Rebecca Scott OAM On Outcome Based Funding Models And Scaling Sectoral Impact Successfully
Rebecca has spent her whole career working in innovation, the first half of it in science at the CSIRO, the second half as a social entrepreneur.
She’s particularly interested in how we can solve complex systemic issues using multi-disciplinary practice. She’s the Co-founder and CEO of STREAT, a Melbourne-based social enterprise that works towards human and planetary health. STREAT works with marginalised young people aged 16-24 years and provides them with a healthy self, job and home. The organisation runs a portfolio of 12 foodservice businesses, including cafes, an artisan bakery, a catering company, and a coffee roastery. In its first decade STREAT worked intensively with over 500 young people, and with a further 1,500 through its outreach programs and short courses.
With the organisation wanting to play a larger role in addressing catastrophic climate change and biodiversity loss, STREAT’s second decade will focus on expanding its training and employment pathways for young people into green jobs. The first of these will be roles into urban horticulture and farming and be part of Moving Feast, a social enterprise sector collaboration to create a fair and regenerative food system for Victoria.
Bec Discusses her perspective on the current Australian social enterprise sector and scaling sustainable businesses through cohesion Amongst the impact sector.
Highlights from the interview (listen to the podcast for full details)
[Tom Allen] - Rebecca, can you please share a bit about your background and what led you to working in social enterprise?
[Rebecca Scott OAM] - I think I fell into it almost accidentally. I was working at CSIRO, and I would say I've always been socially intrapreneurial in the roles that I had there. My first decade in science I had a whole heap of different jobs at CSIRO, but the typical thing that I was doing across those roles was building new stuff. That might've been teams, projects or initiatives, so I certainly had a lot of building experience, but not with the same complexity as running my own organisation. I stumbled into social entrepreneurship when I was doing some volunteer work in Vietnam for three months. I took some annual leave to go and do a volunteer project and I stumbled upon a social enterprise café in Hanoi. From that first meal onwards, I was hooked.
I'd never heard of social enterprise before that, and I think if I had known there was such a field or an approach to solving problems, I probably would have ended up doing it sooner.
But certainly, when I went off to university, there was no such thing as a degree in social entrepreneurship. When I discovered it, it was like a light bulb moment for me. It was really defining.
It's amazing that literally from discovering that café in Hanoi, you then went on to co-found and now be the CEO at STREAT. I'd love to hear a little bit more about this organisation and the key challenges that you've faced in turning this into one of Australia's social enterprise successes?
Thank you for saying that, but it's been a one step forward five steps back this decade, as it is for the majority of social enterprises! The thing that we probably did right from the beginning is we built an idea of scaling right into the DNA of our enterprise. We said that what we want to do is we want to build a model that can be highly impactful and self-sustaining.
We've got this decade long goal to get to that point of sustainability, but we also understand that in a low margin industry like hospitality, we're probably only going to achieve that through scaling.
At that stage, the way we were going to scale was quite different to how we have ended up scaling. We anticipated being a whole fleet of street food carts, and we are certainly not that, but that idea of scaling to try and address the problem we always understood.
Whilst I believe very heavily in local solutions and place-based work, we wanted to really be able to shift the dial in the local area or city that we're in.
What we could see in projects around the world, was that the social enterprise sector on the whole has remained as lots of little industries. Scaling is particularly hard for these types of organisations, but we wanted to see if you could scale these organisations and really shift the dial on those problems? With a problem like youth disadvantage, it sounds easy to solve looking forward, but in hindsight, we realised it was a lot harder than we thought it would be. Now I understand the intricacies of why it's harder than it would seem. If you look around the world, you can say, "well there are franchises that have scaled," so you can see how sectors have been able to scale, particularly in the industries of hospitality and food services. But it's very different to try and apply that same thinking into a social context.
Absolutely. You've just spoken about place-based or city-based approach and your focus on creating impact within that space that you exist. Looking at the responses to the COVID-19 pandemic last year and the way that you instigated Moving Feast (a collective of different social enterprises working together towards a fair and regenerative food system), I'm keen to hear about what you learnt in assembling this project, and how others might then replicate systems-focused solutions in their own companies?
It's a really interesting challenge and also opportunity that the pandemic brought along with some silver linings. In the first instance of the pandemic, what we were trying to do was assemble a whole bunch of our peers who we could see like ourselves were going to be closing their doors to their customers at exactly the same time food insecurity was really rising. Some of the challenges of doing that work included that obviously we were trying to do it in a pandemic, so there were all the safety issues, dealing with social distancing, and operating in different ways to how we normally would. Trying to get thirty organisations working together over Zoom, where in some cases these organisations and people we had never even met became challenging! Many of those organisations we knew well, but in some cases the key staff we were working with we didn't know.
But the thing that was really exciting from that very first conversation, was that it was clear there was nothing but a strong desire to collaborate. My sense is if we picked up the phone years earlier, we would have found many of those same organisations that were keen to collaborate.
The pandemic was a burning platform for all of us. One learning was, why didn't we [pick up that phone] earlier? We knew that this work needed to be done, so whilst we were responding to the pandemic, certainly we had been redesigning what the food system could look like and the role that we could play in a larger collaboration. While doing this, we were also doing a lot of reading amazing research about the food system Victoria needed that had been covered for years by food system academics. During the pandemic, whilst it was us pivoting, it was certainly a strategic pivot where we were moving into that direction anyway. Some of the challenges probably have been around how do you quickly create the right vehicle or umbrella to do work within? If you're bringing in money to work across a group, what vehicle does that money sit in? How does it come in?
Not all of the organisations that we are collaborating with had the deductible gift recipient status, so they're not actually able to take on granting money. We've got different structures, so some of us are companies limited by guarantees while others are incorporated associations. We're a real assemblage of different organisations, and also, we range in scale from CERES who would be the biggest organisation that have turned over $15 million with a couple of hundred staff that has been operating for 30 years, through to smaller organisations. These might be a two-person organisation that have revenue of a couple of hundred thousand dollars and are only maybe two years old. The difference in scale has been a really interesting thing that we've got to deal with because there might be enthusiasm from everyone, but there's different levels of capability and capacity within those organisations.
A really consistent theme particularly amongst the smaller social enterprises was them saying things like, "please understand that we're only small and we're not as big as some of the larger organisations, but please don't leave us behind."
Building a whole heap of projects and activities underneath a larger umbrella that allows an organisation to not only work at the right scale for them, but also not be left behind, is one of the exciting possibilities in collaborating like this. You can actually draw the smaller organisations into the slipstream of some of the larger ones, and you can really do a lot of sharing not just of knowledge, but also optimising assets. We were optimising our facilities, logistics, and there was a large amount of sharing resources in all directions. We were doing all of our work very much in a knowledge commons and generous sharing of everything. There is a real opportunity to not just share knowledge and be able to boost some of the smaller enterprises, but also really to start doing a lot more business together. We began asking, "what does it look like when we start to integrate our supply chains and become customers of each other as well?" Most social enterprises are normally skating pretty thin to the ice. There's not normally large balance sheets that we have, so if we grow our own internal business through conducting business with each other, even if we added 10% of revenue to our bottom lines, that would be really significant for many of us.
I think there are real opportunities to help grow each other, and that's before we start to say, "what are the things that we all need, we all procure and what would social procurement across the whole group look like?"
If you could start to make savings and get efficiencies as a group, I think there's incredible opportunities for collective growth.
There are some great insights there, and you've seen a lot of different social entrepreneurs starting things up through collaborating with them directly. What do you see as some of the most important traits of a social entrepreneur and where can they commonly run into trouble?
I’m personally used to biting off a bit more than I can chew, chewing madly and then trying to hustle as fast and as hard as I can. In that sense, I would say that there is not a day that goes past where I wouldn't be trying to scare myself or push myself outside my comfort zone and ask, "how could we do that?"
A part of what I've needed to do in this project is try and imagine not just the trajectory of what could one organisation scaling actually achieve in a period of time, but instead start thinking about how as a system we could achieve more?
What happens where instead of 1+1+1 only equaling 3, instead in a highly integrated ecosystem it could equal more?
That's the thought that gives me chills, where I want to lie awake at night and imagine greater things. Right now, where I see us sitting as a globe or a sector within the globe is we're a group of organisations that have come together because of the pandemic, but we are sitting within a way bigger crisis or a nest of crises. We're experiencing the climate crisis which is also an existential crisis as the pandemic has been for many people. We really as a sector have to do our most courageous, evidence-based and cleverest work in this next decade. I really believe that we're facing such an existential threat that we've really just got to be so clever about how we work together this next decade.
Incremental growth of each of our individual enterprises just doesn't feel like it's going to achieve what we need to achieve.
If I look around the world and see what's most exciting me, projects like Catalyst 2030 where you've got large distributors addressing the sustainable development goals but doing that in regional or place-based collaboration are one of them.
They are understanding that we scale through distribution and connectivity rather than by replicating or taking something and then scaling it to be a really large size. Really what I'm interested in is what does hyper collaboration look like and how do we do that as a sector?
She is really a revolutionary food system person who built a whole community of food innovators in California, but she did so in a style that I really like that open, collaborative and generous with knowledge approach. She's a real food hero of mine, so I've been reading a PhD about how she conducted that open innovation approach. A final piece of really influential work that I read a number of years ago now was actually done by the Victorian Eco-Innovation Lab when it existed at the University of Melbourne a number of years ago. There was a piece of amazing cooperative research conducted imagining what Australia could look like in 2040. It was a piece of research called Visions and Pathways 2040 and started by assuming that progressed to 2040 and are now in a climate safe environment. We've achieved all of the goals that we wanted from a social and environmental perspective, so what are all the different pathways that we could take to get to that clean and green 2040?
It mapped out all of these pathways that then culminated into four big different directions we could take as a country, and it dealt with the nuancing of that in these four different pathways how do we end up with a different Australia at the end of each of those?
Who has the power in those pathways and who fixes those problems? Is it government? Is it corporations? Is it grassroots community organisations who are the actors leading the change? What are those cities and neighbourhoods looking like at the end of those four different pathways? I think what that piece of research did is it really helped me grapple with my own methods of strategic planning.
When I tried to spend a lot of time thinking about what does 2040 look like and developing STREAT’s 2040 plan that I wrote two years ago, it really helped us grapple with which pathway we were on and how we want it to work and who we wanted to work with. It was a really foundational piece of thinking that really allowed us to inhabit the future, but in a really nuanced way, and then work back from that future to where we are now for those people who love strategic planning. I absolutely love inhabiting the future, so that was a really seminal document for me.
Maybe this is in more mission-led ways, so I think of those large mission-led projects that could be either thematic, in this case asking how do we build a fair and regenerative food system? Or they might be addressing a particular issue that a cohort is facing. You can divide the sector in multiple ways, but if you imagine you were building shadow portfolios for the government and if the social enterprise sector created the structure and the connective tissue that allowed us to do mission-led work against major problems, we could do things in a clever sort of way. We would understand that we'd need to be connecting with outside of the sector as well, because the work requires all actors to be a part of that. Those are the thoughts that I get really excited about. We understand that cottage industries and small enterprises connected to create ecosystems actually create a phenomenal amount of scale, but our strength comes really in our hyper-connectivity.
One of the things that makes social enterprises so effective as social innovators is that we are close to the ground.
Grassroots connectivity means we are buying into organisations and speaking to both businesses and communities in our languages. What it means is that we're really universal adapters.
We’re almost like the plug-in adapters you take when you travel overseas for electronics. I see social enterprises as being really good at that connecting multiple sectors and parts in the system. If we see ourselves as constructing shadow portfolios that are addressing large scale issues, I get really excited about what that looks like. I think we are going to need new government structures, ways of funding work and ways of creating organisations that are quite porous. We shouldn't see our organisations as being concrete or bounded, but instead that IP, resources and people should be flowing in and out of the organisations.
There is so much potential there. You've mentioned governments and social procurement, so I'm interested to hear when looking at social enterprise from a policy perspective, what do you believe are some of the key steps that need to be taken to help foster and support an innovative social sector?
I firstly want to appraise the Victorian state government particularly for these last three to four years. They've shown some real leadership in developing its first social enterprise strategy. Whilst it had a range of areas that it was looking at, it really has been doing incredible work. It's developed a social procurement framework and has invested heavily in the sector, particularly through spending on large infrastructure projects.
If you've got a one-billion-dollar infrastructure project that the government is funding and then 3% of that is procured through social enterprises, you can imagine those big shifts can create phenomenal growth on the ground. Social procurement has been a really critical change.
The gaps that I still see both at a state and federal level is within the social enterprises working in training and employment pathways for particular cohorts. These are what we call Work Integration Social Enterprises, or WISE's.
It's fairly rare that Work Integration Social Enterprises are embedded or a part of the state/federal employment service system, so many of us are doing the work of employment service providers, but not getting any outcomes-based payment for it.
I'll give you an example. For our first decade at STREAT, we've had less than 4% of government funding across that decade and less than 1% of that has been through our state government. That hasn't at all been for creating training and employment pathways that we do for the young people that we work with. In our first decade, we've made direct service savings to the government of $49 million. We've done an incredible amount of research and built an incredible model with RMIT University a number of years ago using all of the costs from the treasury of the young people who came to us for help. We needed to know what it costs down to the dollar for a young person who might be incarcerated for a night, for one police call out or for going to the emergency ward of a hospital for one visit? At that stage we had 400 young people that had come through STREAT and graduated, and what we did is using all the real costs that the government gave us, we then put the database of 400 young people into that model. What we found was that at an absolute minimum, most of the young people who came to STREAT were accessing about $50,000 worth of government funded services each year.
Our interventions end up costing $20,000, and then what we do, is of that $50,000 of services that young people were accessing, is save it in year one. In year one, we would save just over $30,000 of that $50,000 and then those savings would stick. The young people that we're working with are right at the pointy end of their lives. Our young people, especially those who are coming through prison and juvenile justice will cost the system $4-$5 million across a lifetime, because what starts out as juvenile justice cycles into the adult justice system. You're talking about young people who will cost governments and society an incredible amount of money. That $20,000 intervention and of course that one year will be absolutely life changing. Those savings flow onto the government and community, but this does not even mention the incredible difference it makes through changing a life.
The moral obligation that we've got to help people reach their potential and not just be stuck in a service system is crucial. But, if I think about where the challenges are when you're doing holistic work that works across lots of different portfolios of government, social enterprises often struggle because we're not getting funded for that work.
We don't turn up to the Department of Justice and say, "we want $200 for savings from this young person," and then we go to housing and get another bit of money. We exist to work holistically, but the funding structures of governments don't do that.
Unless we can start to receive social impact bonds across every state and territory to get paid for holistic work or create a payment by outcomes system embedded as a part of the employment service provision across a state and federal level, we're really not getting paid for the work that we do.
I think that's just such an incredibly missed opportunity. At the moment, what we've also got is this incredibly perverse situation that's happening where many other people are being paid for the work that we're doing! Employment service providers in this last decade have been paid over $10 million for work that STREAT has done. We have received no money through the system for the work that we do with young people, but the employment service provider who refers a young person to us will get outcome payments. They can receive those outcomes payments at 4 weeks, 13 weeks, 26 weeks and 52 weeks. If they're coming through for example a disability employment service provider, they can get up to $25,000 for work that we've done across a year with a young person. There's a ridiculous situation where not only are we not being funded within the existing service provision for work, but someone else is being paid for that!
There's a real opportunity for us to demonstrate that our models have a far higher efficacy than the existing system that is being funded for low outcomes.
If I look at the Job Active system, the efficacy of a Stream C young person that goes through that system (the most complex young people) is 27% as opposed to my social enterprise that sits between 70- 80%.
At the moment, we're just not getting the investment into social enterprises as service providers. I certainly am very grateful for the social procurement that happens, but in a low margin industry, government would have to buy $400,000 worth of sandwiches from us to fund one young person going through STREAT in a 5% margin industry with a young person costing $20,000. It's a really indirect way to try and scale social enterprise only through procurement. We've actually got to be seen as legitimate service providers who are funded to do more of our work. That doesn't mean that we flip our entire model and become highly government dependent, but imagine if at the moment where we're trying to fund our work entirely through our business engines, you will have to scale your business engine to be so enormous to do that intensive work. However, if governments became partners in that work, even if for every dollar that they put in we matched it with a dollar from our profits, they would still be getting a service that's way more effective and for a better cost than their current system.
We would see our sector start to rapidly grow, and of course they could do other things like increase the amount of impact investment that we get or increase access to affordable capital or support groups, intermediaries and the ecosystem.
They could also support capacity building, but I think probably the most game-changing thing that government could do right now is establish a payment by outcomes type mechanism for our service provision.
I certainly see so much potential in that PBO Approach and know others like yourself who are working very hard to make that happen. To finish off Bec, what books or resources have inspired you that you would recommend to others?
I would first say jump online, go to the Catalyst 2030 website and download their incredible thought pieces and look at the research that supports that project. It's not a book, but it's a very dense document, and they've actually now got a number of amazing reports that they've commissioned. They're really inspirational. Another really great approach, and it's not just from social enterprises but from a bunch of organisations collaborating together on systemic issues and place-based work is a project from the UK called Participatory City. I've just loved the way that they've understood their local community and activated a whole heap of enterprises and community organisations to come together to create a fabric of incredible collaborative opportunities that are place-based into communities where they are suffering in socioeconomic terms. That's providing a lot of inspiration right now and it's a beautiful project. Last year, I was also really inspired to see a couple of terrific reports that came out in response to the climate crisis, but particularly in the areas of training and employment.
One of those was the Clean Jobs Plan or the Alpha-Beta Jobs Plan. That report identified 76,000 green jobs that we need in Australia urgently, but of all of those 76,000 jobs, a third of those were at a vocational level.
If I look at the social enterprise sector and all of the jobs that we need for the future, I think there is a terrific opportunity for the social enterprise sector to focus on those clean green industries that we need, but at that vocational level with people who often haven't finished high levels of schooling and haven't gone to university. These individuals often don't have high levels of literacy, numeracy or English as a first language. That was a fantastic read, and that's certainly where we are focusing in this upcoming decade, far more around what are those other pathways that we want to create for young people into green jobs. We kick start the first of those projects next month I'm very excited to say, and they will focus on horticulture and urban farming.
After a decade of having young people training in hospitality, you'll now be able to come into Streat and choose as of July to be a young urban farmer or a young hospitality person. But then I hope that over time we open up more and more green job pathways.
That report from the Alpha-Beta Jobs Plan was inspirational. There was also another terrific report called the Million Jobs Plan, and that was by a group called Beyond Zero Emissions. It actually identified a million jobs that we needed in green industries, so it had a far greater number of jobs. But once again, it had a similar idea that there are these new, incredible opportunities to conduct both social and environmental justice at the same time. All four of those reports are still sitting on my bedside table. Also, I'm a super nerdy person who loves reading other people's PhDs, so I'm actually reading a PhD at the moment. It's an open innovation PhD that was written about the amazing Alice Waters and her San Francisco based enterprise Massa Organics.
