Human Resources Committee on March 12th, 2015

[The Chair, Conservative, Phil McColeman]

Would you like to challenge the chair?

[Marie-Claude Morin, NDP, Saint-Hyacinthe—Bagot, QC]

No, absolutely not. It's okay.

[The Chair, Conservative, Phil McColeman]

Then please remain silent. You don't need to have a conversation while I'm speaking about this situation.

I am going to say that there's a certain sensitivity I have to this subject matter, as you know, and I don't want it to go off the rails in terms of accusatory comments one way or the other. I believe you are heading in a good direction, Mr. Butt, in terms of your comparison, but let's just make sure that we use our choice of descriptions in a diplomatic manner that is not meant to inflame.

[Brad Butt, Conservative, Mississauga—Streetsville, ON]

I apologize, Mr. Chair. That certainly wasn't my intention. My intention was to make sure that we understand that social finance is not just about a profit driven back to one entity that may invest in social finance. Many social finance models break even. Sometimes they lose money. They are based on communities coming together, organizations coming together for a better social purpose.

A lot of the testimony from the witnesses, with all the respect, Mr. Chair, has been that social finance doesn't work unless there is a massive profit that accrues to some organization that has invested in it. My point is that this is not the case in all social finance models. That was my point. That's why I was asking about United Way. Some of these other.... I know my local food bank is very involved in social finance. It's leveraging private sector dollars and so on. Are those not successful examples of social finance, where the issue isn't about how much money an investor is making, but about a better social purpose outcome at the end of the day?

Are those not projects you support?

[Andrew McNeill]

I think we are probably operating under very different definitions of social finance. The definition of social finance that both Ms. Young and I have come here with, and that I think is widely understood, is that people accept a reduced return on their investment—and I've used the phrase “reduced return” with the deepest respect a number of times in my presentation—in exchange for accomplishing a social good. There is still a reduced return. What you are describing is something that obviously we fully support. Components in NUPGE are involved in United Way, as you pointed out, and support food banks in communities across the country. That would be charity, which involves no return at all on investment. It is a straight donation.

If you consider charity to be a social investment and you are asking us whether we support charity or the aspect of social investment that includes charity, yes, we support charity, as far as NUPGE is concerned, and I suspect CUPE does as well.

[The Chair, Conservative, Phil McColeman]

Are you yielding your time?

[Brad Butt, Conservative, Mississauga—Streetsville, ON]

Yes, I will yield my time.

[The Chair, Conservative, Phil McColeman]

We have room then for one more round of questioning.

Madam Groguhé, go ahead.

[Sadia Groguhé, NDP, Saint-Lambert, QC]

Thank you, Mr. Chair.

I would like to clarify some aspects because I think it is important to do so.

I think the purpose of this study is also to allow us to better understand what social finance is and to have different positions. I think it is important that we get something extra on the issue.

At any rate, I would like to better understand the issue. Can you explain some of the things related to the venture-capital method? When you talk about that issue, you draw attention to performance as well. I would like to get an idea of the relationship between the possibility of performance provided by social finance and the venture-capital method. If there are risks, who needs to take them?

Ms. Young, what do you think about that?

[Margot Young]

It is confusing to try to understand it, because the theory of how the social impact bond is going to work is that the risk lies with the person raising the money, like Goldman Sachs, for example. Because they are raising this money, they expect a return on their investment. They are behind it. It is seen as a new way to invest in the public sector, but as Andrew correctly points out, because these are getting off to a bit of a rocky start, it's actually the charitable organizations themselves that are guaranteeing them. They are the ones that are taking the risk for this.

The people who are creating the bond are making money, but the risk is lying either with the charitable organization or with the government, if indeed it fails. So far, the model looks like there is almost no risk to the financer, and all the risk lies with the people who are supposed to be getting the assistance, i.e., the charity or the government that wants the desired outcome. The other thing is the amount of money they are able to make, which is raising the cost of the public service. Instead of looking for ways they can make money.... A 12% return in this day and age is a very high return on investment for something that could have been done more cheaply by the not-for-profit or public sector.

[Sadia Groguhé, NDP, Saint-Lambert, QC]

With other witnesses, we talked about the assessment of the model and the objectives that we hope to achieve through social finance. However, this assessment seems to pose a problem.

Do you think it is possible to have an assessment and, if so, what should we do to make sure that it generates conclusive data about the objectives being achieved?

Mr. McNeill, go ahead.

[Andrew McNeill]

I think it would be incredibly difficult just for a simple social impact bond by the Peterborough project, which involved trying to reduce recidivism among people who had been released from short sentences. You have so many different factors that can impact it. If you happen to have a social impact bond project to reduce recidivism that starts up just after there's been a major downturn in the economy, then obviously it's going to be harder for people coming out of prison to find work. That's going to have an impact on the number of people who are reconvicted, and that's for a very simple project.

If you look at most social problems, there are so many different factors that come into play, you end up with an incredibly difficult model if you actually want to measure whether that specific project had an impact. For most social scientists, to try to measure the influence of particular factors, they use control groups and it can be a massive undertaking. You would essentially be having to do a major social science research project to measure the effectiveness of every single social finance project.

[The Chair, Conservative, Phil McColeman]

Thank you.

Now, that ends our first hour of witnesses.

I want to thank the witnesses for coming to Ottawa and sharing your views with us here today at committee.

We will take a short recess while we get our video conference in place for the second round.

[The Chair, Conservative, Phil McColeman]

Welcome back, ladies and gentlemen. We're continuing now with our study to explore the potential of social finance in Canada.

Joining us for our final hour today we have Mr. Steve Cordes, the executive director with Youth Opportunities Unlimited. Appearing with Mr. Cordes we have Ms. Courtney Bain. By way of video conference from Toronto, we have Ms. Gillian Mason, the president of ABC Life Literacy. Also joining us by way of video conference from Waterloo, we have Ms. Debbie Brown, the executive director of Crossing All Bridges Learning Centre in Brantford. Along with Ms. Brown, we have Ms. Sherrie Marshall, the manager of operations at Crossing All Bridges.

How's the weather in Brantford, Debbie?

[Debbie Brown, Executive Director, Crossing All Bridges Learning Centre]

It's lovely and sunny. We didn't even have to wear our coats today.

[The Chair, Conservative, Phil McColeman]

Some of you may know that I have a connection to Brantford.

We will proceed with the witnesses now. Each of your organizations has up to 10 minutes to present your testimony. Let's begin with Mr. Cordes.

You have 10 minutes, sir.

[Steve Cordes, Executive Director, Youth Opportunities Unlimited]

Thank you very much, Mr. Chairman.

I did send in a brief overview on the organization, so you'll have that in front of you, in both languages. I won't speak to what's on there, but I'll give you a very brief overview.

I've been with the organization for just over 30 years now, and Youth Opportunities has been around for 33 years in London, Ontario. For the past 20 years or so, we've carved out some unique space within the social enterprise milieu. That is because a traditional model of Youth Opportunities was to prepare people for work through job placement, workshops, and so on. We found quite some time ago that model did not work very well for folks who had a very high level of need. For example, if you're homeless, especially 20 years ago, with no access to phones or to how an employer would actually contact you if you'd never worked before, you're always behind the eight ball. You're also convincing other folks of what your aptitudes and your abilities might be, but given that the labour market looks for evidence of that, you're not able to demonstrate it.

We set up social enterprises because we really wanted a prop. We wanted a prop that was a functional business, where young people could be prepared to operate that functional business and work within all leadership roles there. That way we're not necessarily preparing them to work based on what they have done before. We can place them in a job setting based on what they want to do, the skill sets they might be interested in acquiring, the aptitudes they think they have, and how we can prepare them for that with some informal training and some formal certifications.

You'll see in front of you the various social enterprises we operate. An office recycling program was our first one. We've had a woodworking shop for almost 20 years as well. We make a line of jams and preserves called Market Quality Preserves, and they sell in our own retail space, as well as in established retailers. Some of you from Ottawa would know Farm Boy. I know its head office is here. Today actually was a big day, because it opened up its second store in London. Farm Boy carries our products within all of its stores, as well as some specialty stuff just in its London stores, all manufactured by young people as part of a training program that is a social enterprise. We also have a café, and I'll let Courtney speak to that shortly. We have a kiosk that operates in Covent Garden Market, in London, Ontario.

All of these are props, because all of these are preparing young people for work by having them do work. For young people with limited education and no work experience, we can actually sit down with them and help them understand what a job market demands of them. When people talk about initiative, showing up on time, having drive, showing some passion and interest in your job, if you've never worked before you don't understand those things. What you do understand is that, if you make a mistake, you get fired. What you understand if you've never worked before, typically, is that it's better to wait and stand and be told what to do, because if you do the wrong thing you'll get fired. Quite honestly, there's a significant disconnect. For us, the social enterprise has been a significant investment in our opportunities to be able to help them understand.

On page 2 of the overview, you'll see the successes we've had. On an annual basis now, we place 71 people through our social enterprises. You'll know from the overview that Youth Opportunities sees about 3,000 people a year. Although social enterprise is a significant part of what we do, of course it's not the key driver in terms of young people accessing Youth Opportunities Unlimited. But I would have to say that, for the high-risk youth and the less-skilled youth, it's certainly the most successful venue by far that we have to engage young people in the job market. You'll see the success rates that are there.

I was here when you were interviewing your earlier witnesses and looking at social returns. We can, I'm sure, talk about those shortly, but you'll see that we measure returns in three different ways. One is around success. You'll see those there; 91% of the young people who go through our program enjoy success through our program.

With earned revenues, for every dollar that's invested from public funds, the organization is actually earning $2 in addition to that. The federal funding right now represents about a third of the investments coming into our social enterprises.

Community impact is a key measurement for us. I've pulled out what I see and what I can share with you briefly as the key significant community impacts. There are certainly much more than that. They translate down into the individual experiences that people have and the community and public investment in Youth Opportunities Unlimited as a result of our social enterprises. Farm Boy is an example of that.

I think I'm going to turn it over to Courtney now, and she can talk a bit about her experiences.

[Courtney Bain, Representative, Youth Opportunities Unlimited]

Thanks.

I'm Courtney. I'm 24, and I've been involved with YOU since I was 18. The journey has been a long road and it wasn't always successful, but YOU didn't give up on me. I started doing the skills training program this September, and I finished in February. Through this time, they gave me the skills that I needed. I had never worked in a kitchen before, and I am leaving this kitchen to manage my own. I am now managing my own local restaurant.

Without YOU, I would probably still be homeless and on social assistance. They gave me the skills that I needed. As Steve was saying earlier, you're allowed to make mistakes in the cafe, and that is a great thing. You know that if you accidentally mess up, it's okay; it's going to be fine. The people are okay with that. That's phenomenal.

Witnessing people coming through the cafe, I would say that eight out of every ten people—other than me—who graduate the cafe have found work elsewhere. Also, it gave me strength to be able to do stuff like this. I didn't like myself a year ago, and now I love my success. I'm not going to be on social assistance, and I see a bright future for myself. A year ago, maybe I didn't even think that I could be successful, and now I'm thinking about public speaking. It's giving me great opportunities. If it could do this much for me, think about how many other people it could help out as well.

I can't preach enough about how much this place has helped me. It really helped out. I learned things like how to do inventory. I learned how to manage. I've trained people. All of this has been through YOU.

When I went to my first day at my new job just this week, I went in there and, just like Steve was saying, I didn't want to mess up. I was just standing around and I wasn't getting the training that I needed on the first day. At YOU, they give you that training. Then on the second day at the new job I felt like, okay, I should just get back in.... I know what I'm doing. I've been in a kitchen. YOU has helped me; I'm fine.

Now I'm stuck. You can talk. I don't know—

[Steve Cordes]

Courtney is whispering to me, so I'll talk. She's never short on words. I don't know what you folks have done to her.

[The Chair, Conservative, Phil McColeman]

I usually give a one-minute warning, but you have two minutes left.

[Steve Cordes]

Thank you, sir.

I'll fill a minute and then turn a minute back to Courtney.

I've had the opportunity in my career to speak at conferences about social enterprise in Canada and the U.S. Actually, think of me as the advance team because I have been over to the U.K. a couple of times and visited social enterprises over there as well, and in various parts of the U.S. There are many different models going on out there.

We've also had the opportunity to host many visits, from Canada, Australia, the U.K., to our cafe. So as you're exploring social finance and social enterprise, I hope you'll think about the other London and come down to the one that's a bit closer to home as well.

There's an awful lot that you can do with social enterprise and social financing. We're big advocates for not all of it being in the not-for-profit sector, but certainly ensuring that you do a significant investment in the not-for-profit sector. Based on all the models I've seen and what I've seen at YOU, I'm quite certain that your returns on the social capital will far exceed what you might get out of the for-profit sector.

Do you have anything to say before...?

[Courtney Bain]

The last thing I want to add in my 30 seconds is that it's hard for homeless people to get better. You find a family within your community, and it's hard to leave that community.

YOU gave me a new community, new people to lean on. I didn't have to rely on my homeless friends anymore, so I could break away, and that was great.

I think that's all.

[The Chair, Conservative, Phil McColeman]

Thank you so much for your testimony.

Now, from Toronto, we'll move on to Ms. Mason, for up to 10 minutes.

[Gillian Mason, President, ABC Life Literacy Canada]

Thank you, Mr. Chair.

Good afternoon, ladies and gentlemen. Thank you very much, Mr. Chairman, for inviting me to speak today. This afternoon I'd like to provide a brief introduction to ABC Life Literacy and the journey that we're on in exploring a social enterprise model for a portion of our business.

Throughout its 25-year history, ABC Life Literacy Canada has operated with a healthy mix of revenue sources, including private, public, and donated dollars. They're all invested in the mission of ensuring that all Canadians have the literacy and essential skills they need to live a fully engaged life.

Following the federal government's decision to adjust and realign the funding for literacy and essential skills last June, ABC has been pursuing an alternative funding model for that portion of its work related to workplace literacy and essential skills training to upskill the Canadian workforce. ABC landed on a model to deliver quality training to workplaces across Canada while testing the appropriateness of a social enterprise model in the workplace and in the literacy and essential skills field. This project, which we call “UP”, which is short for upskill, was launched shortly after the federal government's decision and entirely with the resources of ABC Life Literacy Canada. There is a website that can be found at upskill.ca.

Since that time, and with the support of the McConnell Foundation, a social enterprise coach was hired named Norm Tasevski. He's been coaching ABC on the initiative since. I'm aware that Norm appeared before this committee earlier this week.

ABC decided to pursue a social enterprise business model for UP, as there is a direct correlation between the investment being made and the social impact that will result. Through UP, adults with low literacy develop and strengthen their literacy and essential skills. In addition there is a bottom line return on investment for businesses that engage in workplace literacy and essential skills training. By embedding essential skills training into the workplace we know there is a direct positive impact on the employer's business success, and in turn on the economy. When the workforce is better skilled, more adaptable, and resilient, Canadian competitiveness improves overall.

As a not-for-profit, charitable organization, ABC runs programs and initiatives that have a lasting social impact on literacy levels in Canada. The social enterprise model is a natural fit that supports positive social change while delivering much needed services. It generates the funds necessary to run, at least in part, ABC Life Literacy Canada programs.

Mr. Chair, I'd like to share the real challenges that ABC Life Literacy Canada is facing here and now in pursuing a social enterprise model. There are four that I'd like to highlight this afternoon, although there are many challenges in launching a social enterprise.

The first one I'd like to refer to is the time lag—or what I believe others have called “patient capital”—between the launch of the initiative and revenue generation. As with the launch of of any new business, considerable staff and board time, as well as financial investment, are necessary when launching a social enterprise. That's a time when no revenues are being generated, yet the bills must be paid.

The second challenge I'd like to refer to is learning what the market will and won't pay for. There are some aspects of the business model that the market will not pay for out of the starting gate, but they are critical to the success of the enterprise; for example, awareness building, marketing, and communications costs.

The third challenge is the necessity to create a market where there was none. When governments step away from a cause, those of us left to steward the cause must develop a market for the cause. This is a slow and expensive process. It requires enormous expertise and smart marketing and advertising campaigns in a crowded marketplace.

The fourth challenge I would mention is blending the needs of a mature non-profit entity such as ABC, which has been doing thriving business since 1990, alongside a social enterprise start-up. As you can appreciate, this could be challenging. It requires strong visionary leadership, flexibility among staff and existing partners such as our partnerships with the TD Bank and Great-West Life. It requires a high tolerance for ambiguity. We have strong direction, but when creating a market and servicing it simultaneously, there is much emergent, and therefore, much is unknown and unknowable.

Lastly, it requires responsiveness. As opportunities emerge, ABC has learned, in the words of our coach, to pivot. We must meet all of these challenges while learning what a social enterprise really is, and all for the benefit of Canada and Canadians.

Now, if I may, Mr. Chair, I'd like to speak briefly to the role of government in all of this. In the traditional model, the government plays an important part when partnering with non-profits such as us. Normally, when we're working together with government, we outline and agree to the project outcomes, we establish measurements for success, we execute, and then we report on the project outcomes.

By contrast, when we are investing in a social enterprise, similar to the case with any start-up initiative, while the outcome sought is clear, the measurements for success may evolve over the course of the development. These cannot be established at the outset as the value of the product and service, the pricing, and the customers will all evolve over the life of the venture. As with the start-up of any initiative, the value of the product or service is determined by the market and will be reflective of the product development process in response to what the market will pay for it. These may or may not coincide with our starting assumptions or hypotheses.

For the government to pursue social enterprise models, funding models need to be adapted to allow this innovation to occur. We're also learning that social enterprises are not always a viable alternative to traditional public sector funding, as there are many products and services that corporations are not willing or not yet willing to pay for. We also come up against some deep-seated beliefs that it's not the private sector's responsibility but rather the public sector's to fund skills development.

A challenge to advancing the literacy cause and training is that fingers are immediately pointed at the education system. In my view, that analysis fails to deal with the fact that like it or not, the Canadian workforce is the Canadian workforce, with all its strengths and weaknesses. Too many Canadians are ill-equipped to deal with the ever-changing demands of a 21st century competitive economy.

It's important to remember that ABC was in a position to pursue a social enterprise because we do have a diversified funding base through our donor base and through partnerships and sponsorships. As I mentioned, the TD Bank sponsors our financial literacy program “Money Matters”. HSBC funds our family literacy program, and Great-West Life funds our literacy innovations program.

ABC believes that increasing the literacy skills of all Canadians has far-reaching social impact, and it is work that we cannot afford not to invest in. We're building a society based on an assumption that individuals have the literacy skills of someone who has finished either high school, university, or college. The reality check from the program for the international assessment of adult competencies, the OECD study released last year, is that 40% do not have literacy skills of that level, even if they've finished one of those three educational systems. Our skills quickly become outdated, and we do not have systems in place to ensure lifelong learning.

We are hopeful that governments will continue to be part of this solution since, although there is a strong potential return for workplaces that invest in workplace literacy and essential skills training, there are also many low-literacy populations among more marginalized communities.

In conclusion, Mr. Chair, ABC applauds the work of this committee and the Government of Canada in exploring and developing models of social finance to address our country's pressing issues and challenges. We believe there is an opportunity to leverage and bring more resources to the table through adaptive and alternative resourcing models. Social finance is one tool that can help us respond to Canadian workplace literacy and essential skills challenges. Our experience and research indicate that, without question, workplace literacy holds potential. It is not, however, the right tool or answer to all that must be addressed.

As we go forward, ABC will continue to adapt its business model to include social finance so that we may address workplace literacy and essential skills challenges, and provide solutions for a more productive and competitive workforce in Canada. We urge the government to continue to recognize the inherent value of investing in human development programs—our one true natural resource—and in the positive social return on investment that these programs can have. We look forward to working with the government and the private sector to ensure we address the breadth and complexity of the challenge of improving literacy and essential skills in Canada, now and in the future.

Thank you, Mr. Chairman, for the opportunity to appear today. I look forward to responding to any questions you may have. Thank you.

[The Chair, Conservative, Phil McColeman]

Thank you for your testimony.

Now we move to our two representatives from Crossing All Bridges, Ms. Brown and Ms. Marshall.

Please proceed for up to 10 minutes.