Social Enterprises:Combining Profit with Compassion

WHILE preparing the 2009 798 Beijing Biennale， an international art exhibition held every two years in Beijing’s 798 Art District， artist Miao Shiming came up with a bold idea： teach painting to a group of disabled people and display their works at the exhibition. Their works went on to achieve remarkable success at the exhibition thanks to their amazing creativity， and Miao himself learned about the lives of this group for the first time during his work with them.

This experience transformed Miao from an artist into a social entrepreneur. In 2010 he founded an organization providing art education for mentally handicapped people to help them tap their artistic potential. The paintings they produced are printed on greeting cards and New Year gifts and sold at exhibitions， boosting their self-confidence – and their incomes.

Along the same lines， in 2010 the Shanghai Puki Deafs Coordination Agency was set up. The company trains and provides internships to hearing impaired students. The model involves pairing each student with a hearing-abled person and encouraging them to work together on brand design and other forms of graphic design. This helps disabled students better integrate into society as well as learn professional skills.

“Small organizations like these are established with the aim of solving social problems and benefiting society，” said Mao Yushi， a renowned Chinese economist， at a social enterprise forum held in Shanghai. He commented that such innovative models perfectly combine commercial profitability with public welfare.

A New Approach to Social Management

In September 1993 Professor Mao Yushi founded a poverty alleviation micro-credit program in a village in Lüliang City of Shanxi Province， offering micro-loans of at least RMB 500 to low-income households. This provided much-needed capital to improve the lot of people to whom banks wouldn’t lend such small amounts of cash.

But Mao wasn’t satisfied with just this. He was convinced that more strategies were needed to fight poverty in rural China during a period of urbanization. So in April 2002， Mao and his partners got together and established Fuping School in Beijing， a non-profit school run by private individuals to provide training and employment recommendations to rural female workers and safeguard their rights and interests.

In order to provide better employment services， in November of the same year the founders of the Beijing Fu-ping School further established the Beijing Fuping Domestic Service Center， one of the earliest social enterprises in China. Over the past 10 years， this center has trained more than 20，000 women from low-income families in mountainous regions of central and western China and helped them find jobs.

“A social enterprise should be an enterprise first，”said Mao. That is to say， it must earn profits. However， social enterprises are different from ordinary enterprises， which seek to maximize profits and distribute dividends to their shareholders. A social enterprise seeks to create public welfare as well as hard cash. This typically involves social services to disadvantaged groups or environmental protection， and the enterprises characteristically do not accept donations.

According to Yao Kai， a professor at Fudan University’s School of Management， social innovation refers to innovation not only in technology， but also in resource integration and social management. “To some extent， social enterprises complement the role of both government and market. They solve difficult social problems by means of the market and a business model，” Yao said. Of course， in China social enterprises are still just emerging.

Early Days

“To some extent China’s ‘welfare factories’， which were set up by the government in the 1970s to employ disabled people， are similar to today’s social enterprises，” said Zhu Jiangang， director of the Institute for Civil Society （ICS） of Sun Yat-sen University.

Since 2001 when the concept first appeared in China， social enterprises have been taking on this role and their rapid development over the past four to five years has been in part thanks to government support， which includes vocational training and investment.

Social enterprises in Europe are much more mature， especially in the U.K.， France， Germany and Sweden， where they have become a mainstream model.

“Social enterprises are an example for the public sector，” said Marieke Huysentruyt， head of i-Propeller， a Belgium-based organization that “propels” innovation in social enterprises.

According to Marieke， the challenges of urbanization， poverty， unemployment and migration bring opportunities for boosting innovation and growth of social enterprises. “Mature social enterprises not only help solve social problems， but also boost innovation and socio-economic development，” Marieke added.

But statistics show that， globally， social enterprises are still in their infancy， with only 2.8 percent of the workforce engaged in social enterprises.

An Ecosystem of Support

Lü Zhao， founder of the Non-Profit Incubator（NPI）， a center dedicated to supporting the develop-ment of public welfare institutions， got his experience from establishing commercial enterprises. From his point of view， China has a very favorable environment for new commercial businesses. Support is readily available from venture capital firms， accounting firms， law firms and investment banks. However， there are fewer sources of support available for those who want to start a social enterprise.

The biggest obstacle for establishing and developing social enterprises， Marieke believes， is financial support. Moreover， it is also important to establish an “ecosystem” in which people from different departments facilitate the development of social enterprises.

Zhu Jiangang also pointed out that poor managerial skills hinder the development of many social enterprises， whose managers are required to have backgrounds relevant to both NGOs and commercial companies. Standards are higher for social entrepreneurs than for purely commercial entrepreneurs and straight-up philanthropists. A social entrepreneur must have a sense of social responsibility as well as the ability to manage and operate a company.

The good news is that some commercial companies have already started supporting social enterprises in various ways， such as providing free services to or purchasing products from them. Neil Ge， CEO of the Development Bank of Singapore （DBS） China， said its employees give lectures to social enterprises and help solve financial and accounting problems. DBS China also gives priority to social enterprises when purchasing small gifts and services. But social enterprises aren’t charity cases – they are potentially profitable investment opportunities. Now many large firms， such as Citibank and Lenovo， invest in social enterprises every year， and such investments often lead to new business opportunities.