báo cáo thực tập giữa khóa the concept of social enterprise reality and solutions for the case of vietnam

LIST OF FIGUREFigure 1.1 Typical hybrid of social enterpriseFigure 1.2 The difference between traditional enterprise and social enterpriseFigure 1.3 The ILM concept is about keeping the

ACKNOWLEDGEMENT

Doing a thesis requires investment of time, rebounding from failure, motivation, and of course to somehow financial resources However, it is not a soloact There are many who have sacrificed much and have been an ongoing source ofinspiration and support First and foremost, I would take this opportunity to express

self-my profound gratitude and deep regards to self-my guide Dr Nguyen Hai Ninh for hisexemplary guidance, monitoring and constant encouragement throughout the course

of this thesis To me, he is not only the advisor for this thesis but also a mentor whohas opened my mind set in many aspects of life through warm sharing and brainstorming moments

I must also thank all the participants of my group, without their enthusiasticand constructive contribution, my thesis could not be accomplished

Last but not least, to my dearest family and friends, especially my mom, fortheir incredible support throughout the difficult time I have been most fortunate inhaving the support from all of you and it has allowed me to reach my destinationand happy to have made the journey

Table of Contents

LIST OF FIGURES 1

LIST OF ABBREVIATIONS 2

INTRODUCTION 3

CHAPTER 1: LITERATURE REVIEW 5

1.1 The evolution and development of Social Enterprises (SE) 5

1.2 Different viewpoints on social enterprises concept 6

1.3 Social enterprise characteristics 9

1.3.1 Social enterprise is a business model 9

1.3.2 Have a clear social mission 10

1.3.3 Reinvest the majority of their profits 11

1.3.4 Social ownership 11

1.3.5 Undertake different legal forms 12

1.4 Types of Social Enterprise 12

1.4.1 Co-operatives: 12

1.4.2 Employee-owned businesses: 12

1.4.3 Social Firms: 13

1.4.4 Development Trusts: 14

1.4.5 Intermediate Labor Market Companies: 14

1.4.6 Social and Ethical businesses: 15

1.4.7 Community businesses: 15

1.5 The benefits of social enterprises 15

1.5.1 Social impact 16

1.5.2 Economic impact 16

1.5.3 Public services 16

1.6 Typical and famous examples of SEs 17

1.6.1 Grameen Bank – Bangladesh 17

1.6.2 The Big Issue- a hand up and not a hand out 19

1.6.3 KOTO- Know one teach one 20

REFERENCE 23

LIST OF FIGURE

Figure 1.1 Typical hybrid of social enterpriseFigure 1.2 The difference between traditional enterprise and social enterpriseFigure 1.3 The ILM concept is about keeping the labor market “ active”

LIST OF ABBREVIATIONS

CSIP Center for Social Initiatives Promotion

OECD Organization for Economic Co-operation and DevelopmentCIEM Central Institute for Economic Management

ILMCs Intermediate Labor Market Companies

The social enterprise phenomenon can trace its roots back to the eighteenth centuryand the concept as such has evolved to become is a global phenomenon SocialEnterprises (SEs) have been formed from social initiatives, based on a demand ofsolving a concrete social problem of the community and led by entrepreneurialspirit of the founders It is concerned with bringing about the social impacts andsocial changes through innovative thinking

The deep objective of social enterprise is to bring a more sustainable economy

Unlike the usual traditional enterprise, it does not focus on profit maximization but

to use surplus as a means to solve social issues Furthermore, it advances nonprofit

in the ability to financially self-sustain

In the context of Vietnam, since Doi Moi, the most popular organizationform associated with social mission is Non- government organization (NGO)funded from foreign NGOs and donation These organizations have beensignificantly contributing to the social and economic development of our nation

However, recently, when the state of the world economy as well as our economystruggle in difficulties due to the crisis, as well as restructuring trends, fiscaltightening, reduce public debt and the environment increasingly polluted byexcessive economic activity, a new business model, has been conceived anddeveloped as a new trend in our country, namely: Social Enterprise Inevitably,social enterprise model which can bring profound social benefits and sustainthemselves by creative business models is a possible choice as a long term solutionsfor our social welfare career

Because of the necessity of Social Enterprise in building a sustainable

economy, I would like to suggest the topic of my thesis “The concept of social

enterprise: Reality and solutions for the case of Vietnam”

Thesis objectives: The purpose of the thesis is to clarify the fundamental

characteristics of social enterprise The study will guide through the historicalcontext and concept of social enterprise phenomenon in Vietnam In my thesis,there will be recommendations in order to improve the development of socialenterprises in Vietnam

Research Questions

 What is the concept of social enterprise?

 What is the biggest issue in the development of social enterprises in Vietnam

 What are recommendations for it?

Thesis methodology: In this study, both deductive and inductive research approach

are used, together with qualitative method, collection of data and comparison withempirical research methods

CHAPTER 1: LITERATURE REVIEW1.1.The evolution and development of Social Enterprises (SE)

Social Entrepreneurs and social enterprises have been in existence formany centuries however, it was first appeared in the United Kingdom in the 17th

century and have been the country where Social Enterprises most developed

According to MacDonald & Howarth’s research (2008), the first social enterprisemodel appeared as a result of the plague (Black Death) epidemic in 1665.1Theepidemic has left a disastrous consequence that many poor people becameunemployed In this situation, Thomas Firmin established a manufactory using hisown money to supply materials for the operation and provided employments for

1700 people At the time of establishment, Firmin clearly stated that he will notpursuit optimization of profit but to transfer the profit to charitable funds

Since then, models of cooperatives, social housing, micro finance, etc

have been established and replicated in North America and East Europe as a result

of the Great Depression (1929-1933), social enterprise’s activities experiencedsome decreases when the Keynes’s economic model become popular But SocialEnterprises have not been internationally recognized and developed as a trend tosustainably solve social problems until 1980, when Governments innovativelyshared and transferred part of social welfare delivery responsibility to the thirdsector which is later being known as Social Enterprises in many countries

In United States, the social enterprise became more prominent duringthe late 1970s and 1980s in response to the economic downturn and major cutbacks

in government spending Many charities at this time felt the need to increase theirrevenue from sources other than grants and donations Several of these charitiesbegan to rely increasingly on commercial activities for revenue, greatly expandingthis type of American social enterprise As a result, the portion of income thesecharities received from commercial activity increased by 20% between 1982 and

2002.2

1 CSIP, British Council & CIEM 2012

2 These figures are based on a 2002 study of nonprofits with annual revenue of over $25,000

In Europe, social enterprise appeared popularly for the same reason as theUnited States however, in the case of Europe, 40% 3of the European’s unemployedwere considered “long-term unemployed” The downturn significantly cutgovernment budgets across the continent, reducing states’ ability to provideunemployment assistance and job re-integration, further compounding theunemployment problem To solve these problems, several charities chose to focustheir efforts on battling structural unemployment.

Many charities started job-training and work-integration programs—

programs which often had commercial activities From then, the understanding ofsocial enterprise in Europe was shaped and in turn guided the development ofsocial-enterprise policy across the continent

1.2.Different viewpoints on social enterprises concept

Social entrepreneurship has gained increasing popularity and attracted attentionduring the recent years The basic idea of social entrepreneurship is the combination

of a social mission with a business-like operation of the organization However, thespecific meaning of social enterprise has not been officially defined yet Dependingthe point of view, vision, mission, and goal, the term ‘social enterprise’ isincreasingly recognized with some organizations describing themselves in this way

According to Department of Trade and Industry (DTI) in 2002, the definitioncurrently is expressed: 4

“A social enterprise is a business with primarily social objectives whose surpluses are principally reinvested for that purpose in the business or in the community, rather than being driven by the need to maximize profit for shareholders and owners”

Commercial activity, defined as income from special events, sales of goods, and dues and payments where members received comparable benefits, grew as percentage of income for these groups from 48.1% in 1982

to 57.6% in 2002 Kerlin, supra note 11, at page 252

3 Tackling social exclusion in Europe: The contribution of the social economy (Roger Spear et al eds., 2001)

4 Department of Trade and Industry, A Strategy for Success: Social Enterprise Explained, p13

This definition is very comprehensive, stick to the basic characteristics of socialenterprise

First, doing business, should be understood as a model, a pro-active approachand solutions that the organization has adopted in its operation rather than bind ittightly to the form of a company such as : a joint stock company or a limitedliability company….However, it also performs the economic function as acommercial trade company

Secondly, the social objectives are set out as a primary mission of SEs It is themost important goal in shaping the SEs Social goals can be a hunger eradication,poverty alleviation, environmental protection, protection of human rights… Socialenterprise must be established to pursuit social goals

Thirdly, profits are not for individuals but redistributed back to the organization,society or community

However, according to Social Enterprise Alliance (SEA)5, the champion for socialenterprise in the United States

“Social enterprises are businesses whose primary purpose is the common good They use the methods and disciplines of business and the power of the marketplace to advance their social, environmental and human justice agendas.”

Three characteristics distinguish a social enterprise from other types of businesses,nonprofits and government agencies:

 It directly addresses an intractable social need and serves the common good,either through its products and services or through the number of disadvantagedpeople it employs

5 Se-alliance.org (2014), What is Social Enterprise, Available at: enterprise [Accessed 14 Jul 2014].

https://www.se-alliance.org/what-is-social- Its commercial activity is a strong revenue driver, whether a significantearned income stream within a nonprofit’s mixed revenue portfolio, or a for profitenterprise.

 The common good is its primary purpose, literally “baked into” theorganization’s DNA, and trumping all others

The Organization for Economic Cooperation and Development (OECD)6

definition of social enterprise is:

“Social enterprises are organizations that take different legal forms across OECD countries to pursue both social and economic goals with an entrepreneurial spirit Social enterprises typically engage in delivery of social services and work integration services for disadvantaged groups and communities, whether in urban or rural area In addition, social enterprises are also emerging in the provision of community services, including in the educational, cultural and environmental fields”.

Social Enterprise London: summarize the term “social enterprise” in 3characteristics: enterprise orientation; social goals; social ownership

 Enterprise orientation: They are directly involved in producing goods orproviding services to a market They seek to be viable trading organizations, with anoperating surplus

 Social Aims: They have explicit social aims such as job creation, training orthe provision of local services They have ethical values including a commitment tolocal capacity building, and they are accountable to their members and the widercommunity for their social environmental and economic impact

 Social ownership: They are autonomous organizations with governance andownership structures based on participation by stakeholder groups (users or clients,local community groups etc.) or by trustees Profits are distributed as profit sharing

to stakeholders or used for the benefit of the community

6 www.oecd.org/gov/budgeting/47814764.pdf

In Australia, the Australian Department of Education, Employment and WorkplaceRelations define social enterprises:

“A social enterprise is an organization or venture that achieves its primary social or environmental mission using business methods The social needs addressed by social enterprises and the business models they use are as diverse as human ingenuity Social enterprises build a more just, sustainable world by applying market-based strategies to today’s social problems.”

In Vietnam, according to the Center for Social Initiatives Promotion (CSIP) socialenterprises are defined as:

“a concept that refers to the work of social entrepreneurs under different legal entities depending on specific purposes and operation conditions Social enterprises directly target to social benefits, and are led by a strong entrepreneurial spirit to achieve both social benefits as well as economic returns”

Generally speaking, Social enterprise is an organization pursuing social goals orother objectives, activities to create benefits for the community without distinction

of ownership or legal form with the diversity of the level of financial autonomy,innovation and social change

1.3.Social enterprise characteristics

As mentioned above, there is no universal definition of social enterprise howeverthey all have the some basic characteristics as following:

1.3.1 Social enterprise is a business model

Like other traditional enterprises, SE is a business Business operation is aunique characteristics as well as strength of social enterprises in comparison withNGOs, non-profit organizations, charities that simply receive grant and fund for thesocial programs The entrepreneur must generate the majority (more than 50%) oftheir income through trade More accurately, social enterprises have to provide

goods, products and services with good quality and at competitive prices to themarket However, unlike the Charity funds who may call for charitablecontributions or purchase the products from that organization to raise fund, SEshave to compete fairly with and equally with traditional businesses in the samefield This is a challenge of social enterprises, and that explains why socialenterprises always tight closely to social initiatives, because their business solutionsmust be 'social innovation’ so it can bring about social objectives using businessapproach Therefore, with social goals and wise strategy, SE can gain profitability

as well as sustainability for development

Figure 1.1: Typical hybrid of social enterprise

Source: CIEM

1.3.2 Have a clear social mission

The social enterprise community agrees that the primary aim of all socialenterprises must be a social or environmental one In another word, the socialobjectives must be put as the core mission Because the priority objective of SEs isaim at the society, the business strategy is different from traditional business Thedifference is that traditional enterprises meeting customer needs or finding socialsolutions to maximize profit for enterprise owners In contrast, social enterprises usebusiness model as a tool to achieve their social objectives In summary, socialobjectives are considered to be the most basic, the first and foremost and theguideline for business activities of SEs

Figure 1.2: The difference between traditional enterprise and social enterprise

Business Activity

Social objectives Social

enterprise

Source: CSIP, British Council & CIEM 2012

1.3.3 Reinvest the majority of their profits

What a social enterprise does with its profits is a critical way in which socialenterprise is distinct from standard businesses The basic principle of SEs is use theprofit or surplus to redistribute back to the activities of the organization or thecommunity, not to distribute profit to individuals The way of distribution of profits

of each business is different, depending on the set-out social objectives There aresome popular social entrepreneurs to reinvest their profits for social purposes:

 Recruit workers who often do not attract other employers: disabled,

 Operate in places which are less attractive other investors:

 Investing in area which has low profit

1.3.4 Social ownership

Social enterprises are autonomous organizations that are independent of the state

Social enterprises are voluntarily created by a group of people who share certainneeds and aims Therefore, they execute a democratic decision making process Thedecision-making does not rely on the percentage of capital control People and laborhave primacy over capital in the distribution of

1.3.5 Undertake different legal forms

A social enterprise can exist in various forms of business as follow:

 An independent company with social objectives: It may be a private company or a joint stock company…

Traditiona

l enterprise

identify market

design

Social enterprise

identify social issues

design business plan

solve social issues