Companies & Industries

B.C. introduces Canada’s first model for profitable charities

Capitalism gets a little kinder

CB_recycling

(Liang Sen/Redux)

Sure, it’s possible to do good while doing well. But is it possible to imprint that mandate into an organization’s DNA? British Columbia is betting that you can with the community contribution company, or C3.

By allowing entrepreneurs and investors to support their communities while making a profit, C3s are meant to bypass some of the strict regulatory requirements of registered charities and thereby unlock previously untapped capital for social enterprises. In the first such hybrid business model in Canada (Nova Scotia is looking into something similar), B.C.’s C3 designation forces companies to do good by limiting dividends paid to shareholders to 40% of profits. The remainder goes to range of social enterprises from community recycling to services for the disabled.

“The value in the hybrid is that it demonstrates quite clearly that you can run a business with a social purpose,” says David LePage, who has registered his company, Accelerating Social Impact CCC Ltd., as a C3. “This is not corporate social responsibility, and this isn’t charitable giving. This is embedding a blended value—business and social—into a business.”

Key to the program is the notion of the “asset lock,” which ensures investment toward the social cause remains intact, even if the company changes hands, says Ana Maria Peredo, a professor of sustainable entrepreneurship at the University of Victoria. She notes that the model mimics the community interest companies (CIC) that began in the United Kingdom in the mid-2000s.

John Mulkerrin of the London-based CIC Association says that with more than 7,500 CICs registered, the idea has been a success across the pond. “Investment and consumer trends are changing faster than people realize, and the CIC is a wonderful pick-up-and-go,” he says.

But how big is the demand for a corporate beast that is neither fish nor fowl? Becoming a C3 doesn’t confer the ability to receive donations or issue tax credits. “If a charity came in to see me, I would encourage them to use the C3 model to set up their business,” says Del Friday, a lawyer with Kuhn LLP in Vancouver. “Whereas if a small-business owner or young entrepreneur came in I would discourage them because I feel they don’t need the extra regulation.” She notes the requirement for three directors, annual reports outlining community contributions and public disclosure of financials could be cumbersome for small startups.

It remains to be seen whether C3s take off. But supporters insist there is a pent-up demand for investments that make a difference—creating tangible value for governments and society—rather than simply making “a bucket load of money” for their shareholders, says Jim Fletcher, co-founder of BC Social Venture Partners. “It’s all part of a toolkit,” he says. “It’s not a silver bullet.”