Canada’s innovation system is fragmented and needs to integrate civil society, including non-profits and philanthropy, to deliver lasting prosperity for Canadians, say innovation and non-profit leaders.

Government policies and practices are developed, delivered and measured in silos, funding is short term rather than sustainable, and existing rules don’t always support collaboration, they said during Carleton University’s annual TD Lecture on Philanthropy.

“In my view, what we get isn’t true innovation. It’s activity that’s fragmented,” said Lisa Lalande (photo at right), CEO of the Toronto-based Century Initiative, a national non-partisan charity.

“We fund short-term projects, but not the core strength of organizations, the engine that keeps it running,” she said. “We demand collaboration, but the rules don't always support it.”

“We want data-driven decisions, but we don't always fund the research to get the data that we need and to get the insights that are needed to help us understand what is actually working and what isn't working,” Lalande said.

“Right now, we have real gaps in what we know [such as in immigration] . . .We're consistently underfunding this work to build that knowledge,” she said.

When it comes to rules, “in many cases, it's not just that organizations are struggling within the system, it's the system itself is out of date,” Lalande said.

Canada can’t expect to implement new approaches or to scale great ideas if the rules are designed to keep everything the same, she added.

There are still limitations on how non-profit organizations can work with partners outside the sector, making it difficult for non-profits to access the kinds of financing that other sectors use to grow and experiment, she said.

“We tie funding to rigid and short-term requirements that don't match the flow of how change actually happens, and then we don't fully have an updated legal framework to reflect what modern organizations actually do.”

“I like to say we’re asking non-profits to solve 21^st century problems with a 20^th century rulebook,” she said.

 “I really would like to see this sector situate itself, not as just a funder of good or service delivery, but situate itself alongside the efforts of government and business as a partner in their efforts to address our challenges,” Lalande said.

Canada’s “fragmented innovation system is not creating prosperity for Canadians,” said Andrea Nemtin (photo at right), CEO of Social Innovation Canada and former CEO of the Inspirit Foundation.

When it comes to the country’s biggest challenges – housing, climate, inequality – “we’re not seeing innovation at the scale or speed we need,” she said.

“This is because we haven’t built the structure or the systems required to apply innovation to these challenges. We’re still operating as if innovation lives in one part of the economy.”

“We conflate invention with innovation 100 percent, prioritizing the creation of new ideas, while under-investing in their adoption,” she added.

The focus is on startups, tech and commercialization, while social and environmental challenges are relegated somewhere else without sufficient resources or methodologies, Nemtin said. “The separation doesn’t work anymore. These challenges are complex.”

“They require coordination between government, industry, academia and communities. Complex challenges require social innovation to ensure participation, learning, and experimentation and alignment to create lasting change.”

“The challenge then is not only to generate innovation, but to organize a system so innovation can contribute to widespread public benefit,” Nemtin said. “If Canada wants an innovation system to serve all Canadians, it must strengthen not just technological capacity, but also the system capacity.”

Canada is not investing in its human capital

In opening the panel session, Lee Rose (photo at right), manager of community engagement at TD, pointed out that Canada is the process of reinventing its economy, with a focus on innovation and productivity, “but the emphasis in that has been on big physical infrastructure.”

“I would suggest to you that the philanthropic and non-profit sector has been almost invisible so far in this agenda, whether that's by the federal or provincial governments,” Rose said.
“Yet the sector can and should play a vital role through its human capital, through building strong inclusive communities that can attract global talent through services, through philanthropy with its opportunity to take risks, and a greater collaboration between governments, the private sector and the philanthropic non-profit sector,” he said.

For the last 30 years, Canada has invested an enormous amount to create world-class university-educated talent, said Dan Breznitz, Munk Chair of Innovation Studies and co-director of the Innovation Lab at the Munk School of Global Affairs & Public Policy at the University of Toronto.

Despite this investment in human resources, “all of our innovation economic policies utterly and overwhelmingly focus on natural resources. So we basically have been walking on one leg instead of two legs,” he said.

Canada has two of the world’s most coveted resources – a highly educated population and vast natural resources – required for growth, innovation, prosperity and wellbeing, Breznitz said. “And yet we have a blind spot.”

Even the federal government’s “Build Canada” strategy consists of “basically connecting holes in the ground, where we dig stuff or trees, to ports and pipelines and easing up regulation to allow even more holes to be dug and trees to be cut,” he said.

“The question is, ‘Where are the Canadians and where is the immense human capital that we have in our creativity and innovation embedded in this vision?’ And the answer, it is not.”

Such a strategy in fact creates incentives not to use Canada’s talented human capital or creativity

because domestic companies “can make a lot more money and a lot more profits without doing the risk and uncertainty of innovation or even engaging with new knowledge,” Breznitz said.  

Canada is a global leader in higher education and R&D, from AI to quantum computing to diabetes and weight-control drugs, he noted. “And yet what we see is a static, maybe even decreasing, standard of living with the median market income actually declining in real term, now sort of coming back to the levels that they were in 1976.”

“Our productivity and GDP growth is stalling while at the same time that we are more and more and more educated,” Breznitz said.

“We are unbelievably bad in not investing in workers,” he added. “Our businesses and public sector does not buy new capital equipment, does not engage with new technologies.”

“And we have dismal business investment in innovation, or as a matter of fact, in any kind of engagement with innovation and new knowledge,” he said.

Businesses exist to make a profit, he said. “And if we have created a system in which we can make ever more higher profits without taking risk, they will never engage with innovation.”

“We have universities, research institutions and ideation which is as good as it gets in the world, coupled with basically almost third-world capacities in terms of both the government and the private business to use all that creativity and come up with social and economic innovation,” Breznitz said.

Social innovation needs to be integrated into the innovation system

Lalande said non-profits create the spaces where people come together, differences can be worked through, and dialogue actually happens.

“But if those spaces weaken, it becomes much harder to build consensus, to share information, or even to implement new ideas. If that happens, innovation doesn't just slow down, it actually stalls,” she said.

For example, the federal government has priorities in climate and food security, and business has the technology and the capital.

“But none of it works unless you have trust on the ground, particularly as we start to think about development in the North,” Lalande said.

“ I think that’s where nonprofits come in, especially those working with Indigenous communities. They already have those relationships. They understand the realities on the ground.

They can help test new approaches, train [people in] new technologies, and support solutions that are actually led by the communities themselves.”

Canada also needs to be thinking differently about capital, “not just in offering grants, but investment capital, because philanthropy can help shape markets,” she said.

This could include investing in local businesses so they stay rooted in communities, or creating funds or loan guarantees so nonprofits can own assets like housing or buildings “instead of constantly operating at the margins.”

There are billions of dollars sitting in about 11,000 foundations across the country, Lalande noted.

Philanthropy does many good things, but big philanthropy tends to focus a lot on hospitals and health care, “not to disparage some of the good causes,” she said.

But Canada needs to think “about how philanthropy can use its risk capital, its patient capital, be there for the long haul, and to work with government and how to get governments of all time to work more closely with philanthropy,” Lalande said.

For example, she said, there are college-led “smart farm” networks that are testing grounds for precision agriculture robotics and sustainability practices. These smart farms are government- and industry-supported, but as they look to expand into other communities and other locations, “this is where philanthropy can see itself as an investor to work alongside government and industry to scale these networks.”

“Social innovation has to be integrated into our innovation system,” Lalande said.

“We can't have philanthropy doing what our federal government needs to do or provincial or municipal governments need to do, but they [philanthropic organizations’ can de-risk 100 percent,” she added.

“I think that they can influence, they can advocate, they can influence, they can help to support folks to try and create movements and systems change.” I do think that philanthropy can play a more significant role.”

Canada also needs to focus on investing in non-profits for the medium to long-term, not the short term, Lalande said. A minimum five-year investment is required for non-profits “to have the breathing room to actually take an idea and make it come to life.”

Instead “what I've seen is we've pulled back on investing in local communities. The youth centres, the service clubs, the places where people come together,” she said. “That’s where trust is built.”

The consequences of de-investing in local communities is more polarization, less connection and harder time solving problems together, Lalande said.

“So innovation doesn't just depend on ideas or capital. It depends on trust, on people being able to engage across differences. And if we lose our ability, if we lose that, if we lose that as Canadians, I don't think we can move forward as a country.”

“Real prosperity is more than GDP”

Breznitz said Canada actually has a lot of social innovators. “What we don't do very well is celebrating them, helping them to understand how they can have more influence, but also teaching the people who think that they have a solution, because they don't understand what's happening on the ground, that the solution actually already exists.”

Canada needs to create a very pragmatic vision of what it wants to do in, say, the next 15 years, and then start doing the reverse-engineering of how to get there, Breznitz said.

“Let’s get us a map of where we actually want to go, then contextualize it, and then reverse- engineer,” and identify how Canadian philanthropic organizations can help the country get there, he said.

Nemtin said at the community level, people are creating the solutions around social and environmental issues because they need to, for survival.

“The challenge is those solutions cannot be sustained. They hit resource and policy barriers to be able to be sustained, and . . . they don't have the resources to share them with other folks either.”

“This is where big philanthropy is now investing their funds, to be able to listen to community, and then create the change that community needs to be able to do the work that they need, they know they need,” she said.

Nemtin said Canada needs national resources to flow to the community level, so community innovation drives the change around the national priorities. “How can we support the social sector to actually influence policy change that then shifts resources?”

Canada needs to expand its innovation system into a “quadruple helix” that includes not only government, academia and business but also civil society, she said. “And this is where philanthropy and the non-profit sectors live. They live in civil society.”

Such integration would mean government is doing innovation support, policy frameworks and regulation, while businesses doing R&D include social entrepreneurs and non-profits.

“Real prosperity is more than GDP,” she said. “It requires both productive capacity and social capital. We do need productive capacity, we need to be able to innovate beyond innovation. But we also need the social capacity.”

“We need increased support for the social sciences and humanities if we're going to be able to solve these challenges,” along with people who can think in a systemic way, Nemtin said.

“These are competencies that need to be more invested in in our academic sector, and the bridges between academia and civil society need to be strengthened. And then civil society brings collaboration, practical know-how, networks, mobilization, legitimacy, acceptability and experience.”

Nemtin said at its core, social innovation contributes to three critical capacities in the innovation system: participation, learning and experimentation, and alignment. “Together they enable institutions and communities, individuals and enterprises to define complex problems collaboratively.”

“They test solutions in real-world conditions, and then if you can get alignment, embed successful approaches into policy incentives, capital flows, so that they can scale and endure.”

This is where philanthropic organizations that work at a local level can support local non-profits to build relational infrastructure, Nemtin said. “They can support convening, they can support field catalysts, those folks that are bringing people in into the collaborative approach and building the relationships that are required for these kinds of collaboration.”

Social innovation provides the capabilities that allow governments, markets, academics and communities to work together to identify the solutions they want and to be able to achieve them, she said. “Together they form the  foundation of a future-ready innovation system capable of delivering lasting prosperity for all Canadians.”

R$