Damien English (Meath West, Fine Gael)
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I welcome and thank everyone for attending. Last week was busy for the committee. I welcome Mr. Seamus Mulconry, executive director of Philanthropy Ireland, Mr. Seán Coughlan, chief executive of Social Entrepreneurs Ireland, Mr. Diarmaid Ó Corrbuí, chief executive officer of the Carmichael Centre for Voluntary Groups, and Mr. Eamonn Fitzgerald of Social Entrepreneurs Ireland to our meeting on the not-for-profit sector as an industry and its potential for development and job creation. The committee discussed this issue previously, given our interest in it. We also touched on it a number of years ago. Mr. Mulconry may have been present for that. We would be interested in working with our guests further in a bid to create to jobs, as the committee could have a role in helping them with this major area.

I wish to advise the witnesses that by virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to this committee. If they are directed by the committee to cease giving evidence on a particular matter and continue to so do, they are entitled thereafter only to a qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable. Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official, either by name or in such a way as to make him or her identifiable.

If that has not put him off, I will ask Mr. Mulconry to make his presentation.

Mr. Seamus Mulconry:

I thank the committee for giving us the opportunity to present to it. The origins of this meeting go back to work that was done by the Forum on Philanthropy and Fundraising, which many members will know is chaired by Mr. Frank Flannery. The forum's strategic objective is to increase the amount of private sector investment from the current estimated level of €500 million to €800 million by 2016. The sector is an indispensable partner to Government in the delivery of a wide range of services. It is also an important economic actor in its own right. The not-for-profit sector employs in excess of 100,000 people in Ireland, more than pharma and IT combined. A subset, social enterprise, employs between 25,000 and 33,000 people. If we were able to increase the numbers employed in social enterprise to the European average, that figure would be approximately 65,000. There is significant job creation potential. Traditionally, this sector as a whole has not been viewed as a source of job creation or economic activity. For this reason, we wish to speak to the committee.

I will introduce my two colleagues. Mr. Coughlan will brief the committee on social enterprise, its potential and some of the steps that are necessary to deliver on same. Mr. Ó Corrbuí will discuss shared services. Dublin is the shared services capital of Europe. We provide shared services to a large number of entities across the EU, for example, back office operations, IT, etc. There is significant potential to adopt this approach in the not-for-profit sector, which would have a two-fold effect - it would create jobs in that sector while reducing costs and increasing efficiencies.

Mr. Seán Coughlan:

I thank Mr. Mulconry. I will briefly discuss the concepts of social enterprise and social entrepreneurship. Often, we view the not-for-profit sector as comprising exclusively charitable organisations, but a strong emerging trend in recent years has been the focus on social enterprise. Essentially, this is an organisation that provides services or products on a commercial basis but with a social mission at its core. The distinguishing factor between a social enterprise and a normal business is not whether they operate differently, seeing as how they operate similarly, but that the majority of the surpluses generated - if the organisation makes a profit - is reinvested in the social mission. In a sense, this creates the economic benefits accrued from any start-up or commercially viable operation as well as a considerable amount of social benefit. There is no profiteering or money taken out of these companies for private gain. I would argue that social enterprise and social entrepreneurship provide the best of both worlds.

However, the sector is notably underdeveloped in Ireland. As Mr. Mulconry mentioned, the level of social enterprise activity in Europe is much higher than it is in Ireland. There have been positive developments of late. Forfás was commissioned to publish a report on the potential for social enterprise. It was published this year. The Minister of State, Deputy Sherlock, has been appointed by the Government to co-ordinate social enterprise activity across Departments. While this is a positive first step, there is considerable potential to build on this early momentum.

Social enterprise is a significant job creator and contributor to the economy. If we achieve just the mean level of social enterprise activity that is found across the EU, our sector could create 65,000 jobs. This is a major benefit. However, we will only achieve this through the creation of an enabling environment. The two go hand in hand. I stress that this is not a question of money in any sense, but of creating the environment to allow social enterprise to thrive.

I will provide a couple of practical and important examples of what is necessary to allow the sector to grow. Local government is in the process of being reconfigured and realigned. We suggest that the local enterprise offices, LEOs, which will replace county and city enterprise boards, CEBs, will include social enterprise as part of their enterprise strategies. This could be done simply and would help to create the environment in question. Local and community development committees should consider social enterprise when developing their plans.

There is considerable potential for social enterprise in terms of procurement. European legislation allows for the provision of social clauses in tendering processes.

If we were to introduce these clauses, not only could we have the services that, as a State, we are seeking to procure, but we could also have direct social benefits accruing from them also.

We would like to see a preferred treatment of social enterprises in local service tenders. In particular, for contracts or tenders below €25,000 we would like to see social enterprises being on preferred supplier lists. They should not get exclusive access, but should have to compete with other providers. They should be able to compete on a value for money basis. If they are social enterprises rather than private concerns, one will also get the social benefit accruing from that.

I wish to make a last point before handing over to my colleague Mr. Ó Corrbuí. The EU sees social enterprise and social entrepreneurship as critical components of its 2020 vision. Its strategy for the next term of the European Commission, the structural funds and planning, includes social enterprise and social entrepreneurship as major components. Ireland is in real danger of missing out on the support and benefit that will provide, however, because we do not yet have a policy, strategy or engagement process with Europe.

I will give two particular examples. First, at the moment there is a draft agreement for the use of structural funds. All member states will have to produce an agreement with the EU around the use of structural funds from 2014 to 2020. The draft agreement is out for consultation at the moment from the Department of Public Expenditure and Reform. It comprises 159 pages. I note that social enterprise is in the programme for Government and in the action plan for jobs. We have also had a Forfás report published. In those 159 pages there is not one mention of social enterprise, yet there is funding and support from Europe across the Union for the promotion of social enterprise. I think we are missing out on that opportunity.

Second, there is a two-day conference in Strasbourg in January to promote social entrepreneurship. To give the committee a sense of the importance that Europe attaches to this particular topic, the conference will be addressed by the President of the European Commission, Mr. Barroso, as well as by six other European Commissioners. French President François Hollande will address the conference in addition to Antonis Samaras, the Greek Premier. This is a very significant initiative by the EU. Social enterprise organisations will be going but, to date, we have not seen representation from policy makers. I respectfully suggest that this committee might consider sending a representative to that conference, given its significance.

Mr. Diarmaid Ó Corrbuí:

As Mr. Mulconry already mentioned, the sector is quite big when one considers it. There are about 12,000 not-for-profit organisations in the country, including every parish and county. However, not-for-profit organisations are struggling with reduced funding, increased compliance requirements and inefficient business processes, which hamper their impact.

Dublin is one of the shared service capitals of Europe. We can see huge potential for the development of a top quality, cost-effective national shared services centre for the not-for-profit sector. This would enable the not-for-profits to focus more attention on their core mission activity which is not administration but delivering valuable social services around the country.

The successful implementation of a shared services model can deliver significant savings from 15% to 30%, but it comes with a big "if". It requires significant up-front investment and the payback takes time. The Carmichael Centre for Voluntary Groups is a shared services centre and one of the first in the country. We have 47 different groups working the model very effectively. It allows small organisations to be effective without the requirement of having to have their own back-office administration and services.

We could see this model being leveraged quite usefully around the country and in the capital. Critical success factors for shared services are economies of scale, efficient deployment of best practice technologies, significant up-front investment - the lack of which causes difficulties for the sector - a clear business case, and a strong incentive to go down the shared services route. At the moment that incentive is lacking. The current fragmentation of the not-for-profit sector makes it difficult to take this step on its own. It will require leadership and support from State funders to help us on that journey.

Damien English (Meath West, Fine Gael)
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I will now call on members of the committee to put their questions.

Dara Calleary (Mayo, Fianna Fail)
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I welcome the various organisations' representatives. A few weeks ago, I saw the social entrepreneur awards and the Irish Men's Sheds Association won the main award. That was a pretty good platform from which to promote various organisations.

Mr. Mulconry said he wanted to get to €800 million by 2016, which is in two years' time. His organisation seems to be doing a lot of the work but not many of the bricks are in place to achieve that. Can he expand on how he will get there and what key strategies he has in mind?

Mr. Seamus Mulconry:

Philanthropy Ireland has a four-point strategy to achieve that. The first is a national giving campaign, the 1% difference campaign, which is up and running. We are encouraging everybody in Ireland to give 1% of their time or money to a cause they care about. We have about 570 charities signed up to that. The Deputy may have seen the advertising and PR around it in recent weeks. We are half way through that campaign. It is difficult at this stage to measure how much impact we are having. The reception so far has been positive and the charities are engaged.

The second strategy is a social innovation fund. The fund is designed to try to address the fact that somewhere between €50 million and €60 million in philanthropic funding will leave the sector in the coming years as the two largest foundations wind down. The social innovation fund's board is meeting and it is engaging on a fund-raising strategy. The Government has committed to a €5 million tranche of funding if that sum is matched by philanthropic funding. They are now busily engaged in sourcing that funding and will hopefully raise much more than that, but it is an uphill struggle.

The third area is improving fund-raising capacity. One cannot have good giving without good asking. Fund-raising Ireland has pioneered both a certificate and diploma in fund-raising to develop the capacity of fund-raisers.

Fourth, we are looking at changes to tax and regulation. On the regulatory side, the Irish Charities Tax Reform group, ICTR, is spearheading this part of the strategy. We have had major progress in that the Department has agreed to implement the 2006 Charities Act. It is in the process of setting up a register which should be up and running by the end of the year.

As regards taxation, we are seeking measures to encourage the establishment of more trusts and foundations. At the moment, some 25 trusts and foundations are operating that we are aware of, although there may be more because some of them operate underneath the radar. We have one of the lowest proportions of trusts and foundations anywhere in Europe. We are therefore looking for measures from the Government to encourage that.

The report on the four elements was published two years ago. We are well under way on three and a half of them. The only area in which we have not made progress is in persuading the Government about taxation. The Government is examining our proposals but we have not made progress yet.

To put our figure of €800 million in context, every year Irish people dump €1 billion in food. Every household dumps around €740 worth of food. If we could get people to check the use-by dates, and take a proportion of that food to a charity, it would have a massive impact. If we could get men to give as much as women, for example, it would also have an impact. The average yearly donation in Ireland is €130. Men give €100 while women give €160. We are trying to get people to make small differences, which, taken together, can have a huge impact.

The other area is corporate funding. There are no really good statistics for the sector, although this is probably the best document we have. The evidence we have suggests that corporate Ireland gives less than its counterparts in other jurisdictions. We are working with businesses to encourage growth both in the quantum and quality of giving. In many cases, money is being handed over in a way which does not maximise efficiency. We have heard stories - they are purely anecdotal - of a charity entering for "charity of the year" to get €10,000 but it costs them €5,000 to put the pitch together.

We are trying to move away from that towards more longer term relationships between business and the sector. We are also encouraging CEOs of businesses to become involved in charities and non-for-profits, to which they can bring a huge degree of management, time and ability. In terms of whether we will hit our targets, the answer is I do not know. We are doing our best to ensure we do.

Dara Calleary (Mayo, Fianna Fail)
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Mr. Mulconry mentioned the local enterprise offices, LEOs, and social enterprise business programme, SEBP. It is hoped the local enterprise offices will kick-off next month and that the social enterprise business programme will kick-off in January next. What engagement has taken place with the Department of the Environment, Community and Local Government around formal recognition of social enterprise in this area?

Mr. Seán Coughlan:

Our engagement has been with the Departments of the Environment, Community and Local Government and Jobs, Enterprise and Innovation, in particular the Minister of State, Deputy Sherlock, as Minister with responsibility for co-ordination across Departments. We want social enterprise to form part of the remit of the local enterprise offices, LEOs. Social Entrepreneurs Ireland is part of the social enterprise and entrepreneurship task force, which has put together a position paper in this regard. We are also in direct talks with an official at the Department of the Environment, community and Local Government on the issue. We have not as yet heard whether social enterprise will be part of the remit of the LEOs. It is an going conversation with departmental officials and the Minister of State, Deputy Sherlock. Any encouragement from the committee in this regard would be much appreciated.

David Cullinane (Sinn Fein)
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I welcome the witnesses to the meeting. I am hugely supportive of the social economy and the notion of social entrepreneurship. I do not believe it is recognised to the extent it should be in terms of its potential. We would possibly all accept that.

Last year, on behalf of the committee I drafted an economic development strategy for the southeast, much of which was based on consultations and meetings with various groups, including community groups. The issue of social entrepreneurship and the social economy was mentioned by many of the groups and local authority representatives. An issue of particular concern to me was the lack of understanding among the community and local authority representatives of what the social economy means. Perhaps with the establishment of the LEOs consideration could be given to holding information sessions across counties to discuss what is meant by the social economy and social entrepreneurship, including the potential and opportunities in this regard. In terms of social enterprise being part of the remit of the local enterprise offices, property issues may arise. However, the local authorities linking in with NAMA may be of assistance in this regard. A number of local authorities also called for social enterprise business training programmes targeted at those involved in this sector. There is a great deal of work that the local authorities could do through the LEOs, of which I would be supportive.

In recognising the benefits of this sector, we must also accept there is a cost involved. It is important to recognise that this cannot be delivered as a cheap alternative to the State. I would welcome the witnesses view on that. In the North, a package of €80 million by way of the Social Investment Fund is available to communities to progress social economy projects. What funding is made available here? Reference was made by the witnesses in their opening statements to falling revenue from the State and philanthropic organisations. Perhaps the witnesses would elaborate on that shortfall, which would be helpful. They might also update us on the status of the one per cent difference campaign, including take-up and so on.

I am not sure if the witnesses are aware of Communities Creating Jobs and Turning Point are just two of a number of community organisations in the southeast, with whom I have met. What level of interaction do the organisations present have with the many new groups setting up because of the economic situation in which we find ourselves. Perhaps consideration could be given to amalgamation of many of these new community based groups to ensure a more joined up approach in this area. In my view, this would be of benefit.

Mr. Seamus Mulconry:

I will respond to a number of the questions raised and ask some of my colleagues to respond to the others. The philanthropic cliff was referred to by the Chairman of the Forum on Philanthropy. In essence, the two largest foundations in Ireland are The One Foundation and Atlantic Philanthropies, who, between them, account for 86% of philanthropic funding in Ireland. Both organisations are limited life foundations. The One Foundation will close this year. Atlantic Philanthropies has two or three years more remaining. Following the closure of both in the region of €50 million and €60 million will be removed from the sector. While that is a sizeable amount, it is important to bear in mind that the sector raises a lot more money than that. This will impact on approximately 70 organisations and on a given number of fields, including child care, aging policy, dementia and other areas which are heavily funded by both of these organisations. The social innovation fund is the forum's strategy for dealing with this. Currently, the Government has committed €5 million, which must be matched by philanthropic funding. The social innovation fund was set up this year and is engaged in fund-raising as we speak to try to secure the matching funds.

The One Percent Difference campaign was launched in June, although we had been working on it for a long time prior to that. As I said earlier, approximately 570 charities have signed up to it. We will not be in a position to measure it until next year at the earliest. Like any other public awareness campaign, this is one for the long haul. There will not be a sudden burst in giving. In terms of fund-raising in the charity sector, Government funding, in some cases since the recession, has decreased to 40% and the number of people donating to charities has decreased by approximately 70%. Given the severity of the recession, it is remarkable how the sector has held up. The amount of income from fund-raising has also decreased. However, this varies hugely across the sector. Some charities are raising more funds now than they did prior to the recession but the demands on their services have increased exponentially.

The three areas of most concern to the public now are suicide, health care, primarily around cancer and heart disease, and the future of our young people. A charity whose fund-raising is related to any of these areas will get income. However, all of the issues mentioned are in areas in respect of which demand has risen exponentially. The charity sector has since about 2007 had a very rough time. I would expect some charities to fold or merge this year. Some will not last too much longer. Others have adapted and are doing reasonably okay but, as I stated earlier, demand on their services has increased. This One percent Difference campaign is about creating a culture in Ireland of sustained giving. Irish people are brilliant when a crisis occurs. They respond magnificently. They are not as good in between crises. We are trying to encourage people to find a charity about which they care and commit to it on a sustained basis. As I said, it will be some time before we are able to measure whether or not we are getting traction. I think we are but I do not know that yet for sure.

Anthony Lawlor (Kildare North, Fine Gael)
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The crisis is usually an external rather than internal crisis.

Mr. Seamus Mulconry:

Yes.

Anthony Lawlor (Kildare North, Fine Gael)
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Perhaps we should by way of PR campaign by the organisations turn the focus towards the many Irish crises. In terms of the current crisis in the Philippines, a large number of communities are actively involved in raising funds to assist in that regard while at the same time homeless people here need assistance.

Mr. Seamus Mulconry:

In point of fact that is already happening, although it is not so much a PR campaign. What is happening is that people's patterns of giving are changing.

When we did the research we found that people were withdrawing into their local communities. Someone in a focus group put it very well by saying, "My next-door neighbour has lost his job and he may lose his house. I'd prefer to be giving the money to him than to an overseas charity". The overseas charities are probably being hardest hit. What has kept them going is that they probably have the most sophisticated fundraising mechanisms, but they are under severe pressure. There is an understandable tendency among Irish people to focus on their friends and neighbours in their own communities. That is already happening and the overseas charities are struggling most in terms of fundraising at the moment.

Mr. Seán Coughlan:

I wish to come back to some of the Senator's other points. The level of activity on the ground in local communities in social entrepreneurship and social enterprise is quite high in terms of local groups and people taking the initiative in trying to solve some of the challenges their communities face. We in Social Entrepreneurs Ireland see that in the number and quality of applications that come into us for the awards process we run every year. The level of expertise demonstrated by the social entrepreneurs who apply has been increasing each year, which is an encouraging sign.

The second encouraging sign is that in Europe during the recession the number of jobs created by social enterprises has increased rather than decreased. The potential is there and the real question is how we tap into it. We need to have a conversation with at least two groups, if not more. One of those groups is the ordinary citizens. In those conversations one of the most powerful things we can do is to role model. People often have ideas and want to contribute but are unsure how best to go about that. We can give them examples and show them what is possible. In a sense, organisations such as Social Entrepreneurs Ireland, Philanthropy Ireland, Clann Credo, The Wheel and the Carmichael Centre have a real role to play in showing what is possible. I am very happy for people to put that challenge to us and we will need to step up to that mark.

However, we need to have a separate conversation with local government. That conversation needs to be about social enterprise and social entrepreneurship being not just a nice thing to do but of real and direct impact and benefit to local communities. We, in the sector, can bring that conversation a certain distance, but without the support of central government in that we will struggle. I regard those as two complementary conversations we need to have.

David Cullinane (Sinn Fein)
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I can quote an anecdotal story that supports the second point about engaging with local authorities. I do not know if Mr. Coughlan is familiar with the Dunhill Ecopark in County Waterford, which does much good work. Initially it found it difficult to get support. Now that it is successful, the local authority is asking what support it can give. We should look to those centres and projects that have been successful. We can then sell that to local authorities because some of them do not see the logic. They are dealing with so much - they are only getting their heads around the LEOs and they will become more involved in economic management and local economic development. We need to be in there very early stages stressing the importance of the social economy. It would obviously be of benefit to have the success stories to sell to local authorities.

Mr. Seán Coughlan:

I fully agree. The Senator has raised a very interesting dynamic. In supporting commercial activity in the local economy we are prepared to take some risk. We are prepared to invest in early-stage organisations - not necessarily just financially but also with training, mentoring and providing shared services. In our sector the Carmichael Centre is a leading example of that. We are prepared to do that because we know that on average we accrue more benefit from the ones that succeed than we expend on early investment to support start-up companies, particularly small local companies. The county and city enterprise boards as well as other State agencies have been set up for that.

The Senator is right in what he said. At the moment everybody claims to be prepared to invest early on. When a company is a success, those agencies are its new best friends. However, that does not solve the problem we are trying to solve. It is not so much a money conversation but a change in mindset conversation.

The Senator referred to NAMA and empty premises. If we start to be more creative in how we look at these challenges, there are many solutions out there. For example, we have invested in and supported a great initiative, called Fumbally Exchange, which has been set up to go into premises that are underutilised or empty. It builds a vibrant ecosystem of small businesses that are commercially viable within those communities. Part of its remit, because it is a social enterprise, is to build the community around those companies. It has gone into premises in Dublin's inner city and created a new commercial hub of activity there and has now moved on to different premises.

In times of recession people want to give back. If we can give them those examples, the people will step up to that mark. They are very interested in solving some challenges they see on their doorstep. However, we have not created enough examples and a supportive environment. The knowledge exists in State agencies. The start-up process for a social enterprise is almost the same as the start-up process for any commercial enterprise. In Social Entrepreneurs Ireland we spend our time working with our social entrepreneurs on business plans, communication strategies, keeping proper accounts and HR issues. The State has so much expertise in all those areas but organisations such as Dunhill and other social enterprises continually struggle to get access to that knowledge which the State already has. We are not looking for new people or new agencies; we are just looking for a door to open so that we can access what we already have. I just do not see where is the downside.

Mr. Eamonn Fitzgerald:

A point that often arises when we talk about social entrepreneurship and social enterprise is letting the State off the hook in the provision of services. The entrepreneurs Social Entrepreneurs Ireland supports and the hundreds who apply to us every year are either responding to a new problem that has emerged - they have the luxury of being quite flexible, adaptable and innovative and can react very quickly to that - or alternatively they are introducing an new way of tackling a problem. So the State might be doing it a certain way and they have discovered efficiencies and are implementing those as a proof of concept. They are unique in the sense that ultimate success for them is not having a job particularly. Most of them have the beauty of being quite flexible and innovative, and they certainly fill that gap. One would struggle to find many who are trying to take some of the responsibility away from the State - it is really filling that gap in between. That is one of the huge benefits to the sector.

John Lyons (Dublin North West, Labour)
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Most of what I was going to say has already been touched on. Before the witnesses came in, during our private session we were discussing the concept of social enterprise. We need to up our own game in our attitude towards social enterprise. It is a hidden gem that is just not understood in Ireland.

I get excited every time I hear about it because I see the real value of it. I can see the end product and it makes perfect sense. At the same time - Senator Cullinane referred to this - I genuinely believe that although there are people who understand and know what social enterprise is, there are others who will go to a local enterprise office when they are establishing an enterprise. They want to set up a business and would probably be more than happy to take the social enterprise route but simply know nothing about it. We need to do something to ensure people have the option. People need to see that there is a payback not only for the person who sets up a business but for the people in the community or wider society. Why would anyone not want that? It is a no-brainer and work needs to be done in this area. To a certain extent we come from a culture where, by and large, the model is based on looking after the people who set up the company and own the company. It is a different alignment to what we are discussing today. We need to see a change in mindset in this area particularly around how we do business as a country at a political level. I realise the Minister of State, Deputy Sean Sherlock, is trying to deal with that.

I have a question for Mr. Coughlan and a question for Mr. Ó Corrbuí on shared services. There is an obligation not only on the State but on other people to inform everyone about the idea of establishing a social enterprise as opposed to establishing a traditional business. Something needs to be done in this area. As the witnesses have said, there is a part for them to play as well. There is a frustrating aspect to this. Although I am interested in the idea, as a Deputy there are only so many things one can hold at a time. A Deputy cannot give his time to everything. I have been focusing on youth employment in the past two and half years and although I have been very interested in this, the time constraint has not allowed it to be pursued.

I am unsure how to help people who come to me. I spoke to a person from DCU who came to me last week. He wanted to meet to discuss an idea about a social enterprise. What obstacles do the witnesses see if someone comes to the likes of us? What pitfalls will they face as opposed to someone else when it comes to establishing a social enterprise in the current environment? Where is the safest place to direct them to get the necessary support? I realise they could be pointed to the witnesses but I am referring to beyond that.

The shared services model makes perfect sense but I imagine it is the same in all the communities we represent. There were issues some time ago around reductions in the amount of funding that community employment schemes were receiving for overheads. It would have made perfect sense for everyone to use shared services. However, in the community I represent that would have become a local community political nightmare. Although we see it here, how did the witnesses manage to get over the pitfalls of getting the groups the witnesses have spoken of, which are identical to the other groups in all communities, to agree that it is worthwhile to buy in to shared services and that an enterprise can have a more direct input into what it seeks to deliver by taking that approach, rather than each enterprise fighting over a building or who does salaries at the end of the month?

Mr. Diarmaid Ó Corrbuí:

The Carmichael Centre grew out of a need. It was founded in 1998. A number of what were for the most part community groups ended up having no home. They lost the space they had and the model proposed that rather than all 18 groups trying to find their own space, why not come together and share simple things like photocopiers, meeting rooms and catering facilities. Now, we have 46 groups. The problem is there are other potential communities throughout the country that could benefit from that. We believe small is beautiful and we deal with the small end because of particular issues. People at the small end have great passion and dedication. They may not be the best bookkeepers in the world or may not have the ability to do all the things they need to do.

It was a simple model. One possible failing is that it should be replicated, but what we have discovered is that it always needs some sort of spark. The Carmichael Centre would not have happened in 1990 unless there was someone in Dublin City Council at the time who had the leadership to see the merit in the idea and that it was something we should do more. Then, the person convinced a colleague of his in the Eastern Health Board to give us a premises. Dublin City Council gave us a second premises and that gave us the catalyst. These catalysts are needed to spark something.

The idea makes sense. A person can come into the Carmichael Centre and take the view that it is brilliant and that there should be more of them. We have been trying. My predecessors have tried to do it but unless there is some big brother or big sister to provide support, it will not happen. However, once we see it happening we realise there should be far more of it. We believe in it.

There is vast potential at the upper end of the scale for shared services but it needs an initial push. Whether that push comes from someone with a stick or with a nice carrot, either will do, but we need an incentive to make it happen.

Mr. Seán Coughlan:

I was asked about the pitfalls facing people who may be looking to set up a social enterprise. I am making something of a generalisation but I believe when people are setting up, the biggest pitfall is that they believe their greatest need is money. The view is that the person needs someone to write him a cheque because he has a great idea and only then can he go out and change the world. The experience in Social Entrepreneurs Ireland has been that this approach is wrong. If we wrote a cheque for everyone who held that view, there would be many cheques written but the social impact might not be as significant as we would wish.

There are two answers to the question. The first answer is from the social entrepreneur side. A social entrepreneur may believe that the biggest pitfall is money but I contend that the biggest pitfall is getting good robust planning, which involves thinking through the idea first. Many people have the enthusiasm and the passion but if a venture is to succeed more is required.

At Social Entrepreneurs Ireland we are interested in more than funding organisations for two years. Although, we do that as well and we allocated funding of €500,000, all of which was privately raised, last week to eight projects. That is pointless if our funding finishes and then they fold as organisations. One could argue that is simply a wasted investment. How do we stop that from happening? We need to have an organisation in place that has thought through what it is going to do, how it is going to get to the people it seeks to serve, how it will grow and what it will do in terms of income or funding and related planning. There are huge resources available for people to take that step. If someone comes to us with a robust plan, the likelihood of that person getting the money is significantly increased. I point social entrepreneurs to resources like information from our website. The Carmichael Centre has information. The Wheel, a co-ordinating body, has plenty of information on its website. The social enterprise and entrepreneurship task force has a resources section. In a way, it is not sexy work but for the people who really want to make this happen, it is possible to see the potential.

Not everyone is going to be a leader. Everyone has a role to play but not everyone will be in start-up mode. I am referring to people who drive the enterprise forward. Other people need to come behind them. We need to get behind the leaders and, for the other people, we need to point them towards different opportunities for engagement.

The second answer to the question is how to encourage people to take the step of thinking through and planning first, before they go looking for a cheque. There is an analogy with investment in the commercial sector. In the commercial sector there are investors at all stages of the development of a company. There are friends and family when a business is starting out first. There are angels who, typically, put a small amount of money behind a person because they believe the person has potential. There are early-stage venture capital firms, private equity firms and banks to provide financing. As a company grows there is money and there are investors who are prepared to have those conversations across all stages of development.

One of the greatest challenges we face as a sector is that we do not have investors or funders at all stages of development. That dynamic means it is possible to have the hard conversations and that the people involved realise they have to get their planning and structure together to have a chance of getting support from a particular class of investor. That is why the Social Innovation Fund is critical. Social Entrepreneurs Ireland plays a role at early stages. There are other types of funding from well-established trusts and foundations and various philanthropic sources at later stages. However, there are gaps.

That means that we do not have conversations with social entrepreneurs, they do not put in place robust plans and their chances of success are somewhat diminished. It does not cost a lot of money to develop a structure. If funders are concentrated on each stage of the journey then social entrepreneurs will have a much more robust organisations. I would point them towards the resources needed to come up with plans because that is where they will get the money. The money will follow; it is not the other way around.

Damien English (Meath West, Fine Gael)
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I thank Mr. Coughlan for his comments and call Deputy Áine Collins.

Áine Collins (Cork North West, Fine Gael)
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I apologise for being late but I was delayed coming from Cork. Having listened to others talk I have realised that the sector has great potential.

Last Thursday I attended a conference held at the European Parliament Office on Molesworth Street organised by a European social enterprise group. I heard part of the conversation that took place. I wish to draw on the interesting analogy made by Mr. Coughlan that most small companies are social enterprises because they invest money into either paying themselves a wage, fund capital or whatever. He spoke passionately about growing a business, the various funding mechanisms available along the way and that there are great gaps in funding when one goes into the workplace. I agree with him that there are many similarities between social enterprise and normal entrepreneurship and that there are great gaps in the funding available for social entrepreneurship. We have a great opportunity to get some money for social entrepreneurship from Europe because this is a new conversation. At the conference last week I heard that a conference has been arranged for January in Strasbourg and I think somebody from the committee should attend.

Social entrepreneurship is an interesting new area. As some members will be aware, I have been involved in the area through the establishment of the Cork Foundation last March. It was established in order to match funding provided by the diaspora and invest in Cork by funding enterprise, entrepreneurship, businesses and social entrepreneurship. We held our founders' dinner last Friday night and funded our first entrepreneur, which is based at the Rubicon business centre, and a further €15,000 was given to a crèche in the North Lee area. There is great financial starvation at present and people cannot find money.

Mr. Coughlan is right that one needs soft support and people who specialise in sustainability, leadership and mentoring. Everything should be interlinked but it seems that we are dealing with social enterprise and the SME sector separately. We have a great opportunity to merge both types of entrepreneur because we are all trying to treat the same issues. Any community in a rural part of Ireland that wants to survive needs a co-op or social enterprise scheme that will bring businesses together so that they can afford to pay an accountant, the rates bill and other bills. They could all work together in a shared fashion. The day of setting up a business on one's own and surviving in a small town is gone. A lot of conversation needs to take place. There is not much difference between social enterprise and businesses.

I missed what Mr. Mulconry said on taxation and I ask him to repeat his comments.

Mr. Seamus Mulconry:

The form of grant conforms with a proposal that would allow anybody who wishes to set up a trust or foundation to retain the taxable benefit for themselves rather than the entity that they donate into. At present, if one donates to charity the taxable benefit goes to the charity rather than the individual. If one is chasing large donations and going after very large amounts of money, it is very difficult to get to those people. The only people who get to them on a regular basis are tax advisers. We seek a hoop that will allow us to reach the tax adviser and then reach the individual for very large donations or to set up a foundation themselves. We need to create some organisations or entities that can deal in very large amounts of money so that the game changer idea can be funded.

As the Deputy mentioned, there are gaps in the entire life cycle of social enterprises. Some ideas or organisations reach a certain scale where they can provide a national benefit but they need access to large funds. That is why we are trying to have more trusts and foundations so that we can fund such an initiative.

I shall outline one of the must frustrating elements of my job. People assume that I am a grant giver because I am an executive director of Philanthropy Ireland and all kinds of people with brilliant ideas arrive at my office. To be honest, of the 60 ideas that I have received since I joined Philanthropy Ireland I would recommend three of them for a serious conversation and only one for funding.

I will outline some of the ideas that I have received. Recently I spoke to somebody who has an idea and the technology to create a food bank for the greater Dublin area. A food bank is not about waste food being redistributed to the poor; it is about surplus food in the system not being wasted. The initiative would save thousands of euro for the charities who distribute food and solve a waste problem for companies. There are protocols in place that would ensure that the food bank can be done in such as way that it does not involve second rate food being given to people or a brand problem for a company later on. There are some game changer ideas. I refer to times when one looks across the table at a person and thinks their idea could make a difference. At present we do not have entities that can fund such activity but we need them. That is why we are so anxious to get increased funding into the philanthropic sector. It would mean that we could fund such initiatives and things that are unpopular.

If one asks most people on the street one will discover that they will not give money to fund ex-prisoners. If one can get a person not to return to jail then one will save a fortune. It costs more to keep an individual in jail for one year than it costs for all of his or her education up to and including degree level. We spend a lot of money keeping people in poverty. A smarter use of money would save ourselves a lot but that depends on a vibrant philanthropic sector. As I said earlier, Irish people are very generous but we need to get them to add a little bit of thought to their generosity thus ensuring more effective spending.

Áine Collins (Cork North West, Fine Gael)
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Was taxation changed in 2011?

Mr. Seamus Mulconry:

It was.

Áine Collins (Cork North West, Fine Gael)
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That was done at the request of the charity sector which is something that I could never understand. In a past life I was a tax adviser. Part of my work was to help people who asked me to help them reduce their tax burden by suggesting a range of options.

Mr. Seamus Mulconry:

The provision makes perfect sense for most charities who are dependent on funding being supplied through a direct debit, which is the most efficient fund raising mechanism for any charitable organisation. If an organisation has enough direct debits it will have a steady stream of income that will last, in general, for seven years and the cost of acquiring one is much cheaper than any other method. For all of those charities it makes perfect sense.

For larger amounts of money or highly specialised donations, we proposed our measure at roughly the same time the change in taxation was made. We fully support the idea that the taxable benefit associated with direct benefits goes to the charity rather than an individual.

Áine Collins (Cork North West, Fine Gael)
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Did the proposal include a financial cut-off point?

Mr. Seamus Mulconry:

Not a cut-off as such. We proposed that if somebody invests in a trust or foundation there should not be a cut-out. We want it made available to everyone up to €1 million but the taxable benefit should return to the individual. In some cases an individual will give the entire amount but we need that hook in order to reach taxation advisers and through them reach the high net worth people.

Damien English (Meath West, Fine Gael)
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Deputy Áine Collins asked a couple more questions on taxes and I ask Mr. Coughlan or Mr. Diarmaid Ó Corrbuí to respond.

Mr. Seán Coughlan:

I shall make one comment. I agree with Deputy Collins that social enterprises and enterprises are the same. I find it interesting that we tend to draw a divide between them. What is the divide between a social enterprise and a commercial business? Functionally they operate in the marketplace, they compete on quality of product, service and value for money. When one drills it down the only difference is where the profits go when a company is successful and profitable, either it goes to a set of individuals comprising shareholders or owners or it goes back into making a bit of a difference in the world. That is the fundamental difference between the two. Why would we, as a State or country, show bias towards one rather than the other? Why would we be biased towards supporting, in a very substantial manner, the companies where profits go towards benefitting a select number of individuals? I mean biased in the sense of not having supports in place, equal support and parity of support and access. I mean biased against companies where profits go to the general community. Other than that both types of enterprise are the same. Therefore, I endorse and fully concur with the perspective outlined by Deputy Collins. It seems to me that the economic benefits are the same because both create jobs and contribute to the local economy. Social enterprise provides a higher amount of social benefits. We need a parity of access and parity of esteem between social enterprise and business enterprises.

Áine Collins (Cork North West, Fine Gael)
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How do we make it happen? How can we change that?

Mr. Seamus Mulconry:

It is a change of mindset. When this case is presented, there are very few who turn around and say they do not agree. However, I just do not believe they have seen it in this perspective. What they tend to see or hear, when they hear "social enterprise", is that this is all the do-good stuff, as if there are a couple of trees down the road and we will walk over and give them a hug, and we will be fine. That is not what this is about. This is about business. Social enterprises are businesses and they operate as businesses. They live and die as any other business would. That is the key. It is a mindset change. When people hear "social" in the term, they think it is charity and do-gooding. That is what we need to change.

Áine Collins (Cork North West, Fine Gael)
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At the moment, I presume most social enterprises are companies limited by guarantee, whereas an entrepreneur is limited by share capital. Should we have a separate entity that would get both started? A company limited by guarantee is a bit onerous at the moment but, hopefully, we will change the audit status of that soon. Most of the community area is limited by guarantee at the moment.

Mr. Seán Coughlan:

It is interesting. Other jurisdictions have definitely looked at this and put in place structures that are either limited by guarantee with no share capital, which allows no profits to be distributed out to owners, or limited companies with share capital. For example, in the UK there CICs - community interest companies - which allow ownership of a company, which is a legal structure, but they limit the amount of profits that can be returned to the owners. If the company is not profitable, there is nothing to give out, but if the company is profitable, there is a cap on how much of those profits can be returned to owners or shareholders. Anything in excess of that has to be reinvested back into the social mission.

What this does, interestingly, is open up investment in capital markets to those companies to which they would not otherwise have access. Commercial investors may want to get some return on their investment. As a result of the social mission, they may be prepared to take below-market rate returns on their investment but they do not want to give the money and get nothing back for it. Therefore, one opens up a whole new class of capital for investment, which is a good thing.

In the US, another take on this is that companies that had a social mission built into them were very reluctant to invest a substantial part of their profits back into that social mission because, essentially, they could get sued by their shareholders for not fulfilling their fiduciary responsibility, which is to maximise shareholder profit and value. Therefore, there is a new company entity in the US, called the B Corp or benefit corporation. This allows a company to legally insert a social mission into a for-profit company. The company is still profitable but it protects the company from litigation in the event that it actually grows and wants to give something back to society. California was one of the first states in the US to introduce this legislation and many of the US states are starting to introduce this structure, on a state-by-state basis.

In answer to the Deputy's question, we do not have anything like that here. There are either two options. It is either a company with share capital or a company limited by guarantee. There are definitely models in other jurisdictions we could look to, and this is definitely something I would encourage us to do going forward.

Áine Collins (Cork North West, Fine Gael)
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It might be the ideal set-up for a small business as well, and both could be incorporated.

Damien English (Meath West, Fine Gael)
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We can look further at this issue of community interest companies in discussion on Report Stage of the Companies Bill.

Seán Kyne (Galway West, Fine Gael)
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I welcome the witnesses. It is a very interesting discussion and I am particularly interested in the last comments regarding the community interest companies and the B Corps. In some way, every company is worth its salt or is reinvesting to some degree, whether it be a local supermarket employing local people and sponsoring the local football team and so on. Most companies are putting something back, one would imagine, or they are doing so if they are sensible and responsible.

Mr. Mulconry said that if we were employing up to the EU average in social enterprises, we would be talking about 65,000 jobs compared to the 25,000 to 33,000 we have at present. At the same time, he said Dublin is the European capital of shared services. What else are European countries doing in order that they are more successful at this? There was mention of issues surrounding procurement in terms of LEOs, or whatever is the equivalent of LEOs across the EU. Is there more to it than that?

The witnesses mentioned the Carmichael Centre, which I had heard of, although I have learned much more today. He stated that the catalyst was somebody from the city council or HSE saying they would run with this and provide a building. Is that still a State-owned building where the company is paying peppercorn rent? Is that rolled out nationally?

With regard to European funding, will the witnesses expand on what is available and how that ties in with regard to structural funds? Particular reference was made to the years 2014 to 2020.

Mr. Diarmaid Ó Corrbuí:

We have the buildings. Whether they are State-owned or not, the Carmichael Centre has had two buildings since 1990. That was the catalyst in that it provided a base which enabled people to come together. We need that physical space to make it happen. We have tried to replicate it around the country and one of the biggest hurdles, which was before NAMA and all the rest, was that local partners were needed, as we had initially with the Carmichael Centre, where the Eastern Health Board, Dublin City Council and certain individuals decided to make this happen. We tried this nearly ten years ago in Cork and, while it nearly happened, it did not. Unless there is follow-through at the early stage, it will not happen. It is like the position with seed capital. It is that initial push to get communities together and say this model works and it can be seen in the Carmichael Centre and in other parts of the world. It does work but it will not happen with local groups trying to get together and scramble together to get up and running. Some initial leg-up is needed, and when that is available, it can be a fantastic model.

Mr. Seamus Mulconry:

A point was made about Dublin being the shared services capital of Europe, which ties in to a broader policy question. Among the industries we attract into Ireland, we can attract them into specific locations. When Accenture set up its shared services centre in Dublin, it was told it would need to set up the centre between the canals and that if it tried to do it on a site outside the main centre of town, it would not be able to do it because it could not recruit the right people for it. If one is now doing something in the digital space, one is also going for Dublin's inner city.

Technically, everybody says that, with modern technology, you can run a business from anywhere. Guess what? You cannot. Most of these businesses run on people and the people need to be in a central location. If one wants to recruit for the high-tech sector, it will be recruiting people those who are in the city centre and down on the digital alley. The beauty of social enterprises is that they tend to be small local businesses dealing with local needs, so they can be encouraged anywhere throughout the country. There is a real problem for policymakers at the moment. If one goes down the high street of any medium-sized town in Ireland, one will see shops closing like there was no tomorrow. A lot of that business is migrating to very large supermarkets. What happens to those towns? What are people going to do if there are not small local businesses? There really is an onus on policymakers to start thinking how we can replace with other enterprises some of those small local businesses and shops which are not going to survive. I believe social enterprise can play a role. It is particularly of interest to me because I come from that small shopkeeping background and I can see that the kind of business I grew up in no longer exists.

Mr. Coughlan may want to handle the European question.

Mr. Seán Coughlan:

In terms of what we need to do in order to enable the sector in Ireland, one of the best signposts in terms of what needs to happen, and I have touched on some of the components of that, is the Forfás report. Forfás was commissioned to publish a report on the potential for social enterprise in this country. That report was published in June of this year. I emphasise that we are very encouraged by the appointment of the Minister of State, Deputy Sherlock, to co-ordinate social enterprise across Government. The Forfás report contains a number of recommendations around leadership development, procurement, financing and funding, and policy development. Essentially, that is a blueprint for how this sector can be developed and reach its potential in Ireland.

We are asking the Government to act as soon as it can to implement the report's recommendations.

In terms of European funding, the social business initiative launched by the EU two years ago is specifically tasked with encouraging social entrepreneurship and social enterprise across the Union. Its remit extends to the end of this decade as part of the broad Europe 2020 strategy. The conference in Strasbourg that was mentioned several times during this session is being driven by the social business initiative. A fund of €90 million has been developed under the initiative for investment in social enterprise. In fact, that is a seed allocation, the intention being to leverage it tenfold using the European Investment Bank. In other words, we are potentially looking at a fund of €900 million for social enterprise projects. These moneys will be distributed to agencies which will then select local social enterprises in which to invest.

This initiative is indicative of the substantial commitment to social enterprise at EU level. I would strongly encourage both the Government and the committee to support it. An expert group has been established whose function is essentially to determine policy under the initiative. Its membership includes representatives of the sector, that is, individuals involved in social enterprises and in agencies that support social enterprise. Paul O'Sullivan, chief executive officer of Clann Credo, is the Irish representative. The expert group reserves a majority of its membership slots for nominees from member state Governments. To date, however, as far as I am aware, Ireland is not represented.

Damien English (Meath West, Fine Gael)
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Again, Mr. Coughlan has given us several issues to consider. Indeed, today's engagement has been useful in terms of highlighting the types of activities and initiatives on which we should focus. I am struck by what Mr. Coughlan said in reference to job creation structures in this country. Those structures are set up to create jobs, not to achieve profits. As such, there is no reason that social enterprises cannot tap into the infrastructure. We certainly can work to achieve progress in this area. Would it be useful to classify enterprise centres with incubator units as social enterprises? Should start-up courses for businesses include a specific aspect on social enterprises? These are issues we will consider in the context of getting the message out about social enterprise.

I understand there are some 7,000 or 8,000 registered charities. Why do we have so many and should we be looking at ways of reducing duplication? Mr. Ó Corrbuí is right about the carrot and stick approach. Government funding has been cut in many areas, but we continue to grant aid many of the organisations we are discussing here without, unfortunately, effectively encouraging and rewarding those which work the hardest, engage with shared services and so on. There is a role for us in trying to make this happen, part of which is to look at the number of charities. Does Mr. Ó Corrbuí see an issue there?

Mr. Diarmaid Ó Corrbuí:

It is sometimes dangerous to focus too much on headline numbers. There are somewhere between 8,000 and 12,000 charities in Ireland, more than half of which are local, community-based organisations which are volunteer only and employ no staff. Another 20% employ fewer than five people, with only 2% having more than 50 staff. The sector is very fragmented but I would not say there are too many charities. In fact, we probably have fewer per head of population than is the case in the United Kingdom.

The problem is that we do not provide sufficient support to those charities that need to go to a certain scale. The market signals are not strong enough and there is not the degree of openness and transparency one would require. Those charities which move on and expand need to look at the best way of delivering their services. They do not have the same profit motives as private sector enterprises and, therefore, are less inclined to engage with shared services. These organisations may need incentives to examine their cost base. When they grow to a certain size, they should be examining whether, for example, there is a need to replicate all their back office functions. This is an issue applying to only a small segment of the sector.

The main difficulty is that the social enterprise sector is neither recognised nor understood. We do a lot of work around the country providing social and enterprise training. If one goes to the county enterprise board and mentions social enterprise, one is met with blank faces. We need to forget about the word "social" and emphasise that what we are talking about here are enterprises that just happen to be social. If that message goes out, it will be a good achievement.

Damien English (Meath West, Fine Gael)
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We need to sell the job creation aspect; that is the key.

Mr. Seamus Mulconry:

When he examined the social enterprise sector, Mr. Frank Flannery, who is not much into do goodery, concluded that there is job creation potential there. This is coming from a fairly hard-bitten businessman. In Dublin City University, meanwhile, the hottest courses are on social enterprise. A new generation is coming through the education system whose members have a genuine interest in social enterprise and the talent to make it happen. If we can persuade the system to make a few minor changes to facilitate that talent, we will see significant job creation potential. It will require building a different economy to the one we had during the boom, which, after all, did not work. Social enterprise has a role to play in that effort and in providing, to steal a phrase from a leading supermarket, real jobs for real people. We are not talking about jobs that are only suitable for people in a white coat with several degrees; these are real jobs in local communities that will allow people to make a contribution not only through their work but through their involvement in those communities.

Mr. Seán Coughlan:

I concur with my colleagues' summaries. Social enterprise is enterprise - that is the message we are trying to get across. The potential is enormous. All it requires is a little leadership from both sector and State to tap into that potential. It is about job creation, enhanced social justice and building a society of which we can all be proud.

Damien English (Meath West, Fine Gael)
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I thank the witnesses. We will be in touch with them in due course. We had already decided before today's meeting to place a greater focus on this issue in the coming year. If we all work together, we should make progress. Our next step is to invite the Minister of State, Deputy Sean Sherlock, for a discussion on this topic. We will take it from there.