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Stephanie Smith laughs with Father Roberto Ubertino, executive director of St. John the Compassionate Mission and St. John's BakeryDeborah Baic/The Globe and Mail

A few steps north of Jilly's strip club and Dangerous Dan's Diner on Broadview Avenue sits a humble little bread shop.

St. John's Bakery sells handmade bread from its unprepossessing quarters, using organic ingredients and 200-year-old recipes drawn from Brittany, France. In peak season, it churns out 2,500 loaves in an eight-hour shift.

The bakery is no ordinary enterprise. Like other artisanal brands, it sells its bread at farmers' markets, and to Bay Street bankers, restaurants and specialty food stores throughout Toronto. But the bakery also employs people at the edges of society, those who have little opportunity of finding work elsewhere, from refugees who speak little English, to former drug addicts, homeless people and those with physical or mental disabilities.

It's what's known as a "social enterprise" – a business with the twin goal of generating an income and serving a social purpose – and it's a model that's increasingly popular in Toronto. At least 150 for-profit and non-profit social ventures have sprouted up in the city, half of them in the last five years, according to Social Innovation Generation, a program that advises them.

"It's meant a new lease, a new chapter in my life," says head pastry chef Stephanie Smith, 36, as she pours banana-bread batter into pans. She had been on social assistance and struggled to find work to support three children. "This job means a lot to me."

Sean Rowley, who helps Ms. Smith on Mondays, concurs. "I love it here. Nice people," the 27-year-old with Down's syndrome says. "I'm learning to organize."

Social enterprises in the city span all sectors, from a furniture-pickup business that employs the homeless to a DJ service whose staff are youth in foster care. Some, like Goodwill, have been around for decades. Most, such as Interpreter Services Toronto and Friends Catering, are fairly new. The degree of emphasis on profit varies. But they all share common traits – the primary focus is on a social or environmental objective, and any income or surplus profits should be plowed back into the business.

The model is attractive enough that students at George Brown College and the Rotman School of Management are offering free consulting services to such businesses. George Brown started doing it in 2008; since then, almost 200 students have been involved, lending assistance to 50 companies.

Filling a void

Miziwe Biik Development Corp. got a hand with its business plan from Rotman. It is starting a social enterprise that will help aboriginal carpenters gain work experience, through home renovations or large-scale commercial projects, and eventually land full-time jobs. Its manager, Kenn Ross, is looking ahead to the 2015 Pan Am Games, and sees opportunities for aboriginal tradespeople to partake in their construction.

"The best social program is a job," he says. "You can't be against that – if you're a Conservative, it's putting people to work and giving them dignity in their work. If you're centre or left, it's training people, giving them dignity and breaking cycles."

It's no coincidence social enterprises are multiplying these days. Post-recession demand for social agencies' services is still high, and Toronto's jobless rate is stuck at 8.3 per cent. At the same time, governments at all three levels are trimming budgets just as donations to many charities are dwindling.

The sector, which has flourished in other countries such as the U.K., Bangladesh and South Korea, still faces hurdles in Canada. Clarity is lacking around tax rules and legal definitions, and growth could be even greater if enterprises had better access to capital.

But politicians are starting to get on board. Both the federal and Ontario governments (on the brink of elections) have recently signalled that they will make it easier for charities to run businesses and tap into social financing. Among others, former prime minister Paul Martin is championing the sector as a way to stimulate job creation, particularly among the most marginalized, and bolster innovation through the economy.

Mr. Martin sees its potential as nothing short of transformative. "In a world following the recession and with the competition we're now facing and the rise of Asia, we've got to be prepared to look at more innovative ways of creating jobs and developing a strong economy," he said in an interview this week. Social enterprise "taps into the imagination and the initiative of literally thousands of Canadians that would otherwise lie dormant. There's virtually unlimited potential."

Investments in social enterprises are already bearing fruit. Most of the 2,033 employees of social enterprises supported by the Toronto Enterprise Fund in the past decade "have successfully transitioned to permanent employment, increased their income and improved their housing and health conditions," says Anne Jamieson, the fund's program manager.

Six of the 13 established enterprises it has funded have grown their sales to a point where they cover their business costs.

Windfall Brides is one such startup. It has hundreds of full of brand-new bridal gowns and evening gowns donated by local retailers, some of them designer labels such as Vera Wang and Anne Barge. It plans to ramp up sales this year, training and employing several dozen people, and put the proceeds into funding its poverty-alleviation programs.

Finding the right mix

St. John's Bakery seems a sweet story of success. The reality of its growth is somewhat grittier.

It began 25 years ago as part of the St. John's Mission. But only recently has it scaled into a full-fledged business. In the past year, it became economically self-sufficient.

The bakery is a business and not a charitable program, says Father Roberto, who, with bakery administrator Shawn Burk, oversees the business. He doesn't want people to buy the bread out of pity, but because it's high quality. Indeed, the pastries and bread are delicious, though prices reflect the organic ingredients and how labour-intensive the process is – a loaf of bread goes for $5.

It hit plenty of bumps along the way. While an efficient, automated bakery might need just a couple of workers, St. John's typically has close to 30. They range from those with autism, depression and homelessness to others with no English and those who have never worked before. Some don't turn up for work, or quit. Cultural misunderstandings can flare up. Some people lack conflict-resolution skills.

"It's not stable," says Father Roberto. "People have crises more often. Their lives are not as secure, and we've had quite a lot of turnover. It's quite exhausting."

The mood is light-hearted, though, on a Wednesday afternoon on the floor. Music plays. The air is scented with butter and sugar. Ms. Smith uses a mixture of miming, clear sentences and good humour to communicate with Monica, from Mexico, and Sandor, from Hungary. The job's taught her patience and tolerance.

Father Roberto perseveres. He's trying to find the right mix of workers – including hiring more mainstream, professional staff to ensure stability. He's had to fire a few people who were too difficult to manage. He expects to turn a small profit this year, while giving people a chance to learn a trade and build self-esteem.

"We're still fine-tuning the formula," he says. "We're a business with a social mandate. And we're proving this can pay for itself.

"We can't compete with Weston's. But we can create a niche, and sell to the rich to help the poor."

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