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What is a Social Enterprise

An organisation that applies commercial strategies to maximise social impact rather than profits.

In the last few months, we have met lots of entrepreneurs and changemakers to better understand social entrepreneurship's ecosystem in HK and its start-up scene. We were given some interesting insights into HK social and environmental issues.

Our key takeaway?

A lot of people still don’t know what a Social Enterprise is! They think "Social Enterprise" is a buzzword meaning NGO, charity or any other kind of non-for-profit organisation. But the truth is that a Social Enterprise is usually a for-profit company. While charities and social enterprises both have a positive impact on society, a charity usually relies on donations or public funding whereas a social enterprise mostly generates its own profits. Social Good Stuff describes a Social Enterprise as "an organisation that applies commercial strategies to maximise social impact rather than profits".

Where it’s getting confusing is that a social enterprise can be created, owned and/or operated by a non-profit organisation.

A Social Enterprise embraces 4 principles:

  1. Social or environmental purpose

  2. Financial self-sustainability / sustainable business model

  3. Limited profit

  4. Participative governance

The textbook case of Tiostone

Let’s take Tiostone, which produces eco-concrete bricks from recycled glass waste in Hong Kong, as an example.

  1. Its environmental mission is to raise awareness on recycling and reduction of greehouse gas emissions related-issues. Thanks to Tiostone's advocacy activities, Nitrogen Oxides (a major greenhouse gas) emissions were cut by 20% in Hong Kong!

  2. Tiostone’s income comes from selling bricks. It doesn’t rely upon any donations. They have been running their business for 11 years now, so they must be really sustainable!

  3. Profits are reinvested in R&D so they can continuously look for other types of waste to recycle and improve the technology of the bricks.

  4. All stakeholders (waste collecting NGOs, factories, etc.) play a substantial role in the decision process. If you want to discover Tiostone’s success story, it’s here

Social or environmental purpose

In Hong Kong, most Social Enterprises are Work Integrated Social Enterprises (WISE). WISE are enterprises that are providing work opportunities to individuals that are structurally excluded from the job-market. For instance, Café 8 only employs people with learning disabilities from The Nesbitt Centre and other NGOs.

The diversity of Social Enterprises in HK is quite limited. But as there is an increasing awareness about social and environmental issues in HK, more and more start-ups are starting to tackle these multiple issues.

What are they? Here are some relevant examples: inefficient waste management, poor living conditions for foreign domestic workers and elderly or youth suffering from a stressful education system. But we met so many inspiring social entrepreneurs who want to make things change! Have a look:

  • HKOWRC recycles food waste and reduces greenhouse gas emissions

  • HelperChoice improves working conditions for foreign domestic workers

  • The Second Box secures a sustainable income for elderly and recycles cardboard

  • MyDrCoach helps primary school pupils to overcome homework overload

  • And so many more…!

Limited profits

Profits are reinvested in the social or environmental mission: it’s not an end but a means to leverage positive impact on the society. It implies many things such as limiting the gap between top and bottom salaries!

Sustainable business model

Like "traditional" businesses, a Social Enterprise has to focus on its economic activities: wealth and job creation and balancing income & expenses in order to be self-sufficient. For a Social Entreprise, its business model is a means to reach social impact.

Participative governance

Usually, all stakeholders are naturally involved in the social entreprise due to strong local partnerships. Thus, the decision process is not based on capital ownership

How big is the Social Enterprise scene in HK?

In Hong Kong, social entrepreneurship is relatively new compared to other countries. But the number of Social Enterprises is constantly growing: it went from 329 in 2010 up to 574 in 2016 according to data from Fullness Social Enterprise Society’s reports “Hong Kong: Frontiers in Social Entrepreneurship” and “Comparing the KPI of the Social Enterprise Sectors”.

However, the uniqueness of HK is that most of these Social Enterprises are operated by NGOs. Indeed, in the 80s', a few NGOs implemented income-generating units that acted as today's WISE. As it became a success, more and more NGOs launched similar initiatives and even got support and funding from the Government to create Social Enterprises.

Social Enterprises created by individuals outside the NGO world is actually new: it went from 16 in 2010 up to 123 in 2016!

Dedicated Funds & Impact Investing

The increasing weight of Social Enterprises in Hong Kong also paved the way to impact investing. Impact investments are investments made to generate social and environmental impact alongside financial return.

It is quite a newborn industry in HK: there are 6 public funds dedicated to social enterprises but it only reaches 3,7B HK$. Fortunately, more and more private impact investment funds are emerging, like #43 Ventures, to support the booming social business industry!

So In So Good’s mission is to foster social entrepreneurship in Hong Kong. For that, we launched an incubation programme to support tech start-ups solving social or environmental issues. We also designed a training programme for underserved youth to train them on how to create their own social enterprise. For further details on who we are and what we are doing in Hong Kong, click here!

If you want to know more about social enterprises and meet social entrepreneurs, visit our event page where we share all major events in the social business ecosystem!

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