An Approach to Sustainability for Social Enterprises
The Toronto Enterprise Fund conducted research to develop and articulate an approach to sustainability that meets the needs of enterprises receiving TEF funds.
This section summarizes the findings, defines important terms, and provides a simple management framework for developing sustainability plans for enterprises working with people who are homeless or low-income.
2. Key Findings
- Sustainability planning should prioritize financial sustainability, but also recognize the importance of non-financial resources. The literature cites examples of enterprises facing human resource challenges following successfully meeting financial sustainability needs.
- Enterprises will have unique sustainability plans. The differing financial structures of enterprises will require a different mix of financial and non-financial resources in order to be sustained.
- From a manager’s perspective, sustainability planning must and can be simplified into a pragmatic framework that can be implemented in a step wise fashion.
- There is a lack of clarity about the meaning of “sustainability”, and the financial needs of social enterprises amongst non-profit stakeholders. Clear communication with stakeholders that control resources is a critical factor in the successful implementation of any sustainability plan.
3. Definitions and Sustainability Plan Framework
The following definitions were adopted as “working definitions” as TEF enterprises created their initial sustainability plans in 2004.
”The ability of an enterprise to obtain, develop, maintain and renew resources in order to meet its social purpose. Sustainability is measurable and reflects social, economic, environmental and financial resources.”
“The ability of an enterprise to continue operating by means of any or all of the following revenue sources: earned income, charitable and public sector contributions.”
Sustainability Plan for an Enterprise
A sustainability plan defines the resources required for the ongoing operation of an enterprise and the strategies and actions to be used to attain, develop and maintain the resources. As financial sustainability is critical, a plan must identify business and human development costs and the resources required to sustain them. A well-designed sustainability plan will increase the ability of an enterprise to control resources and its future.
A framework for sustainability planning is shown in Figure 1 below.
|Sustainability Planning||Planning Should Include|
|Assessment of Current Status||
A complete financial and social performance review of current operations including all aspects of the current business operations.
A review incorporating perspectives of different stakeholders controlling resources.
|Define the Desired Strategies to Obtain, Develop and Maintain Resources||
Identification of the unique resources that fit best with an individual enterprise. Financial sustainability plans should consider strategies in each of the following areas:
1. Cost Reduction
Succession planning for key staff and volunteers. Maintenance of valuable human resources may be overlooked if enterprises focus entirely upon financial sustainability issues.
|Define Measurable Goals and Objectives||Clear measurable targets for each resource within the sustainability planning.
Financial targets for 3 –10 years in the future.
Contingency plan(s) if optimal resources are not attained.
|Key Issues Relating to Strategy Implementation||
Improving Performance to Attract Resources:
Actions to improve the financial performance of the enterprise, with a particular emphasis on business performance. These strategies are designed to increase business revenue and decrease costs.
Actions to improve the social performance of the enterprise in order to improve the return or benefits to stakeholders providing resources.
Communicating with Stakeholders to Obtain Resources:
A communication plan that meets the unique needs and expectations of the individual stakeholder being asked to provide resources.
Assessing Impact on Social, Environmental & Economic Performance:
As enterprises pursue financial sustainability, they may be required to consider operating changes with positive and negative impacts on social, environmental and economic performance. Any strategy must ensure that the pursuit of financial sustainability does not make the enterprise unsustainable from another perspective.
Developed for the Toronto Enterprise Fund by Allan Day & Associates, July 2004