What defines an Indigenous business? A guide aims to weed out fronts and frauds

A coalition of Indigenous economic organizations wants the federal government to adopt new definitions of what constitutes Indigenous businesses and organizations into its procurement process.

"We know that there are shell companies that maybe have an Indigenous front person that's being used really to access a lot of set-asides and procurement opportunities," said Dawn Madahbee Leach, chair of the National Indigenous Economic Development Board and a member of the National Indigenous Procurement Working Group.

The new Indigenous Business Definitions were released by the National Aboriginal Capital Corporations Association (NACCA) last week and developed by the National Indigenous Procurement Working Group, which consists of representatives of various Indigenous organizations, government departments, and industry associations.

In 2021, the federal government announced a government-wide procurement target of five per cent for Indigenous businesses. The federal government's Indigenous Business Directory includes a list of Indigenous companies eligible for special consideration when bidding on some federal contracts.

The new guide provides criteria for Indigenous sole proprietorships, corporations, non-profits, charitable organizations, co-operatives, and partnerships.

Some of the criteria are similar to what is used by the federal government, such as requiring 51 per cent ownership and control by Indigenous people, while other definitions are tougher, said Madahbee Leach.

She hopes the definitions will help weed out businesses that aren't Indigenous-led, false claims of Indigeneity and tokenism from opportunities meant for First Nations, Métis and Inuit.

"It's going to make a difference to ensure that those set-asides that are meant for our people go to our people," said Madahbee Leach.

"There's so much opportunities to involve our people in Canada's economy and procurement is one of the best ways."

NACCA's criteria for proof of Indigeneity excludes membership in some organizations the federal government's Indigenous Business Directory criteria includes.

"We've contested that directory and we said we need to maintain it because we know how to determine Indigeneity way better than, you know, a civil servant," said Madahbee Leach.

Controls versus barriers

The Canadian Council for Aboriginal Business, which was part of the working group that developed the definitions, said it has concerns about the criteria around joint ventures and partnerships, and that the definitions require further work.

The guide's criteria include agreements that define the Indigenous partner as "having the relevant credentials in the industry and/or experience in operating a business, at least 51 per cent ownership, majority of realized economic and monetary benefits, and majority management control."

Tabatha Bull, president and CEO of the Canadian Council for Aboriginal Business, said there's no set standard on what experience means and that makes that part of the description qualitative in nature and difficult to enforce through a certification.

"My concern is always that we're creating controls or barriers to weed out the people or the businesses that are not legitimate but in doing so we're creating additional barriers for those that are," Bull said.

The definitions were developed with the aim to be applied widely by both the public and private sector. 

In an emailed response, a spokesperson for Indigenous Services Canada said it has not adopted NACCA's definitions as it is working with Indigenous partners, including NACCA, on a Transformative Indigenous Procurement Strategy to develop procurement policies and processes "that will better support Indigenous business development and participation in federal contracting."

"Our work with partners includes finding solutions related to defining Indigenous businesses," the email said.