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Jesus 'Chuy' Garcia: We want socially responsible businesses. Here's how to grow them.

Thursday, May 19, 2016
by Jesus "Chuy" Garcia and Marc J. Lane

  
 Photo by Eric Young Smith
Yvonne Cherry works for Cleanslate, a social enterprise run by the Cara program.


Too many residents of Cook County are living on the outskirts of hope. And the challenges that poverty brings with it are tougher than ever.

Yet the social sector that helps our poorest residents is under enormous stress. Nonprofits can no longer count on government contracts and grants, and charitable resources are inadequate to fund the deepening problems too many face.

While public and social-sector programming has improved the lives of countless people, increasingly so have market-based businesses.

Alone, and in combination with government and philanthropic efforts, disruptive business strategies are effectively addressing the most intractable social problems. For-profit, social-purpose businesses are defining success in terms of both financial and social returns. While some nonprofits are closing or consolidating for lack of funding, others are becoming entrepreneurial, supplementing charitable donations and government grants with revenue earned by businesses they own and run, instrumentalities of mission in their own right.

The Cara Program's Cleanslate is one example. Local governments contract with Cleanslate to beautify neighborhoods along high-traffic corridors; Cleanslate, meanwhile, employs people outside the economic mainstream who thereby gain valuable job skills.

Other progressive nonprofits are partnering with each other and even with traditional businesses, breaking down cultural barriers, leveraging their competencies and gaining economies of scale. And a growing number of so-called impact investors are deploying capital to test and develop market-based solutions to social problems.

Against this backdrop, the Cook County Board has created a Commission on Social Innovation. This commission will optimize the County Board's role as an agent of positive social change—as a convener, as a catalyst and as a collaborator. The commission will provide actionable, data-driven social policy recommendations for the County Board's consideration—some socially impactful in the short term, others over the long term.

In its quest to attack concentrated poverty, the commission will explore how it can help leverage the buying power of place-based anchor institutions—including universities, hospitals and museums—as customers of worker-owned cooperatives, democratically controlled businesses owned by the county's unemployed and underemployed.

The commission will work constructively with the Illinois Medical District in encouraging the incubation and spawning of innovative, mission-driven health-related businesses.

The commission will evaluate opportunities to help Cook County residents in food deserts band together to build and maintain neighborhood stores. That might include membership models, connecting with local businesses or nonprofits, or relying on newly sanctioned crowdfunding opportunities.

The commission is expected to support the work of the Illinois International Port District and other government units to revitalize the Port of Chicago through impact investment, philanthropy or both, not only maximizing its commercial potential in concert with other Great Lakes ports, but also maximizing its social potential as an engine of economic development.

And the commission hopes to collaborate with the Cook County Land Bank Authority to support the efforts of social entrepreneurs and investors eager to redevelop and reuse vacant, abandoned, foreclosed and tax delinquent properties.

These initiatives and others the commission considers won't be zero-sum transactions. The commission's aim is nothing short of transformation.

We invite all the residents of Cook County to partner with us as we harness the power of the marketplace to drive positive social change. Although the commission is authorized to receive donations of money, labor and services from any person or any public or private agency, our greatest hope is that the public will attend the commission's meetings, contribute to the work of its committees and offer its members input and advice.

Together we can unleash the county's enormous social and financial capital for the common good.

Peterborough's problem was daunting: Sixty percent of prisoners serving short-term sentences historically had gone on to re-offend within a year after their release. But policymakers were confident that a solution was within their reach. They attracted private investment to pay experienced social service agencies to provide intensive, multidisciplinary support to short-term prisoners, preparing them to re-enter society and succeed outside the penal system. - See more at: http://www.chicagobusiness.com/article/20131007/OPINION/131009850/a-new-kind-of-futures-contract-for-illinois#sthash.ThgxeiFt.dpuf

The world's first social impact bond, or SIB, was introduced in 2010 to fund innovative social programs that realistically might reduce recidivism by ex-offenders in Peterborough, England, and, with it, the public costs of housing and feeding repeat offenders. Prudently building on the strengths of that initiative, Illinois Gov. Pat Quinn is rolling out SIBs to help solve some of the state's most vexing social problems.

A SIB isn't a traditional bond where investors are guaranteed a fixed return but a contract among a government agency that agrees to pay for improved social outcomes, a private financing intermediary and private investors. SIBs shift the risk of experimenting with promising but untested intervention strategies from government to private capital markets, with public funds expended only after targeted social benefits have been achieved.

Peterborough's problem was daunting: Sixty percent of prisoners serving short-term sentences historically had gone on to re-offend within a year after their release. But policymakers were confident that a solution was within their reach. They attracted private investment to pay experienced social service agencies to provide intensive, multidisciplinary support to short-term prisoners, preparing them to re-enter society and succeed outside the penal system.

The government decided which goals would be supported, but exactly how those goals would be achieved was left to the private sector. It was the investors, through a bond-issuing organization, who ultimately endorsed the allocation of investment proceeds — how much would be invested in job training, drug rehabilitation and other interventions.

If the Peterborough plan eventually shrinks recidivism rates by 7.5 percent or more, the government will repay the investors' capital and share the taxpayers' savings with them, delivering up to a 13 percent return. If the target isn't hit, the investment will have failed and the government will owe the investors nothing.

Illinois' SIB effort was spearheaded by the state's Task Force on Social Innovation, Entrepreneurship and Enterprise — the governor's think tank on social issues, which I am privileged to chair — with support from Harvard University's John F. Kennedy School of Government, the Rockefeller Foundation and the Aurora-based Dunham Fund. A request for information issued by the Office of Management and Budget on May 13 yielded responses from service providers eager not only to reduce recidivism here but also to create jobs, revitalize communities, improve public health outcomes, curb youth violence, cut high school dropout rates and alleviate poverty.

Now the governor has issued a request for proposals intended to spur better outcomes for Illinois' most at-risk youth — by increasing placement stability and reducing re-arrests for youth in the state's Department of Children and Family Services, and by improving educational achievement and living-wage employment opportunities justice-involved youth most likely to re-offend upon returning to their communities.

Kudos to Mr. Quinn for bringing SIBs to Illinois. May they soon start delivering on their promise.

- See more at: http://www.chicagobusiness.com/article/20131007/OPINION/131009850/a-new-kind-of-futures-contract-for-illinois#sthash.ThgxeiFt.dpuf
The world's first social impact bond, or SIB, was introduced in 2010 to fund innovative social programs that realistically might reduce recidivism by ex-offenders in Peterborough, England, and, with it, the public costs of housing and feeding repeat offenders. Prudently building on the strengths of that initiative, Illinois Gov. Pat Quinn is rolling out SIBs to help solve some of the state's most vexing social problems. - See more at: http://www.chicagobusiness.com/article/20131007/OPINION/131009850/a-new-kind-of-futures-contract-for-illinois#sthash.ThgxeiFt.dpuf

Jesus “Chuy” Garcia is a member of the Cook County Board and the chair of the Cook County Commission on Social Innovation. Marc J. Lane is a Chicago attorney and financial adviser and the vice chair of the Cook County Commission on Social Innovation.

Reprinted from Jesus "Chuy" Garcia and Marc Lane's May 19, 2016 editorial which appeared in Crain's Chicago Business. Crain Communication Inc.'s permission is gratefully acknowledged. Copyright © 2016 by Crain’s Communications Inc.


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