Three Worlds of Social Enterprise

1
Three Worlds ofSocial Enterprise

• by
• Stephen W K CHIU
• Director of Public Policy Research Centre and
• Professor, Department of Sociology
• Chinese University of Hong Kong

2
Social enterprise in the context of welfare reform

• Esping-Andersens Three World of Welfare
  Capitalism as the starting point
• Liberal Regime US UK
• Conservative Regime Italy
• Social Democratic Regime Sweden
• Social enterprise as an institutional innovation
  in response to welfare reform in almost all
  advanced countries

3
Social enterprise in the context of welfare reform

• Social Enterprise emerges as a common response to
  many common problems in advanced countries,
• structural unemployment
• government budget deficits
• inadequacy of traditional social policies
• need for more active social integration measures
• Yet, different countries have different patterns
  of social enterprise development because of
  differences in the pre-existing welfare system
  and the subsequent welfare reform

4
PRAMS Five Key Questions for Social Enterprise
Development

• We analyze overseas experience in social
  enterprise development within the PRAMS framework
• P (Problems)
• R (Resources)
• A (Agents)
• M (Market Niche)
• S (Scale and Scope)

5
P (Problem)

• What is the pressing problem in the welfare
  reform under tightening government budget
• Re-commodification (the need to push people back
  into the labour market to channel people back to
  private source of welfare services)
• Updating (the need to adjust to new needs and
  demands amid socio-demographic changes)
• Rationalization (the need to be cost-effective in
  delivering high-quality welfare services)

6
R (Resources)

• How to mobilize resources for social enterprise
  initiatives?
• Market (sales of goods and services)
• State (public subsidies, e.g. contracting, seed
  money)
• Society (community support, e.g. volunteer work,
  donations, training, consultancy)

7
A (Agents)

• Who are the primary agents for social
  enterprises?
• Newly established
• Existing organizations (e.g. non-profit
  organizations venturing into business activities,
  or private business embracing social goals)

8
M (Market Niche)

• Where are the market niches for social
  enterprises?
• Newly emerged or Existing, underserved areas
• Demand for goods and services not yet fulfilled
  by private firms
• Community needs unmet by government provisions

9
S (Scale and Scope)

• What is the scale and scope of the social
  enterprise sector as a whole?
• Scale whether the sector performs a significant
  role
• Scope whether the sector occupies a well-defined
  position

10
Overseas Experience Pathways to social
enterprise development

• Different societies show different patterns in
  the development of social enterprises
• Pre-existing welfare model and the subsequent
  welfare reform interact with the local social
  context pave different pathways to social
  enterprise development

11
Social Enterprise in the USA

• The social enterprise sector gained momentum from
  the mid-1990s onwards as a result of
  private-public cooperation, with the third sector
  spearheaded the development
• The major pattern is that nonprofit organizations
  venture into revenue generating activities in
  order to support social mission
• The pre-existing liberal welfare system is such
  that the government plays a relatively passive
  role in income redistribution and social service
  provisions

12
PRAMS in the US Case

• Problem
• Re-commodification
• Welfare reform in 1996 the Personal
  Responsibility and Work Opportunity
  Reconciliation Act
• Amid state retrenchment from welfare provision,
  the nonprofit sector also sees the urge to look
  beyond traditional funding sources for their
  social missions

13
PRAMS in the US Case

• Resource
• Government support relatively small
• Revenues are generated from the market through
  sales of goods and services and
• A community-wide support, including grants by
  foundations, capital investment by social venture
  capitalist/venture philanthropist

14
PRAMS in the US Case

• Agent
• Existing non-profit organizations venture into
  income-earning activities, sometimes through
  establishing a subsidiary
• A social enterprise community in the making, with
  major players including
• Academic and university faculty
• Independent consultants and consulting firms
• Management Assistance Centres
• Foundations
• Venture philanthropists

15
PRAMS in the US Case

• Market Niches
• New market niches emerged by social movements
  including corporate social responsibility,
  ethical consumption, and social returns on
  investment
• social enterprises can appeal to end users and
  corporate sponsors with their social purposes

16
PRAMS in the US Case

• Scale and Scope
• The social enterprise sector in the US is
  significant because it helps generating
  additional revenues for social goals by creating
  a private-public cooperation
• Though many of their activities may overlap with
  private organizations, they carve out a niche by
  mobilizing community support for their social
  purposes

17
Social Enterprises in USA

• With nonprofit organizations venturing into
  revenue generating activities, the phenomenon of
  social enterprise is exploding. There are about
  175,000 economically active nonprofit
  organizations in the US as of 2002.
• As of 2002, the estimated aggregate employment is
  8,780,300 people, or 8.2 of the countrys total
  private employment.
• But the current pool of self-identified social
  enterprises is small, fragmented. According to
  the social enterprise database maintained by the
  Social Enterprise Alliance, there are about 5,000
  enterprises

18
Social Enterprises in the USA

• In 2000, services-related ventures are the major
  type of earned-income ventures, with 31 in human
  services
• A wide acceptance of nonprofit organizations
  venturing into income-generating activities, with
  65 already doing or being interested in doing so
• On average, operating ventures generated 12 of
  annual net revenue
• 35 say they are making money 19 say breaking
  even, and 35 say in need of subsidies

19
Social Enterprises in the UK

• The social enterprise sector emerged as a result
  of private-public cooperation, with the
  government taking a major coordinating role
• The government believes social enterprise can
  play a greater role in the delivery and reform of
  public services
• The major pattern of social enterprise
  development is newly-formed small organizations
  providing community-based services

20
PRAMS in the UK Case

• Problem
• Re-commodification
• The New Deal in 1997 from welfare to work
• The welfare state restructuring means that the
  government needs new social agents for the
  delivery of existing and new welfare services

21
PRAMS in the UK Case

• Resource
• 82 percent of the revenue are generated through
  provision of goods and services
• 12 percent of the revenue through grants and
  donations

22
PRAMS in the UK Case

• Agent
• Mainly newly formed organizations
• At one end are the voluntary and community sector
• At the other are ethical and socially responsible
  businesses

23
PRAMS in the UK Case

• Market Niche
• Market niches are opened up both by privatization
  of welfare services and by decentralization of
  administration
• Social enterprises are encouraged as public good
  providers

24
PRAMS in the UK Case

• Scale and Scope
• The social enterprise sector is significant in
  that it occupies a society-wide strategic role in
  urban renewal, community development and public
  service delivery
• The sector has a relatively clear position, with
  principal areas including health and social care,
  together with other community and social/personal
  services

25
Social Enterprises in the UK

• In 2005, around 15,000 social enterprises in the
  UK, about 1.2 of all enterprises in the UK
• The typical social enterprise employs 10 people,
  with the median turnover of 285,000 pounds
• The majority (71) has one particular target
  beneficiary group
• 25 of all social enterprises aim to help people
  through employment
• Major activities Health Social Care (33),
  Community or Social Services (21)

26
Social Enterprise in Italy

• Social Enterprise emerged as a bottom-up
  community-based development
• The pre-existing welfare system is such that the
  government plays a relatively significant role in
  income redistribution, but a relatively small
  role in social service delivery
• The major pattern of social enterprise
  development is that community-based co-operatives
  emerged as new social agents to capitalize on an
  under-explored market demand for social services

27
PRAMS in the Case of Italy

• Problem
• Updating (the need to adjust to new needs and
  demands amid socio-demographic changes)
• Italian welfare model is primary about monetary
  transfer and the supply of public education and
  medical services
• The undersupply of social services became an
  acute problem starting from the late 1970s

28
PRAMS in the Case of Italy

• Resource
• Government support relatively insignificant in at
  the beginning, but later became the primary
  client through contract-out services
• The majority of the revenues are generated
  through the provision of community-based services
• A community-wide support including volunteers

29
PRAMS in the Case of Italy

• Agent
• Throughout the 1970s to 1990s, newly formed
  social co-operatives acted as primary agents for
  the provision of social services to the local
  community
• Two types of social co-operatives as recognized
  by legislation in 1991
• Type A delivering social, health and
  educational services
• Type B producing goods and services for private
  customers or public agencies, with at least 30
  of the workforce being disadvantaged or hardly
  employable workers

30
PRAMS in the Case of Italy

• Market Niches
• Market niches emerged first in those under-supply
  areas such as home care and residential care for
  the elderly, juniors and handicapped
• Market niches emerged later as public authorities
  reserve up to 20 of the public demand for goods
  and services for enterprises who employ at least
  30 of total workforce as disadvantaged persons.

31
PRAMS in the Case of Italy

• Scale and Scope
• The social enterprise sector is significant in
  its role in social service delivery and
  employment integration
• The sector also enjoys nation wide recognition,
  as evidenced by legislation in 1991.

32
Social Enterprises in Italy

• In 1991, when the Act was passed, social co-ops
  numbered just under 2,000
• In 1998, around 4,500 social co-ops
• Rough 70 are supplying social services, and 30
  are work integration
• The average size is 40-50 members and 25 paid
  workers.

33
Social Enterprises in Italy

• It is estimated that there is a total of 100,000
  members of social co-ops, of which about 9,000
  are volunteers and 75,000 are paid workers.
• The total number of users served by social co-ops
  are about 400,000.
• The users are mainly elderly, juniors, and
  handicapped.
• The principal form of service was day care.

34
Social Enterprises in Sweden

• A top-down model of social enterprise development
  that the government transfers part of its
  existing services to new social agents
• The Swedish welfare state provides both monetary
  transfer and full-range of social services.
• The development of social enterprise is
  comparatively limited because the state plays a
  dominant role in social service provision

35
PRAMS in Sweden

• Problem
• Rationalization (the need to be cost-effective in
  delivering high-quality welfare services)
• The major problem is that both the government and
  citizens question whether some areas of those
  services are cost-effective and/or providing
  citizens with enough choices.

36
PRAMS in Sweden

• Resource
• Resources are generated in the process of
  privatization, through which part of the welfare
  services are transferred from the government to
  other social agents

37
PRAMS in Sweden

• Agent
• Newly formed non-government organizations are
  given opportunities to provide welfare services.
• CDA (co-operative development agency) acts as the
  primary promoter for new organizational models

38
PRAMS in Sweden

• Market Niches
• Through privatization, the Swedish government
  created quasi-markets in which the government
  transformed to the role of service purchaser
  from a variety of competing providers

39
PRAMS in Sweden

• Scale and Scope
• The social enterprise sector is small and
  relatively insignificant, acting as a new policy
  tool for the government
• The scale is relatively small even for the two
  most dynamic cluster of social enterprises,
  namely social work co-operatives and community
  development enterprises.

40
Social Enterprises in Sweden

• In 2002, there were about 90 social work
  co-operatives providing work to approximately
  1,400 persons
• Only 9 community businesses were in operation in
  2002, with an aggregate turnover being 1 million
  euros.

41
Cross Country Comparison
42
Lessons for Hong Kong

• The Enterprise Side
• Social enterprises are most likely to succeed in
  responding to unmet community needs
• The development of social enterprise as a whole
  depends on how large the room is left behind by
  the market and the state in that regard

43
Lessons for Hong Kong

• The Social Side
• Social enterprise development requires consensus
  building in order to achieve the followings
• decide which social agents are to take up those
  new social roles
• to form a private-public partnership so as to
  form a viable resource pool
• To generate community support, e.g. corporate
  sponsor, professional training, volunteer, etc.