Question #1: There are many terms to describe an organization, e.g. traditional and for-profit enterprises, social enterprises, and nonprofits. What are the key differences between them?
Answer: Traditional, for-profit enterprises are any businesses aiming to grow, increase profit and shareholder value, and exit – which is the case of many tech startups nowadays. In contrast, nonprofits, as the name already implies, are not profit-driven. Instead, these organizations prioritize social and environmental causes, and rely on mainly fundraising to generate sufficient income for operation.
Compared to the other two organizations, social enterprise has a shorter history, which can be traced back to the mid-19th-century in the UK. They are businesses that focus on the greater good. Their goal is to create positive socio-environmental impacts and simultaneously generate profit. In our opinion, this is a perfect mix of traditional enterprises and nonprofits, and should be the future of all businesses.
Question #2: What are the industries, sectors, regions, or countries where social enterprises are needed?
Answer: With regards to which sectors are transformed the most by social enterprises, in recent years, there has been a wave of social enterprises in Southeast Asia that develop solutions in waste management, water management, and textile and garment manufacturing, to name a few. However, with mounting issues across the world, alongside increasing crises with monumental impact, EGL expects more social enterprises to be established and exert influence on more economic sectors.
Additionally, we believe that the need for social enterprises and their innovations is not, and will not be, limited within certain territories. This belief comes from EGL’s own experience, with our solutions being implemented in not only Vietnam but also in other parts of the world. Our innovations in Vietnam also gain interest from entrepreneurs based in other continents, who aspire to adopt those innovations to their own countries and regions, obviously with modifications to adapt to contextual nuances.
Question #3: How to start a social enterprise, or how to transform an existing commercial, traditional enterprise into a social one?
Answer: The way to start a social enterprise depends on the legal framework in the country of establishment. For example, in Vietnam, one needs to begin by registering their social enterprise as a sole proprietorship, a partnership, a joint stock company, or a limited liability company – which is the same process as any normal companies. However, social enterprise owners will need to document their commitment to resolving social and environmental issues and use at least 51% of their after-tax profit for this commitment.
Transforming a commercial enterprise to a social one is a slightly different story. In Vietnam, if a company aspires to be legally regarded as a “social enterprise”, they will need to comply with the requirements as explained above. However, another pathway is to take incremental steps to ‘resemble’ social enterprises, such as hiring applicants from marginalized and disadvantaged communities or abiding by Environmental, Social, and Corporate Governance standards, without going through the said legal process. Eventually, it is all about whether a company’s products, services, and overall operations are tackling the world’s pressing issues or not, irrespective of its title or label.
Question #4: If social enterprises are not profit-driven, how can they stay viable and sustainable, and attract talents?
Based on our experience, social enterprises need to be supported by viable solutions and feasible business models to survive and grow sustainably. Both solutions and business models need to overcome rigorous validation studies, including but not limited to feasibility studies, pilots, prototyping, and in-field research and development, before the social enterprise is decided to be operated.
Recruitment in social enterprise is always difficult – but EGL’s advice is to always clearly communicate the enterprise’s purposes, missions, and commitments. This advice has helped us build a team of changemakers that are passionate about our causes and devoted themselves to a better future for everyone.
Question #5: What advice would you give to aspiring social entrepreneurs and innovators who want to start innovating and operating their social enterprises?
Just go for it! For those who want to run a social enterprise, it could initially be daunting; but it is a journey worth embarking on. For others who are less inclined to establish social enterprises, remember that you do not have to do that to innovate. Innovations do not have to be big; they could be incremental, positive changes in your company’s everyday operation to become more responsible and sustainable. Regardless of the route you choose, you are all social innovators who gradually make this world a better place to live in.