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Report on

Enhancing Efficiency of Social Enterprise through Innovation Exchange with

Social Enterprise in Seoul

2011

By

(in alphabetical order)

Adeline Chan, Fu Hong Society

Cheryl Cheung, St James Settlement

Grace Ma, Stewards Ltd

Jennifer Fung, TWGHs

Jessica Tam, HKCSS – HSBC Social Enterprise Business Centre

Terry Chan, St James Settlement

Verdi Chan, The Salvation Army

Outline:

Part 1

Introduction, Background and Visit Objectives

Part 2

Internal Competence of SE in Seoul, Business Diversity, Social Innovation,

Professionalism, Market Driven

Part 3

Cultural factors, SE model, Government Support, and Public Resources

Part 4

Community Network, Public Engagement, Community Needs, Voluntary

Organizations

Part 5

Conclusion

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I. Introduction, Background and Visit Objectives

Social enterprise has becoming a trend in HK in recent years. According to the SE

landscape study conducted by the Hong Kong Council of Social Service, there are

more than 360 social enterprise units in HK, of which around 80% are operated by

non-profit organizations. „Job creation for the disadvantaged‟ and „poverty

alleviation‟ are the major social objectives of most social enterprises (over 80%),

though „promotion of fair trading‟, „advocacy of sustainable development‟ are also

some popular social missions of SEs.

Despite the rapid growth of number of SE, successful rate of social enterprise is,

however still not promising. On average, less than 1/3 of social enterprises can be

self-sustained after three years of operation; Majority of social enterprises in HK are

focusing on some conventional business such as catering and cleansing, which are

nevertheless competitive markets. Most social enterprises are yet to develop

innovative and sustainable business model which can cater to both social and market

needs. While balancing double bottom line – social and financial missions are not

easy – quite a lot of social enterprise are striving hard to develop innovative and

viable business models.

In view of the above need, HKCSS has in collaboration with Beautiful Foundation of

South Korea in organizing a social enterprise study tour to Seoul, namely „Enhancing

Efficiency of Social Enterprise through Innovation‟. A delegation formed by 7

social enterprise practitioners in HK was formed and visited Seoul during Oct 16-22,

2011. The delegation also joined the Social Entrepreneurs Conference organized by

Beautiful Foundation, and was invited to deliver speech and share HK experience of

running social enterprises to the counterparts in Korea.

Seoul has been selected as a visitation site because of its rapid development of social

entrepreneurship in recent years. After the Asian financial crisis and the subsequent

economic downturn in early 00‟s, the Seoul government has devoted to solve

unemployment problems by using social enterprise model. A Social Enterprise

Promotion Act was enacted in 2007 so as to encourage NGOs and private sector to

incubate new social enterprises. Regional policies and funding schemes were

implemented since then. As a centre of creative industry and innovation in Asia,

Seoul also encourages social innovation. Korea‟s experience may shed light on HK

future development particularly on production innovation and business enhancement.

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Tour programme

Oct 17 (Visit SEs operated / incubated by Beautiful Foundation)

- Anguk Charity Shop

- Fair Trade Café

- Eco Party Mearry

- Beautiful Store and Bookshop

Oct 18 – The Social Entrepreneur’s Conference

Oct 19 – (SE visits)

- Social Venture Incubation Centre

- SE restaurant “Organization‟

- Haza Centre, Noridan

- Touch4 Goods

- Oct 20 – (free time and visit)

- Good Travel

This report will analyze the success factors of social enterprises in Seoul from three

levels i) SE internal competency ii) Cultural and policy factor iii) community

network.

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II: Internal Competence of SE in Seoul, Business Diversity, Social Innovation,

Professionalism, Market Driven

According to our observation, it was found that Seoul is an “Innovation Everywhere

City”. We encountered a number of innovative products and decorations in our host

organization – Beautiful Store, and we were impressed by the upcycling products

which designed and retailed by various social enterprises included Eco Party Mearry

and Touch 4 Good. (Please refer to photos for details)

Glass Bottle Roof

Golf Club decorated by recycle materials

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Video Tape Sculpture

Upcycling products made from used sofa in Eco Party Mearry

Surrounded by bags made from used banners in Touch 4 Good

Business Diversity

When comparing the social enterprises in Hong Kong and Seoul, it was found that

other than the common lines of business such as catering, retail and business support

in Hong Kong, Seoul ran more diversified industries. Upcycling was one of the

examples. We visited two organizations which we did not have in Hong Kong. Both

of them were inspiring involving young people.

Travelers’ Map – The organization designed various domestic or overseas travels for

maximizing satisfaction for traveler, maximizing contribution to local community and

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minimizing impact on environment. The organization also ran youth travel school,

“Road Schola” to train alternative travel specialists. Travelers‟ MAP had a

certification as a first social enterprise for sustainable tour in Korea.

(www.travelersmap.co.kr)

Noridan – A Korean based multi-disciplinary social enterprise focused on social

vitality and a sustainable lifestyle. Noridan created cultural and artistic products

through design and performance art. The organisation also heavily focused on

promoting recycling industrial waste. Noridan‟s slogan was “we play, imagine, and

recycle.” Along with their own social mission, Noridan believed in the balance in

work, play and study and promoted these in their practice.

(www.avantageventures.com/avcatalogue/sv-noridan)

Professionalism

In Korea, one of the main factors to make social enterprises attractive and sustainable

was the involvement of professionals. Some of the social enterprises were even

founded by professionals. They got a mission in their own profession, and they knew

how to facilitate and foster a social enterprise with the professional.

Hong Kong was starting to involve professionals in social enterprises. The Social

Angel Program in HKCSS – HSBC Social Enterprise Business Centre was a good

example. The Program recruited professionals to provide consultancy services and

advices to social enterprises which provided a great cornerstone to newly developed

social enterprises. It was also a big help for Hong Kong social enterprises which were

mostly run by social workers in NGOs who were not familiar or well trained to run a

business.

It was believed that professionalism would become more common in social

enterprises. We were looking forward to witness the synchronization between

innovative ideas and professionalism in Hong Kong social enterprises and ultimately,

more citizens and participants of the social enterprises benefited.

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III: Cultural factors, SE model, Government Support, and Public Resources

The success of social enterprises in Korea may also due to strong policy support and

substantial public resources. Compare to Hong Kong, South Korea has a more

comprehensive and systematic vetting system of social enterprises. It has enacted a

Social Enterprise Promotion Act in 2007, which is the only regulator in granting and

approving social enterprise status. The Korean government has also provided funding

and other support (such as land use) for some organizations in incubating social

enterprises, Beautiful Foundation, Work Together Foundation, Hope Institutes are

some of these major supporters.

Five social enterprise models are summarized as below, in comparison with the

business forms of SEs in HK.

1. Model A: The “Trading Non-Profit Organization” (NPO)

Dynamics

• NPOs looking for other sources of income or seeking to achieve financial

sustainability through the delivery of social services (other than work

integration)

Features

• develop earned-income strategies

to compensate for decrease in public subsidies

• government plays a prominent role in economic & social life & develops

contractual relations with NPOs

to promote dynamics & initiatives & increase cost-efficiency

Directions

• NPO development towards commercialization

develop more business-oriented activities

set up subsidiary or independent entity (for-profit company)

South Korea

Community Welfare Centres (CWCs)

Hong Kong

Subsidiaries of NPOs set up to earn

market income

Activities:

• Dominated by large foundations

operating universities & hospitals

under strong public regulation.

• Rapid growth of unemployment and

Activities:

• Non-profit sector has grown

continuously from the late 1940s

onwards

• Government funding for NGOs

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the financial crisis of 1997

• “Productive Welfare” is implemented

in 1999

• pilot project of “Self-Help Support

Programmes” & “Community

Welfare Centres” (CWCs) for

serving the disabled, the elderly or

the poor

• launched the “Social Employment

Creation Scheme” from 2003 onward

declined during 2000s

• Relied on government subsidies

traditionally & reinforced the

incentive to look for other sources of

funding, especially through

market-oriented activities

2. Model B: the “Work Integration Social Enterprise” (WISE)

Dynamics

• Provision of (stable or temporary) job opportunities with training and/or

employment services

Features

• Governments have developed policies

to promote the creation of organization taking care of vulnerable people

who excluded from the labour market

• People with physical or mental disabilities are clearly a major target group

• Such organizations offer more or less stable jobs to these persons

to offer employment services, such as training & assistance

to reintegrate the mainstream labour market

Directions

• Defined by a very specific work-integration mission

South Korea

Self-Sufficiency Enterprises &

Certified Social Enterprises

(Job-Provision Type)

Hong Kong

NPOs’ initiatives for work integration

Activities:

• “Self-sufficiency enterprises” were

established in the 1990s

government started pilot

projects to address poverty

problems

launched public works

programmes, work-integration

Activities:

• Various types of social enterprises

primarily emerged to provide

disadvantaged people with training

& employment service &

opportunities.

• The rapid development of WISEs

was strongly related to the drastic

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scheme in 1999

• Parts of these programmes were

contracted out to specific NPOs

called Local Self-Sufficiency Centres

(LSSCs)

• The Law on the promotion of social

enterprise passed in 2006 to stipulate

work integration

• In 2007, 509 self-sufficiency

enterprises, employing over 3,000

workers, operated in cleaning,

construction, care services,

recycling, agriculture,

manufacturing…etc

• Among 251 certified social

enterprises in 2009, more than 40%

(110) were using social employment

creation schemes as work-integration

type

rise of unemployment (from 2.2% in

1997 to 7.9% in 2003)

adopt a “Welfare-to-Work”

approach in social welfare

policies.

• Various programmes were launched

“Enhance the Employment of

People with Disabilities through

Small Enterprise” ( 創業展才

能計劃) (2001) (37 approved

projected)

“Community Investment &

Inclusion Fund” (社區投資共

享基金) (2001) (102 approved

projects)

“Enhance Self-Reliance through

District Partnership” (伙伴倡自

強計劃) (2006) (41 approved

projects)

3. Model C: the “Non-Profit Co-operative” Enterprise

Dynamics

• Collective self-employment & innovative responses to unmet needs based on

co-operative tradition

Features

• Underline 2 folds: social & co-operative

• Tend to view co-operatives as for-profit enterprises

to purse broader social proposes

to serve members‟ interest

Directions

• Focus on self-reliance & democratic governance

South Korea

Workers’ Co-operatives, Consumers’

Medical Co-operatives

Hong Kong

Social co-operatives-type initiatives

operated by NPOs

Activities:

• Aiming to promote & empower civil

society

Activities:

• A “social co-operative model” is

owned by all members, share an

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develop job creation activities

for the disadvantaged, care

services

create fair trade businesses with

villages of poor producers of

the Philippines

• Co-operatives included workers‟

co-operatives, consumers‟ medical

co-operatives & children facilities set

up & run by parents

equal power in decision making.

• Place the social co-operative model

under “an empowerment approach”

focus on the needs of the needy

stress the sense of ownership

• HK Federation of Women‟s Centres

(香港婦女中心協會) has assisted

women from the grassroots to form 2

co-operatives:

Women Green Life Workers

Co-operative Society Limited

(婦女綠色生活職工有限責任

合作社) (2001)

Women Healthy Living

Workers Co-operative Society

Limited (婦女健康生活職工有

限責任合作社) (2007) by

providing the elderly with

escort services for outpatient

and domestic care

4. Model D: The “Social Enterprise Stemming from Non-Profit/Profit Making

Partnerships”

Dynamics

• Involvement of private companies (or company foundations) to support NPOs

or joint initiatives with a social mission

Features

• Encouraged by governments

partnerships between private companies & NPOs

• Aiming by raising more funds from big corporations within the framework of

Corporate Social Responsibility (CSR)

• Private companies set up social enterprise as subsidiaries or independent

organizations

to pursue a social mission

• Venture philanthropy or some advanced CSR-related initiatives

Directions

• Private companies take initiatives as part of their efforts

to show their Corporate Social Responsibility (CSR)

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South Korea

Social (joint) ventures

Hong Kong

Social (joint) ventures

Activities:

• Partnerships for job creation started

in 2001 between Local

Self-sufficiency Centres (LSSCs) &

some conglomerates

• Strategic alliances helped LSSCs to

partly solve the problem of lack of

resources

• In 2006, SK Telecom established

“Sharing Happiness Foundation”

to support the creation of social

enterprises delivering catering

services & free school lunches.

• Hyundai, one of major leading South

Korean companies has already

started to offer a financial support to

social enterprise initiatives

Activities:

• Refers to partnership activities

jointly operated by NPOs & private

companies

• Founded in 2007, Social Ventures

Hong Kong (SVhk) innovates social

change by applying a dual-engine

model:

SVhk Capital: the venture

philanthropy fund dedicated to

providing financial &

non-financial support to

high-impact social ventures

SVhk Foundation: a charitable

organization promoting social

innovation culture & incubating

innovative social solutions.

Projects include: Dialogue in

the Dark, Fullness Christian

Social Enterprise, Diamond Cab

Barrier-Free Taxi Service

5. Model E: The “Community Development Enterprise”

Dynamics

• Multi-stakeholder partnerships (NPO, FPO & Public) promoting participatory

local development.

Features

• “Community” refers to a whole population & local challenges in a specific

area

focus on community revitalization or local development, often in rural

disadvantaged areas

• Try to rely on local resources

local culture & social bonds, local labour force & expertise…etc

• Foster forms of community-based ownership, involving different types of

stakeholders

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non-profit, public or for-profit organizations or various groups including

unemployed, homeless & other vulnerable persons

Directions

• Create conditions enabling local people to stay where they live.

• Vitalize the local economy, improve living conditions, enhance residents‟

employability

South Korea

Self-sufficient local community

business

Hong Kong

Social (joint) ventures

Activities:

• The “self-sufficient local community

business” has been spread since 2010

through a programme of the Ministry

of Public Administration & Security

(government-driven) launched

to promote initiatives

responding to social problems

in rural areas

• Certified social enterprises are

identified either as:

the job-providing type

the service-providing type

Activities:

NIL

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The Criteria for Approval of Social Enterprises in South Korea (exerted from

Social Enterprise Promotion Act)

Criteria Contents

Organizational

Type

Non-profit organizations/Co-operatives/Social welfare foundation/Association

Paid Employees Paid employees other than volunteers or unpaid members necessary.

Income from

Business

Activities

Income from business activities for 6 months prior to an approval application

should exceed 30% of wages.

Social Goals Job creation type should hire the socially disadvantaged as more that 50% of the

employees.

Social service type should provide more than 60% of total services to the socially

disadvantaged.

Mixed type should provide more than 30% for hiring & social provision for the

socially disadvantaged.

The socially disadvantaged are the households with their income lower than 60% of

the national average household income, senior citizens, persons with disabilities,

victims of sex trade, & the long-term unemployed.

Governance Employees or service clients should participate in decision-making process.

Profit

Distribution

Corporations or for-profit foundations should use more than 2/3 of their profits on

social goals.

Statute The status should specify its social goals, business contents, governance, profit

distribution & reinvestment principles, investment & financing, employee

composition, dissolution & liquidation, & donating more than 2/3 of remaining

assets to other social enterprise or public funds in case of liquation.

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Culture of SE/Government Support /Public Resources

Korea

The government enacted the social enterprise promotion act in 2007, it has approved

109 social enterprises, and it announced a plan to increase the number of social

enterprises annually to 1000 by year 2010. Currently, 11 government ministries are

involved in social enterprise programs. The Ministry of Labor also spent 7.3 billion

Won in 2003. In 2007, the budget increased to 1.3 trillion Won, of which culture,

green energy, community service, education and caring service will be selected as five

strategic areas for social enterprises.

Besides, the government also strengthenes its activities of linking private-sector

resources, both individuals and groups, encourage baby-boomers to provide their

technical support and expertise after retirement, promote aged people‟s participation

in the labor market and help to create social service jobs. While the government itself

gives social enterprises a level of financial, procurement, tax and other policy

incentives equal to that for SMEs.

Donation culture in Korea is also mature which may also facilitate the growth of

social enterprises. Up until now companies which donate money to not-for-profit

social enterprises have been allowed to treat up to 5% of their incomes as losses.

Hong Kong

In HK, more than 80% of SEs are subsidiaries of NGOs; in some cases

underperformance is condoned as funding can be easily sourced from the „mother‟

NGO‟. Quite a lot of social enterprises are receiving external funding, mainly include

• Social Welfare Department- “Enhancing Employment of People with

Disabilities through Small Enterprise Project”- Seed Money

• CIIF- development of Social Capital

• Jockey Club Trust Fund- for start-up and capital cost

• Other Community or Charity Foundations- e.g. Keswick Foundations, Oxfam

• Many of these funding sources will target for specific goals and objectives

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Whereas the HK government also offers substantial funding support to social

enterprises, there is a lack of official legal form / registration status for SE. SEs are

not obligated to disclose its financial and social information to the public before of

this legal gap. The ambiguous status of social enterprises may weaken public

confidence towards social enterprises.

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IV: Community Network, Public Engagement, Community Needs, Voluntary

Organizations

In Korea, community network is essential to the success of their social enterprises.

We find a high public engagement culture, strong community network and abundant

voluntary work service that may contribute to the success of Korean social

enterprises.

Background

Social Needs

There was a massive unemployment during economic crisis in late 1980 which

created a lot of social problems. Thus, the Korean government mobilised diverse

economic and social resources to tackle these problems.

Aiming to fight unemployment, the Korean government introduced public work

business programmes. It also developed new employment opportunities in voluntary

organizations. In 2000, the Korean government developed the National Basic

Livelihood System (NLBS). In this System, if the beneficiary of the NBLS is

considered as able to work, he/she must engage in work integration scheme.

At that time, SE started to set up based on social co-operatives and association,

emphasis on job creation and social service. An in 2007, the Social Enterprise

Promotion Act was enacted. Financial subsidies for initial capital and various tax

benefit for certified SE was introduced.

Social economy

While the local government takes the lead in promoting social enterprises, private and

public sectors join together, linking up local resources and promoting

knowlegde-based volunteer work, and participate in the work integration program.

The local governmet also promotes participation of aged people in the labour market

which helps to create social service jobs. While the government was unable to solve

the dual problem of job creation and service provision, it focused on developing and

sustaining a self support community and empowering the civil society.

Belief

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• To aspire an alternative economic practice on the part of civil society

organisation, which witnesses the harmful effect of neoliberal globalization of

environmental destruction. Recycling was the main theme in their belief.

• To restore tradition social economy

• To promote and empower civil society, create jobs for the disadvantaged, thus,

consumer co-operatives, worker‟s co-operatives were materialized.

A Successful Story of SE with strong community network – Gongsindotcom

Gongsin means « Let‟s study in new and fun ways, and become gods of studying » in

Korean

Aim :

To overcome inequalities in education with an aim to match each young student with

their own one-on-one mentor

• One-on-One Mentorship Business

University students from Korean‟s renown universities are recruited to

become mentors.

Provides 1:1 mentoring for low income class students

The philosophy and study methods of mentors are shared on the Gongsin

website to spread the information nationwide

• Online Business

Provides online self-initiative study contents for free to low income

students and

Provides online self-initiative study contents for an affordable fee to

general students

Outcome:

• More than 200,000 students joined, and it is registered as a

teenager-recommended website

• Participating students of the 1:1 mentorship business have shown remarkable

improvements in their academic performance and their attitude and personality

• Some of these students returned to Gongsindotcom as « mentors »

• Profits made from the website‟s banner advertisements and streaming services

are put towards the mentorship business as well as for scholarship program for

Gongsindotcom members

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Community Involvement of this project

• University students

• Website designers/technicians

• Computer specialists

• Business sector

• Tertiary institutes

• Government

• Social Enterprise sector

• Low income students

• Overseas partner – e.g. Indonesia

V. Conclusion

We had analyzed the social enterprise development in Seoul from three perspectives.

First, internal competency of Korean SE; Second, the civil society and community

network and the last, government policy support and the unique culture in South

Korea.

Business natures of social enterprises in Korea are more diversified, in compare with

their counterparts in Hong Kong. The Korean SEs devoted more efforts in innovating

their products and operational procurement, the upcycling products are some of those

successful examples. We also found that SEs in Korea are highly professional, not

only on business operation but also in training of staff and volunteers.

Because of a long history of labour movement and civil society development,

volunteerism and donation culture are also strong in South Korea. Social enterprises

in South Korea use a large number of volunteers, some of them even play

management / leadership role on business operation. The usage of volunteers may

greatly reduce the manpower cost of social enterprises thus alleviate their financial

burden as social businesses.

The Korean government is also playing an important role in SE development. The

enforcement of Social Enterprise Promotion Act in 2007 demonstrated the strong

commitment of government in advancing social entrepreneurship and social

innovation. Status of social enterprises in Korea can by no means ambiguous, unlike

HK, as the registration system requires Korean social enterprises to commit the

recognized social missions and fulfill the requirements, before they get subsidies and

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other government support.

Whereas the Korea social enterprises are strong in some aspects, the SEs in HK also

have some strengths of our own. For instance, business involvement in SE

development is much more prevalent in HK, while „social investment‟ or „venture

philanthropy‟ are not popular in Korea. In Hong Kong, some private investors begin

to use „social investment‟ as a new model to incubate social enterprises - Dialogue in

the Dark HK is a successful example. We also observe some new social investment

intermediate in HK, for example Social Ventures Hong Kong.

In short, there are similarities of SE development in Seoul and Hong Kong. For

example, SEs emerged against the backdrop of „Asian Financial Crisis‟, which led to

a high percentage of unemployment rate and the problem of poverty. While Korea is

strong in community development, we see a lot of civil society support in Korea. In

Hong Kong, nevertheless, business and welfare organizations are the major driving

engines of SEs.