholders and members of society to understand the role that the social economy plays in revitalizing neighbourhoods and villages. The social economy is a natural partner for municipalities because it makes an important contribution to community development. It makes it possible to provide a wide range of services at all stages of life, including perinatal services, daycare, recreation, public transit, home care for the elderly, and funeral cooperatives.

The social economy also plays an important role within communities in the exploitation of local resources through forestry and agricultural cooperatives, recycling businesses, and cultural expression. It enables a collective response to social and material needs both locally and regionally, through such things as housing coops, school cooperatives, access through information through community media, solidarity financing, and so on.

It plays a role in social and professional insertion and integration, in creating permanent jobs for marginalized groups, such as disabled people and young people with problems, to mention just two. Therefore, it contributes to the dynamics of community economic development.

How much time do I have left?

[The Chair, Conservative, Dean Allison]

You have two and a half minutes.

[Nancy Neamtan]

Very well.

In conclusion, it is important to know that the Government of Canada has established an initiative that has had an extremely positive impact in Quebec. Since the initiative has worked well in Quebec, it could be extended to other parts of Canada.

The Government of Canada is about to announce a contribution to the Fiducie du Chantier de l'économie sociale. At present, we are waiting for the official announcement by our minister. The federal government's contribution has made it possible to raise other funding, including $12 million from the Fonds de solidarité de la FTQ, $8 million from Fondaction, which are pension funds, $10 million from Investissement Québec, and $8 million from other private investors that will be collected next year.

Through its regional agency, the government has contributed to strengthening regional and sectorial networks through a capacity-building program. It also contributes to research and development, which are very important in every sector of the economy. It is also opening up programs designed for SMEs to collective enterprise.

Thus, the Government of Canada has already shown Quebec that it can and will help. This is deeply appreciated. We are here to see how we can continue that cooperative partnership which has contributed significantly to economic and social developments in Quebec.

Thank you.

[The Chair, Conservative, Dean Allison]

That was very nicely done. You packed a lot of information into seven minutes.

We're going to move to Ms. Hunter, please.

[Carol Hunter, Executive Director, Canadian Co-operative Association]

Thank you.

My name is Carol Hunter and I am the executive director of the Canadian Co-operative Association. CCA is the umbrella organization representing co-operatives across Canada. Our organization includes provincial associations, credit unions and financial co-ops, agricultural, consumer, as well as service sector co-operatives. A complete list of our members is included at the end of our brief, which is here if the clerk wants to take it.

Co-operatives and credit unions in Canada have combined assets of over $225 billion and 155,000 employees. There are over 9,000 co-operatives, credit unions, and caisses populaires across the country, providing services and products to over 11 million Canadians.

Canada has one of the highest proportions of co-op membership in the world; 40% of Canadians are members of at least one co-op. In Quebec, co-op membership stands at 70% of the population, and in Alberta it is 65%. Over 70,000 Canadians serve as volunteers on the boards of co-ops and credit unions.

World-wide, close to one billion people are members of co-operatives, and the global movement of co-operatives has always seen itself as part of the social economy. The European Union names co-operatives, mutual societies, associations, foundations, and social enterprises as the major elements of the social economy.

Whether it is called the social economy, social enterprise development, or community enterprise, these businesses are all locally owned and democratically controlled. They put service to the community rather than profit maximization to shareholders as their raîson d'être. They are an important third leg of the economy, along with the private and public sector of our mixed economy.

While we are pleased that Quebec has received substantial federal government investments under the partial roll-out of the social economy initiative, we are all concerned that this national program has not been rolled out across the rest of the country. We believe that there is still a major need for such a program to help with social economy enterprise start-up and growth, and in this short presentation we will explain why.

The social economy has been, for many years now, part of the policy landscape of the European Union and its member countries. And for ten years now, as last week's celebration of the tenth anniversary in Montreal showed, the social economy is part of the Quebec landscape as well. We argue that the social economy is growing in Canada and around the world. Why then should the federal government not support programs that can help social or community enterprises to grow better, faster, and in every region of the country?

Why are social economy enterprises an important part of the solution to key policy drivers? The development of the social economy can help provide some of the answers to the issues raised by some of the crucial policy drivers of our day.

First, on globalization, the world economies are becoming increasingly intertwined. The traditional large private corporations can change the location of ownership, control, and location of jobs overnight. Social economy enterprises, from co-operatives to non-profits, however, are rooted in their communities. Jobs and services stay there and these enterprises reinvest their surpluses in our communities.

Second, on the environment, while climate change and environmental concerns are at the forefront of the concerns of Canadians, social economy enterprises, such as renewable energy co-operatives, whether ethanol or wind, can help give communities a real role in doing something about the environment. Through the federal agricultural co-operative development initiative, CCA is helping new producer co-ops get started in this area.

Third is accountability, transparency, democratization, and participation. In Canada and around the world, there is growing pressure to see our institutions implementing these principles to the fullest degree. In the business world, this is equally true. Social enterprises, as democratic and locally rooted businesses, can provide the framework for communities to really own and control their future.

Fourth is poverty and exclusion. Canada still has too high a poverty rate of roughly one in six, and this rate is more than double for aboriginal communities and visible minority groups, and very high for people with disabilities. Social enterprises can allow marginalized peoples to participate more fully in our economic development and better share in our success as a country.

And the last policy driver is an aging workforce. As our workforce ages at a dramatic rate, it is crucial for us to draw on all of the groups in our society, from inner city youth to rural communities that are not presently fully participating in the workforce. Social economy enterprises can provide the right tools for workforce training and skills development and act in areas where the traditional private sector will not venture.

We'd like to speak now to what the federal involvement can do. We believe that the federal government should help social enterprises to get started and to grow, because by providing short-term and start-up help to social enterprises, dependence on EI and social assistance is reduced, as well as the need for ongoing long-term government support. Helping people to develop the self-help institutions that can soon function without government aid is a smart government policy.

Second, while governments have spent and continue to spend more money supporting individual and private sector entrepreneurs and entrepreneurship, a level playing field argument means that other business models, such as community-owned businesses, should also be supported and nurtured.

Third, federal government funds can help leverage much greater funds from provincial governments and other sources, as the Quebec example shows, where some $22 million in federal funds is leveraging some $30 million from other sources.

Finally, the federal government can demonstrate leadership by setting an example for provinces and cities that have not yet begun to help the social economy sector.

What kinds of programs are needed? The CCA believes we need a menu of federal government programs that include six components. First, develop social enterprise technical assistance and support for feasibility studies and training. Second, provide patient capital, large sums of long-term capital funding that can help leverage funding from other sources. Third, open up all existing federal government programs, from training to small business programs, to include help for social economy enterprises. Fourth, stimulate joint partnerships with the provinces and cities in a social economy program. Fifth, develop tax credit incentive investment programs that encourage individuals to invest in co-operative development. Finally, continue and expand existing programs such as the cooperative development initiative, as well as the newly launched agricultural co-op development initiative.

Canada is a rich country that prides itself on organizational diversity, a mixed economy, inclusiveness, and entrepreneurial innovation. A social economy initiative or a community enterprise partnership, whichever name we want to give it, would help to stimulate local solutions to job creation, the provision of community services, and above all, mutual self-help.

Thank you for your attention.

[The Chair, Conservative, Dean Allison]

Thank you, Ms. Hunter, for your presentation.

We'll now move to our videoconference.

Mr. LePage, I believe you're out in Edmonton today.

[David LePage, Program Manager, Enterprising Non-Profits Program]

Yes, we're actually doing a project with the rural secretariat, presenting on social enterprise to local public servants and non-profits.

Thank you very much for the honour to present today to you. As you know, I represent Canadian Community Economic Development Network, CCEDNet, which is a national membership organization of over 650 members representing 3,000 networked organizations across the country. CCEDNet works with these organizations in order to strengthen Canadian communities using community economic development principles, an integrated model joining social and economic results.

When we view the economy as a whole, we look at it as having three sectors. One sector is the public sector, which is government-owned and government-operated businesses and systems. The other is the private sector, which is the entrepreneurs in the private sector, the corporations, and the partnerships. The third is the social economy, which is the assets and the enterprises used to generate both social and economic benefits. The engines of the social economy are the credit unions, the cooperatives, and the social enterprises.

The part I would like to focus on for the next couple of minutes to demonstrate its effectiveness in strengthening communities is social enterprise. When we talk about a social enterprise, we're talking about a non-profit organization that owns and operates a business for the dual purposes of not only generating income but also achieving a social and/or environmental purpose.

In the tradition return-on-investment model, there has been a separation between the non-profit sector, which has looked for a social return on investment, versus the private sector, which has looked strictly at a financial return on investment. A social enterprise looks for a blended return on investment; both the social and the financial returns are considered basic objectives.

There are three basic purposes for social enterprises. One is to enhance the financial sustainability of non-profits. A very good example of that is Atira Property Management in Vancouver. It is a for-profit commercial property management entity that's owned by a non-profit. The profits from that corporation go back to the non-profit to provide housing for women in need.

There is creation of employment, an example being Potluck Catering in the downtown eastside, which employs 30 individuals through their non-profit to their social enterprise, 15 of those individuals coming off welfare or out of homelessness situations.

The third purpose is to promote the mission of the non-profit, an example being Eco-Lumber Co-op in B.C.

It is not just in British Columbia. We can look at the employment in Red Deer, Alberta, for persons with disabilities in the bottle depots, or in Lake Lenore, where the grocery store and the greenhouse actually saved that small 300-person community from losing its grocery store. In the inner city of Winnipeg, Inner City Renovation employs aboriginals to work on the actual physical rehabilitation of the neighbourhood.

We believe there are four points within the potential role of government to support social enterprise and the social economy, the first being the creation of an enabling environment with a supportive regulatory and policy environment for the social economy, including the charitable rules and regulations that support social economy activity.

The second is enterprise development support, which is support along an entire enterprise development path to support the enterprise search, the transition, and the beginning of social enterprises. That includes supporting learning and networking among the participants.

We believe another key support for the social economy is an examination and adjustment of procurement policies in the federal government, so that procurement policies support a blended return on investment and support contracting policies and procedures that will break down contracts to allow smaller social-enterprise and social-economy businesses, along with SMEs, to have access to federal procurement.

The fourth is access to capital. This includes both patient capital and investment credits for the private sector investors interested in partnering with the social economy.

We believe that strengthening Canadian communities is a partnership of government, the private sector, and the social economy, and the stronger we make that social economy, the stronger we'll make Canadian communities.

Thank you.

[The Chair, Conservative, Dean Allison]

Thank you, Mr. LePage, for that presentation.

We're going to move now to our next presenter, Mr. Savage. You have seven minutes, sir.

[Sylvain Savage, Director , Improvement, Service Delivery and Management Practices, Economic Development Agency of Canada for the Regions of Quebec]

I was not expecting to make a presentation as such, but I will talk to you about initiatives that Canada Economic Development for Quebec Regions has implemented, the ones that Nancy mentioned earlier.

In fact, we had planned to put in place three initiatives as of April 2004. One was a capacity-building initiative for organizations in the social economy, for which we had set aside $5 million. If we take out the operating budget for this EDAC initiative, we can say we invested $4.8 million between April 2005 and today.

Our second initiative plan was to establish a capital fund for social economy enterprises in Quebec. We asked social economy stakeholders in Quebec, through a competition process, to suggest innovative ways of implementing investment funds for social economy enterprises. After the competition, a jury panel established for that purpose determined that the Chantier de l'économie sociale had put forward the best proposal.

Since then, we have been negotiating with the Chantier de l'économie sociale and other financial partners, such as the Fonds de solidarité FTQ and Fondaction. The government of Quebec joined us at the last spring budget. These talks are now concluded, and we are very proud of the work accomplished so far.

A third initiative had to be taken into account and implemented—ensuring that social economy enterprises in Quebec had better access to our regular programs. Even though social economy enterprises have had access to our programs since 2004, we thought it would be a good idea to promote the programs. This was a very successful effort. In fact, the contribution we are now making to social economy enterprises is two or even three times what it was in previous years.

That is what we have accomplished so far, and we are quite satisfied. All amounts intended for the capacity-building initiative were committed in the first year. Next winter, we plan to assess the results by looking at the impact on the economy, job creation and other facts.

For example, we provided assistance to the Société de développement Angus,which enabled the revitalization of an entire neighbourhood in eastern Montreal. We have a long-standing partnership with Angus, and are very proud of it.

In addition, the Fédération québécoise des coopératives forestières asked us for assistance in planing and implementing a strategy to help forest cooperatives in Quebec, to give them the tools to meet a number of challenges. That request coincided with the softwood lumber crisis.

Ms. Neamtan mentioned a number of social economy sectors in Quebec. We are proud to say that we have been able to cover almost all those sectors, including community media, environment, manufacturing businesses and adapted businesses that hire disabled people.

We have been able to support many projects.

[The Chair, Conservative, Dean Allison]

Thank you, Mr. Savage, for that overview.

Ms. Mennie, do you have a presentation?

[Johanne Mennie, Deputy Director, Community Development and Partnerships Directorate, Department of Human Resources and Social Development]

Yes, I do.

[The Chair, Conservative, Dean Allison]

Okay, great. You have seven minutes.

[Johanne Mennie]

Good morning, Mr. Chairman. Mesdames et messieurs, membres du comité, bonjour.

My name is Johanne Mennie. I am deputy director of policy development in the Community Development and Partnerships Directorate at Human Resources and Social Development Canada.

My presentation will be in bilingual format. I will be switching from French to English along the way. We have, however, provided you with a full and complete set of an English presentation and a French presentation, as well as the bilingual presentation.

The social economy is an entrepreneurial social movement. Social enterprises are diverse, and the terminology differs across the country. They include co-operatives, mutuals, enterprising non-profits, mission- based enterprises, and community economic development organizations.

What social enterprises all have in common is that they reinvest the entirety of their profits in the community or back into the enterprise itself. Put simply, a social enterprise is first and foremost a business. This means it is engaged in some form of trading, but it trades primarily to support social, environmental, or cultural objectives.

In 2004 the Government of Canada committed funding, to be delivered through the regional development agencies and the Social Sciences and Humanities Research Council, to support those engaged in this entrepreneurial social movement.

Funding has been provided to strengthen strategic planning and capacity in social economy enterprises, as well as to strengthen the financing of patient capital loans.

The funding was provided to three regional development agencies: the Atlantic Canada Opportunities Agency, the Department of Western Economic Diversification, and the Economic Development Agency of Canada for the Regions of Quebec, as well as to Industry Canada's FedNor initiative.

The Social Sciences and Humanities Research Council has a mandate based on community research related to the social economy.

Human Resources and Social Development Canada—Social Development Canada, at the time—provided policy leadership. This work included the development of a policy framework and strategy to guide longer-term federal actions to support the social economy.

From a policy perspective, HRSDC has undertaken a number of activities, including finding out what other countries were doing in the social economy and what kind of policy, regulatory, and financial environment was put in place to support social economy-type enterprises. We also gathered a broad base of evidence of what was happening in Canada and about the issues, challenges, and successes faced by social enterprises.

What we discovered was that there were a large number of social enterprises engaged in a wide range of activities that include such things as job creation, workforce integration, urban regeneration, environmental services, child care and home care, housing services, and many other endeavours that improve the quality of life.

These enterprises contribute to increasing employment, producing new products and services, engaging in innovative methods of service delivery, enhancing social inclusion, strengthening community development, and increasing productivity and competitiveness.

For example, The Cleaning Solution, of Vancouver, British Columbia provides high-quality, environmentally friendly cleaning solutions while offering meaningful employment opportunities in the janitorial field for individuals living with mental illness. After just one year in operation, The Cleaning Solution has achieved a 500% increase in revenues, has more than doubled the number of individuals with mental illness it employs, and has almost doubled the number of hours worked per month per employee. Over this period, the average monthly wage of employees, over and above their disability benefits, increased by almost 80%.

The next example is the Saskatchewan Native Theatre Company, located in Saskatoon, which produces and directs performances that promote a positive image of Aboriginal people, as well as entertain the community.

The SNTC has extended its programming to other areas, including working with young so-called at-risk Aboriginal youth. For example, under one of its programs, the SNTC hires dozens of young Aboriginals for eight months to teach them how to create, produce and act in a play depicting issues important to them, such as the impact of crystal meth on Aboriginal youth.

Through this method, young Aboriginals can develop fresh perspectives on Aboriginal culture, accumulate school credits and acquire significant work experience, while having access to support and educational services. It also boosts their self-confidence, hopes develops their self-esteem and helps them set new personal goals.

Our research findings suggest that social enterprises must overcome a number of challenges in order to develop and succeed, particularly when starting up, growing, or expanding. One of the most significant challenges is in the realm of financing.

Social enterprises lack appropriate financing depending on the stage they are at in their life cycle. This means tackling barriers that might prevent investors from investing in social enterprises, or social enterprises from seeking appropriate financing.

Another challenge for social economy organizations relates to proper skills development of social enterprise managers and board members. Many of the challenges facing social enterprises are more complex because they deliver both a financial and a social, cultural, or environmental bottom line. They therefore need access to appropriate training, support, and information to maximize both their business performance and their social impact.

A third barrier relates to the lack of baseline data about the social enterprise sector: its size, characteristics, activities, and so on.

Raising awareness, providing examples of and sharing good practices of innovative and entrepreneurial models could attract new inputs, customers and funding.

At this time we are continuing to assess how social enterprises may support areas such as child care, integration of immigrants, safe communities, labour market integration of multi-barriered individuals and persons with disabilities, and economic adjustment. We are continuing to advance our understanding of tool kits on financing, accounting, and legal issues that might assist social enterprises to improve the efficiency, transparency, and accountability of their organizations; tools to measure and report on the social and financial impacts of investments by social enterprises; as well as ways to inform Canadians in rural, and immigrant and refugee communities about the availability and viability of the social enterprise co-operative model.

Some examples of social economy organizations are attached to my statement that was distributed earlier.

Thank you, Mr. Chairman.

Thank you, ladies and gentlemen of the committee.

[The Chair, Conservative, Dean Allison]

Thank you very much, Ms. Mennie.

We're going to start our first round with Ms. Brown. I just remind everyone again, Ms. Mennie is with us only until twelve. If there are any questions for her, you'll probably want to tackle them in the first round.

Ms. Brown, go ahead for seven minutes, please.

[Bonnie Brown, Liberal, Oakville, ON]

Thank you, Mr. Chairman.

Thank you to the presenters both present and on the screen. I want to thank you so much for the examples you have given of these social economy models that have been described both verbally and on paper for us.

I don't think I'm unlike a lot of Canadians in having this idea of the charitable sector, the for-profit sector, and the non-profit sector, but this is kind of a blurring of the traditional models most of us have in our minds. To have this described for us with a set of examples of projects that are working is most helpful and also shows us the wide range of activities that are taking place under this model. Therefore, it sounds to me like we can't afford to do without all these jobs you people are creating in your particular agencies.

I want to go to Ms. Mennie right away. I understand that the 2004 federal budget allocated $132 million to the social economy initiative, of which $100 million was for the establishment of patient capital funds, and $15 million over five years--or $3 million a year--was for research related to the social economy. I want Ms. Mennie to tell me where the social economy initiative is at this point. What was the budget for 2006-2007? What has happened to the $100 million of patient capital funds? One of the other presenters mentioned access to capital as one of the issues in getting some of these organizations started or maybe an expansion started.

Ms. Mennie, can you tell me about the numbers?

[Johanne Mennie]

These programs are the responsibility of the regional development agencies, FedNor, Industry Canada, and the Social Sciences and Humanities Research Council. I'm not really in a position to answer questions related to the actual rollout of the funds with respect to the 2004 initiatives.

[Bonnie Brown, Liberal, Oakville, ON]

How convenient, Mr. Chairman.

Is it not true that the Minister of HRSD is the person in whose budget this $132 million was placed in 2004?

[Johanne Mennie]

No. Actually HRSDC received no funding at all through the 2004 initiative. The 2004 initiative spread the moneys to each of the regional development agencies as well as to the Social Sciences and Humanities Research Council and Industry Canada and FedNor. We received no moneys.

[Bonnie Brown, Liberal, Oakville, ON]

So you're responsible for the policy development around the social economy initiative but you don't have one cent to implement the policies that you can get the officials and the minister to agree to. Is that correct?

[Johanne Mennie]

We received the mandate to be responsible for developing a policy framework for the social economy. The social economy initiatives were the ones announced in 2004, and you're correct in saying that we received no funding through that initiative.

[Bonnie Brown, Liberal, Oakville, ON]

I'm glad I asked these questions, Mr. Chairman, because it seems to me there's a serious disconnect. It seems to me that the department whose officials develop policy should also be the department in charge of the money; otherwise, there's a terrible lack of accountability.

What policy framework are the regional development agencies operating under right now? Is it just their own regional development thrust? If they're administering all these funds, what is their policy framework?

[Johanne Mennie]

I believe I should defer that question to one of my colleagues from one of the agencies. He could answer that question probably better than I can.