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The Bauhinia Foundation Research Centre (The Centre) today (17 October) released its study ‘Social Enterprises in Hong Kong’, which reviews the business operation of social enterprises (SEs) in Hong Kong and the challenges facing them, with a view to making recommendations to foster sustainable development of SEs.
The study, commissioned by the Centre and conducted by K & M Consultancy Co. Ltd., found no universal definition of SEs, and that the concept of SEs has been evolving over time. In general, SEs refers to business operations seeking to serve community interests while deriving income from business transactions to sustain their operations. SEs will reinvest the majority of profits in fulfilling their social missions.
“The study findings are quite positive. We are pleased to note that local SEs are providing diversified products and services, which indicates the sound foundation of SEs development and growth in Hong Kong. Meanwhile, SEs have provided job / training opportunities and enhanced a sense of dignity for the disadvantaged. This is worthy of the community’s support and active involvement. However, local SEs are facing various challenges and require the assistance of the Government and other stakeholders. Given SEs overseas have developed over a longer period of time, the Centre suggests local SEs to make reference to overseas experiences when dealing with their problems,” the Centre’s Chairman Dr Donald Li said.
Dr Li added, “The Centre put forth six recommendations under three directions, i.e. change of mindset, integration of resources and commercial operation, in the hope of gathering assistance and support for SEs from a wider group of people through new mindset and mode. This will also help to make more effective use of public and social resources.”
The study revealed that quite a number of local SEs are weak in business operation, lack knowledge and experience on human resources, management skills, information technology and law, which hinder their business development. Moreover, they have difficulties in becoming self-financing as a result of over-relying on the funding support from the Government and their affiliated organisations.
The Centre’s Vice-chairman and the study’s convener Lau Ming-wai said, “Balanced economic development is imperative for upholding the long-term competitiveness of Hong Kong. In the long run, operating SEs under the mindset of poverty alleviation or in the form of social welfare would suppress motivation for innovation by SEs, which will slow down SEs development and restrict their socio-economic contribution. As always, the Centre encourages joint efforts by the Government, civil society and business sector to focus on the disadvantaged in a move to build up a better society.”
“Looking around, you can see that a lot of enthusiastic people with financial capability and creativity are willing to assist SEs development. In line with our earlier research on businesses’ role in poverty alleviation, we hope our present recommendation will assist SEs to win public recognition and support through new mindset and modes, as well as making more effective use of public and social resources. The development of SEs should meet the best interest of the society at large. In the long run, SEs should equip themselves with comprehensive business strategies and financial planning, rather than endlessly relying on the funding support by the Government or affiliated organisations,” Lau Ming-wai added.
In a bid to promote SEs’ sustainability under the principle of self-financing operation, the Centre puts forth six recommendations in the following three directions, including change of mindset, integration of resources and commercial operation.
I. Change of Mindset Although SEs need to fulfill their social missions (such as creating job opportunities for the disadvantaged and providing products or services needed by the community but with unattractive profit yield), they should move away from the welfare system to pursue projects that are beneficial to the society instead of projects that merely help relieve poverty. The Centre therefore suggests:
1). Introducing an SE accreditation scheme To enhance public recognition and investors’ confidence, it is recommended to introduce an accreditation scheme to provide qualified SEs with financial and other assistance. 2). Strengthening the social awareness of business practitioners Strengthening the social awareness of business practitioners helps encourage the business sector treating SEs as fair competitors and engage more socially-minded business practitioners to provide professional/business advice and training, concessionary rent or outsourced contracts. In the long run, the business sector is encouraged to integrate the SE spirit into their business practice.
II. Integration of ResourcesTo achieve sustainable development, SEs have to adopt proactive measures to improve their weaknesses. The Government should play a bigger role in coordinating and allocating resources from different sectors. The Centre suggests:
3). The Government should expand the role of the existing SE Support Unit to provide one-stop dedicated oversight, regulation and promotion of SE development. Such one-stop service helps avoid duplication of support and services and centralise volunteers’ coordination. It could also help SEs prepare business plans and provide ongoing professional advice to SEs. A comprehensive and systematic platform for information, experience and training sharing helps facilitate public debate and participation.
III. Commercial OperationOne way to facilitate SEs to achieve self-financing instead of relying on funding support by the Government and affiliated organisations is using business model for SEs operation, where sufficient funding sources and appropriate market strategies are two key elements for success. The Centre recommends:
4). Exploring alternative financing channels The Government is suggested to provide SEs with low interest/interest-free loans and tax incentives for profits and to allow SEs to distribute a reasonable return to shareholders (e.g. up to 30% of the profits), which should be taxable.
Over time, investment and finance intermediaries are encouraged to develop financial products that meet the needs of SEs, when the development of SEs is more established. In the longer run, the Government could set up a financing platform to provide a capital market and match SEs with social investors.
5). Enhancing publicity efforts on promoting SEs Although there are some media columns for social enterprises, the publicity is still insufficient to spread SEs’ spirit and mission widely. The Government is encouraged to take the lead in holding an annual bazaar for SEs to publicise their businesses and products/services to the community, to explore market potentials and to build up consumer confidence.
6). Promoting social franchising Successful SEs can extend their business experiences and social impact through granting franchises to new SEs which have limited business expertise. With a proven business model and the franchiser’s all-round support in the form of business resources, knowledge, experience, best practices and branding, business start-up for the franchisees will be easier and their risks of failure will be reduced. Meanwhile, SEs may enjoy the benefits of collaborative buying, producing, selling and learning. In the long run, franchising could become a way forward for SEs.