New agency could boost social enterprises

Sonal Shah

Social entrepreneurs in April scored a home run when the Obama administration created the first ever Office of Social Innovation (OSI), to be headed by Google.org’s Sonal Shah, and passed the Serve America Act, which contains funding for multiple new programs under the aegis of OSI.

Based out of the Domestic Policy Council, OSI aims to support innovative nonprofit projects addressing pressing societal problems, many of which are recipients of foundation money. Increasingly, however, SRI money has started to flow to social entrepreneurs working on similar problems—and OSI may have a positive influence on such investments.

The Office of Social Innovation is poised to benefit groups in the social enterprise space, which are using business tools to accomplish social goals, says Ian Fisk of the William James Foundation [see “Banks for a New Economy,” Sustainable Industries, January 2009]. Despite its focus on nonprofits, many expect OSI to encourage the flow of funds to the for-profit sector by validating community investment programs with federal funds.

With government backing, individual and institutional investors will have a stronger argument for investing in community development, says Lisa Woll, CEO of the Social Investment Forum. Even though it’s the fastest-growing component of SRI, community investment is still by far the smallest component of SRI at less than 1 percent of total SRI funds, according to Social Investment Forum’s 2007 report on socially responsible investing trends.

Although the Obama administration claims it wasn’t created as a direct response to the global financial collapse or concerns about subprime mortgage practices, OSI could indirectly help prevent mortgage defaults, shore up community support systems that have been challenged by the current recession, and support community investment programs that provide sustainable financing to underserved areas.

“Social entrepreneurs are a new class of entrepreneurs who want to combine doing well with doing good,” says James Dailey, a technology consultant to microfinance institutions around the world. “Highlighting that, making it part of the economic recovery, is a way of reinvigorating the entrepreneurial dream by connecting that impulse with more positive businesses.”