Recommendations for a Canadian Social Innovation and Social Finance Strategy

Sept 2018 Charity & NFP Law Update

On September 4, 2018, the Social Innovation and Social Finance Strategy Co-Creation Steering Group, appointed by the Federal Government in 2017 to develop a Canadian social innovation and social finance strategy, released its Recommendations Report (the “Report”). The Report is a comprehensive document that is extensive in its scope and innovative in its recommendations. The Report follows after the report of the Standing Senate Committee on Social Affairs, Science and Technology released on May 10, 2018, which recommended the creation of a Social Finance Fund, and which was discussed in the May 2018 Charity & NFP Law Update.

The Report states that in order to address the many complex and pressing social problems that Canadians are facing (such as housing insecurity, the opioid crisis and climate change), it is essential that the contribution by charities, “non-profits” and co-operatives to the overall economic growth of Canada is recognized. Along with the different ways in which private companies, individuals and other actors in society are contributing to address these social problems, the Report recognizes that charities and non-profits are investing in research and development as well as creating sustainable businesses models in order to grow the impact of their work.

The focus of the Report is on the following twelve recommendations (divided in seven areas of action), to be implemented by the Government of Canada:

I. Governance and public service infrastructure

Recommendation 1: Anchor commitment and long-term policy action toward social innovation and social finance in Canada through legislation.

Recommendation 2: Establish and fund a permanent multi-sectoral Social Innovation Council to advise the federal government.

Recommendation 3: Create a permanent Office for Social Innovation.

II. Capacity and skills

Recommendation 4: Improve social purpose organizations’ access to federal innovation, business development and skills training programs.

Recommendation 5: Establish a multi-departmental Social Innovation Ecosystem Program.

III. Funding and capital

Recommendation 6: Create a Social Finance Fund.

Recommendation 7: Ensure federal funding practices support and enable social innovation.

IV. Market access

Recommendation 8: Incorporate social procurement guidelines, tools and training opportunities into the Government’s focus on a cohesive sustainable procurement plan.

V. Policy and regulatory environment

Recommendation 9: Address the legal and regulatory issues impeding charities and non-profits from engaging in social innovation, social finance, and social enterprise.

Recommendation 10: Initiate a series of controlled regulatory experiments, or “sandboxes,” to explore and experiment with new regulatory models.

VI. Evidence and knowledge sharing

Recommendation 11: Establish a Social Innovation Evidence Development and Knowledge Sharing Initiative.

VII. Awareness and mobilization

Recommendation 12: Coordinate a national social innovation and social finance awareness campaign.

The Report further explains that these recommendations are to be implemented together in order for Canada to be on track to achieve the 17 Sustainable Development Goals of the United Nations’ 2030 Agenda for Sustainable Development, which include ending poverty in all its forms everywhere and ensuring inclusive and equitable quality education, amongst others.

Recommendation 9 of the Report is of particular interest to charities and not-for-profits in Canada, as it proposes amendments to the unrelated business rules in the ITA for charities to facilitate the use of social enterprises by charities and not-for-profits, recognizing that these organizations “create value beyond the cost of the tax benefits they receive.” Recommendation 9 also refers to and endorses the recommendations of the Consultation Panel on the Political Activities of Charities from 2017 with regard to a new “regulatory approach that focuses on charities’ purposes rather than activities” including a list of charitable purposes that better reflects contemporary social and environmental issues and values. In this regard, the Report suggests that revocations of charitable status should be suspended until a “complete range of issues areas affecting registered charities are addressed, in close consultation with stakeholders.”