Social enterprises, economic transformation and decarbonisation

Acknowledging the role social enterprises can play in creating a dynamic and inclusive labour market where everyone has the opportunity for secure, fairly paid work, the Budget takes a welcomed step towards integrating social enterprises in the employment ecosystem. Consistent with the eight principles of employment services reform outlined in the Employment White Paper (White Paper), through the Budget the Albanese Government has expressed a commitment to supporting social enterprises as a mechanism for delivering employment outcomes for Australians who face barriers to employment.

The $2.4 billion commitment over five years to deliver more economic opportunities for First Nations Australians is focused on the priority areas of jobs, health, education, justice, housing and essential infrastructure and services. These commitments seek to enhance First Nations peoples’ self-determination and economic empowerment.

The Government has also reinforced its focus on outcomes based contracting, committing $4.7 million over three years from 2024–25 to establish the $100 million Outcomes Fund introduced in the 2023-24 budget."

The $399.1 million over five years for ESG related initiatives includes funding to promote positive economic transformation associated with decarbonisation, to leverage the opportunities of the move to a net zero economy. The Budget was underpinned by the Government's industry policy 'Future Made in Australia', which contained a commitment of $22.7 billion in funding over the next decade. The initiative is focused on creating jobs and strategic investment in the transition to net zero by investing in renewable energy and technology, developing clean energy industries and supply chains and securing Australia's place in the move to a net zero global economy.

Budget snapshot

Employment opportunities

A cornerstone of the employment-related initiatives is the $21.9 million employment pathway program, 'WorkFoundations', that will see WISEs funded to work directly with people facing complex barriers to employment. Included as part of the $54 million Budget commitment to a Paid Employment Pathways Package, the WorkFoundations program will support individuals obtain supported employment opportunities through social enterprises and other suitable businesses.

The Paid Employment Pathways Package will invest $54 million over five years to trial two new employment pathways programs:

• WorkFoundations ($21.9 million program) will support social enterprises and businesses who can provide wrap-around supports and tailored paid job placements for up to 6 months to assist job-seekers with complex barriers to employment.
• Real Jobs, Real Wages ($32.1 million program) will support job-seekers experiencing long-term unemployment to build their capabilities by providing a tapered subsidy to employers who can provide secure and supportive job opportunities.

Improving outcomes for children and families

The Government has reinforced its commitment to the $100 million Outcomes Fund (Fund) announced in the 2023-24 budget, committing $4.7 million over three years from 2024–25 and an additional $0.8 million from 2028–29 to 2033–34 to establish, manage and evaluate the Fund. The $100 million Outcomes Fund is focused on improving outcomes for children and families to prevent cycles of intergenerational and community disadvantage, alleviating barriers to employment, promoting inclusive employment models and addressing the housing needs of vulnerable and homeless Australians. Payments will be made to projects achieving agreed, measurable outcomes.

First Nations economic empowerment

The Government will invest in a range of initiatives to support First Nations economic empowerment, including:

• $777.4 million over five years from 2023-24 into the new Remote Jobs and Economic Development Program (Program), which will create up to 3,000 jobs in remote Australia. The Program will be implemented in partnership with First Nations communities to embed a place-based approach and build skills and experience to deliver important local services.
• A Community Jobs and Business Fund will be established under the Program to identify and pursue projects that support community development and create local economic opportunities.
• The Government also intends to enhance Indigenous Business Australia’s ability to leverage their capital, enabling greater investment in First Nations housing, communities and businesses.
• $76.2 million to implement a new voluntary First Nations Prison to Employment Program to replace the existing Time to Work Employment Service from 1 July 2025. The new program will have a strong focus on supports that are culturally safe and tailored to First Nations clients. The program will address the underlying barriers to employment to better connect participants with opportunities post-release.

Sustainable finance

The Budget included sustainable finance commitments, with the Government allocating $17.3 million over four years from 2024-25 to mobilise private sector investment in sustainable activities. This includes extending Australia’s sustainable finance taxonomy to the agriculture sector and developing a labelling regime for financial products marketed as sustainable. The Budget also included $76.2 million over five years in funding to support Australia's international engagement on sustainable finance and climate change – including funding for participation in the G20 and United Nations Framework Convention on Climate Change (UNFCCC), and to support Australia's bid to co-host the 31st Conference of the Parties (COP31).

The development of a product labelling regime is key to supporting transparency and reducing the risk of greenwashing. The expansion of the sustainable finance taxonomy supports the work undertaken by the Australian Sustainable Finance Institute (ASFI), alongside Government, to develop an Australian Sustainable Finance Taxonomy (Taxonomy), which will receive funding under the Budget to expand the taxonomy to include agriculture. ASFI is currently seeking input on the public consultation paper, which sets out draft headline ambitions and environmental objectives and draft climate change mitigation criteria for the first three priority sectors under development (namely, electricity generation and supply; minerals, mining and metals; and construction and the built environment). Further, industry sectors, including agriculture and 'Do No Significant Harm and Core Social Safeguards' will follow in subsequent consultation processes.

Sustainable finance taxonomies, which are currently in place or under development at a global level, are a set of common definitions for sustainable economic activities (ASFI's recent report outlines 12 taxonomies in place globally, and 15 currently under development – collectively representing more than 55 per cent of global GDP). They can be used to guide the transition of the economy, construction of sustainable financial portfolios, capital investment companies and economic activities by providing clear and consistent definitions of what is classified as a sustainable activity and, given Australia's commitment to net zero by 2050, defining how economic activities will need to transition over time to continue to be classified as sustainable.
ASFI welcomed the sustainable finance initiatives included in the Budget, recognising these measures as helping to 'accelerate the growth and credibility of sustainable finance markets in Australia, and drive investment for Australia to play a major role in global decarbonisation efforts'.

Implications for the social enterprise sector

To advance the inclusiveness of Australia's labour market, the Government is exploring new partnership opportunities with the social enterprise sector, focusing on the role social enterprises can play in creating employment pathways. With experience supporting over 200 social enterprise clients, MinterEllison can assist by providing legal support and capacity building to increase readiness to engage with Government.

A key focus for the Government when exploring partnerships with the social enterprise sector will be developing capacity within the sector through programs like the Social Enterprise Development Initiative (SEDI). The SEDI, announced in the 2023-24 budget, will support social enterprises and charities to build their capacity and improve social outcomes by providing grants of up to $120,000 focused on capacity-building across the social enterprise sector. MinterEllison has extensive experience supporting clients in capacity building, and has assisted a range of social enterprise clients to be impact investment ready including through building governance hygiene, supporting the development of compliance frameworks and contracting capability.

The Government has already begun partnering with the social enterprise sector to advance inclusive employment. For example, MinterEllison has worked with social enterprise incubator White Box Enterprises, who was selected to partner with the Department of Social Services in the 3.5 year Payment by Outcomes trial (PBO). The trial, which commenced in July 2022, has been designed to measure the effectiveness of WISEs in delivering long-term employment outcomes for people who face barriers to work. Payments are made to White Box Enterprises, which is separately contracting with a range of WISEs, when it delivers particular employment outcomes and enables excluded job-seekers to transition to the open labour market. First year results of the trial show that social enterprises are effective in creating meaningful employment with retention rates at 86%, well above the predicted rate of 62%. The trial has also illustrated the cost-saving opportunities for Government, producing overall costs that are 17% lower over five years compared with Disability Employment Services participation.

How MinterEllison can assist you

Strategic advice

In the move to 'A Future Made in Australia', First Nations businesses and the social enterprise sector will be required to develop capacity to leverage the opportunities presented by the Budget, including participating in the just transition to a net zero economy.

With experience assisting a range of social enterprises and First Nations businesses, MinterEllison can provide strategic advice on how to develop capacity and effectively participate in the just transition to a net zero economy. MinterEllison can support your business in leveraging the opportunities presented by the Budget including through the Paid Employment Pathways Package and initiatives to support First Nations businesses.

Outcomes-based contracting

The outcomes-based budgeting strategy and commitment to funding WISEs also means that social enterprises will need to readily measure and report on their social impact. With experience advising on all sides of outcomes-based contracting and social impacting investing, MinterEllison can provide strategic advice on the co-design and implementation of outcomes-based contracting.

Wider social enterprise sector support

MinterEllison also provides broader social enterprise sector support in terms of capacity building, supporting social enterprise peak bodies (including the national peak body Social Enterprise Australia and state and territory bodies), certifying bodies (including Social Traders and Supply Nation), funds (including Social Enterprise Finance Australia (SEFA) and First Australians Capital) and intermediaries (such as Social Ventures Australia, Social Impact Hub and White Box Enterprises). MinterEllison also works alongside clients to amplify social impact through shared values partnering (including our longstanding relationship with the Westpac Foundation, in which we offer legal support to social enterprise grant recipients and social change fellows).

Transitioning to net zero

The Government is also working closely with trading partners to identify opportunities to drive greater supply chain transparency and better market recognition of high ESG standards. MinterEllison has extensive experience advising government, corporate and social sector clients on ESG considerations related to the transition to net zero, and the risks and opportunities presented by the transition, including managing ESG-related reporting requirements and building ESG considerations into legal due diligence processes.

Please reach out if you have any questions regarding social enterprises, First Nations businesses, outcomes-based contracting, social impact investing, sustainable finance or the risks or opportunities of the net zero transition.