The vital role of business in social enterprise

By Thomas Tang

 

Click here to download the original article as published in the South China Morning Post. 

Participants at the Summit on Social Enterprises conference organized by the Home Affairs Bureau last month lamented the absence of one vital sector: corporate leaders.

Regrettably, some of Hong Kong’s most skilled businessmen snubbed the event despite a plea from the government for corporations to mentor such organisations.

The social enterprises concept is relatively new to Hong Kong, although a number of them are well established. While they resemble charities and non-government organizations in their goals, they are run on business lines. Unlike typical businesses, they are not solely committed to profit making and to serving the needs of shareholders. Furthermore, they provide goods and services that the government and private sector are unable or unwilling to. In doing so, they bring commercial acumen to areas that were once the domain of charities. Social enterprises move people in need away from dependence on charity and welfare towards self-help through entrepreneurship.

Attendees at the conference put the absence of corporate leaders down to the indifference of businesses, large or otherwise, to the plight of social enterprises, and ignorance of what they are trying to achieve.

It could be argued reasonably that many mainstream businesses in Hong Kong and elsewhere qualify as social enterprises – for example, a company that makes wheelchairs or one that collects scrap metal for recycling. Companies that have a hiring policy for disabled people, or others that have set up in deprived areas to create employment, would also fit the bill.

These are all good examples of companies that have embraced some sense of social mission in their psyche, but it would be false to class them as true social enterprises, as their primary motive is not to create social value but private wealth.

A better case would be a rural co-operative that moves the products of poor farmers to markets via established supply chains and fair trade channels, while at the same time addressing wider issues like environment, employment, discrimination and education. The resulting profit is ploughed back into the organisation so it can thrive and continue to improve incomes.

Opportunities to set up social enterprises in Hong Kong should be plentiful if one follows this line of thinking. Under its “enhancing self-reliance through the district partnership programme”, the government has set aside HK$150 million, of which roughly a third has gone to non-governmental organisations to set up restaurants, shops and housekeeping services. This allocation is commendable and has given a leg up to many needy causes. The test is whether they will flourish given the vagaries of customers and the skills of management and staff.

Business, therefore, can play an important role in the success of such ventures. Much like opening a new shop or factory, an entrepreneur has to convince an investor that he or she has the right business model, marketing mix, management team, corporate governance and cash-flow projections to maintain liquidity and growth. This hopefully attracts sufficient investment capital, either as equity or loans. These come with onerous conditions that keep entrepreneurs on track – and this is the sort of discipline that social enterprises could do with.

Recipients are beholden to deliver not just short-term targets but sustainable ones, too. Grants and charity are not the answer. Social entrepreneurs must make the transition from a traditional welfare mentality to shrewd commercialism if they want to run successful ventures that can also create social value. Welfare agencies and sheltered workshops are unlikely to transform themselves overnight. Again, this is where business can play a vital role, by providing not only the seed capital but also the training and business tools to help put social enterprises on the road to self-reliance.

Dr. Thomas Tang is Executive Director of the Global Institute For Tomorrow.