Policy for the Social Sector, but Why?

This week’s readings emphasized on the role of policy in fostering social innovation. The first question that came to my mind while dwelling on the readings was – Why such an emphasis on policy if private foundations and impact investors serve as the primary source of capital for social ventures? However, the first reading [1] emphatically answered my question by setting the facts right. The article states that the federal government is the “funder-in-chief”, spending several billions of dollars in the provisioning of social services. In contrast, the largest private impact investors spend a fraction. An effective policy framework will assist in evaluating, monitoring and eventually increasing the impact realized per dollar spent by the federal government. Thus, the emphasis on policy in regards to social innovation, is well justified.

On reflecting further, the next question that followed was, what should be the objectives of federal policy in the social sector? A reading from the Stanford Social Innovation Review [2] elucidated the goals of federal policy towards social innovation to be four-fold – improving access to growth capital, providing seed capital to create a pipeline of innovations, investing in tools to determine what works and removing outdated tax and regulatory barriers to innovation. Each of these goals do seem very intuitive but there are tangible actions and barriers associated with each one of them.

Improving access to growth capital requires federal funding to be effectively channeled towards high-impact ventures that have exhibited concrete results. In order to achieve this goal, the government needs to adopt an evidence-based process with an emphasis on impact metrics. Implementing such a process may face strong resistance from ventures that currently sustain their federal funding due to strong political support. Also, the selection process itself may require significant resources to be implemented. This may inhibit the growth of innovation at scale.

Providing seed capital to create a pipeline of innovations entails the identification of potential entrepreneurial ideas and assisting those entrepreneurs to start-up their social venture. However, assessing the impact of a seeded start-up is a resource intensive and highly subjective task, let alone the assessment of entrepreneurial ideas. Determining which ideas to seed through a transparent process, will prove to be a challenge.

Investing in tools to determine what works follows from the first goal of federal policy. It is important for the federal government to monitor and evaluate the investments. This essential goal can now be achieved through comprehensive impact assessment tools and standards offered by firms like B Labs. Building the capabilities to leverage such tools can be a possible challenge.

Removing outdated tax and regulatory barriers to innovation has become increasingly important with social entrepreneurs leveraging for-profit business models to create a broader social impact. Hence, the government should identify and amend outdated regulations that may constrain the social sector. A potential challenge here can be the resistance from the existing beneficiaries.  

Given the importance of an effective policy framework at the federal level along with the intricacies of the objectives that such a policy framework should achieve, the federal government should carefully assess actions and actively implement the identified actions to maximize the impact per dollar of investment.

References:

[1] Forbes.com. (2017). Forbes Welcome. [online] Available at: https://www.forbes.com/sites/skollworldforum/2012/11/12/why-we-arent-getting-the-full-benefit-of-social-innovation-and-what-the-government-should-do-about-it/#28d58d76316f.

[2] Ssir.org. (2017). Innovating the White House (SSIR). [online] Available at: https://ssir.org/articles/entry/innovating_the_white_house.