Social Enterprise in China

1. Social Enterprise in China July 22, 2011

2. Agenda • What is social enterprise? • How is social enterprise practiced in China? • Examples of successful social enterprises • How can Pentok use social enterprise? • Questions • Resources

3. Social Enterprise - 社会企业 • There are many different definitions for social enterprise. It is a relatively new concept from the mid-1990s and it is still evolving. • Generally speaking, social enterprise is the act of achieving philanthropic goals by using business strategies • A typical business strategy usually involves selling goods or services • Philanthropic goals may include • Cleaning the environment • Advocating for women’s rights • Raising funds for cancer research • Providing university scholarships for children from poor families

4. How are social enterprises different from traditional for-profit businesses? • The primary goal of a traditional for-profit business is to maximize profits for its investors. All profits from a traditional business are: • Given to investors (shareholders and/or owners) • Reinvested in the business, for the purpose of generating more money for investors • Profits from social enterprises are: • Given to a philanthropic purpose • Reinvested in the business, for the purpose of generating more money for the philanthropic purpose

5. Does this mean that all social enterprises are non-profit organizations (NPOs)? • No. Some for-profit businesses use of a portion of their profits for philanthropic purposes rather than maximizing investor profits, and can therefore be said to use social enterprise techniques. • Nike contributes about 3% of its income to the Nike Foundation, which supports girls in developing countries • Wal-Mart urges its vendors to produce ecofriendly products and encourages its consumers to buy them • Cadbury Chocolates uses Fair Trade chocolate from Ghana, which improves the standard of living of thousands of Ghanaians

6. Does this mean that all NPOs are social enterprises? • Some have used social enterprise techniques for many years • Museum gift shops • Universities • Thrift stores (Goodwill, The Salvation Army) • But many NPOs do not use social enterprise techniques at all

7. Why is social enterprise a good idea for NPOs? • Most NPOs obtain the majority of funding through external funding: • Government funds • Grants • Donations • External funding can be unpredictable and unreliable • Social enterprise can offer NPOs a steady stream of income with which to finance its philanthropic purposes

8. Agenda • What is social enterprise? • How is social enterprise practiced in China? • Examples of successful social enterprises • How can Pentok use social enterprise? • Questions • Resources

9. History of social enterprise in China • The concept of social enterprise in China was formally introduced around 2004 • The development of social enterprises is spreading very quickly among grassroots organizations • Due to political and legal differences, formal and official social enterprises are more difficult to incorporate in China than in Europe or America

10. Challenges facing social enterprises in China • Inadequate legal and regulatory framework for social enterprise development • Low awareness among donors, government agencies, and general public • Political barriers • Shortage of initial funding • Lack of training, experience, and resources to successfully implement projects • Inability to compete with commercial enterprises

11. How can social enterprises benefit China? • Job creation in new enterprises • Reduces and potentially eliminates poverty • Cultivates the public awareness of citizens • Improves social public services • Many NGO leaders and intellectuals believe the movement of social enterprise will be a good remedy for many social problems and unmet social needs, and a boost for civil society development in China

12. Agenda • What is social enterprise? • How is social enterprise practiced in China? • Examples of successful social enterprises • How can Pentok use social enterprise? • Questions • Resources

13. Shokay • Headquarters: • Shanghai • Founded In: • 2006 • Founded By: • Carol Chyauand Marie So (USA) • Description: • Sell winter accessories, toys, and jewelry made of yak fiber online and through retail stores in 10 countries • Social Enterprise Aspects: • Provide consistent income to nomadic yak herders in Western China • Preserve local culture • Promote sustainable use of environment • Community development

14. Norlha • Headquarters: • Gansu Province • Founded In: • 2007 • Founded By: • Kim Yeshi (USA) • Description: • Sell hand-made yak shawls at high-end fashion stores in France and China • Social Enterprise Aspects: • Provide consistent income to nomadic yak farmers on the Tibetan plateau • Provide 70+ Tibetan nomads with stable employment by training them to independently manage all aspects of the manufacturing workshops

15. Amdo Craft and Cafe • Headquarters: • ZekuCounty, Qinghai • Founded In: • 2001 • Founded By: • Unknown (Sweden) • Description: • Sell hand-made crafts from Amdo Tibetan nomads online and in retail stores around China • Run a café in Xining that sells drinks and snacks • Social Enterprise Aspects: • Provide income to 50+ Amdo Tibetan families • Preserve Amdo Tibetan traditional skills and culture

16. Vista Project • Headquarters • Australia • Founded In: • 2006 (?) • Founded By: • ? • Description: • The Vista Building is a commercial building in Sershul that contains rental shops, hotels, and restaurants • Social Enterprise Aspects: • Commercial activities from the Vista Building funds all outreach programs • Improve the economic, social, cultural well-being of recently-urbanized and disadvantaged Tibetans in Sershul County (Sichuan)

17. ShambhalaSerai Hotels • Headquarters • Beijing (?) • Founded In: • 2005 • Founded By: • Laurence Brahm (USA) • Description: • Run five hotels in Tibet and Beijing • Social Enterprise Aspects: • Geo Tourism: tourism that sustains or enhances the geographical character of the environment, culture, aesthetics, heritage and well-being of its residents • Each hotel is a historic building restored by Tibetan artisans • Fixtures and decorations produced by local women supported through micro-finance programs operated by Shambhala • Some hotels in Tibet are staffed entirely by local Tibetans

18. Agenda • What is social enterprise? • How is social enterprise practiced in China? • Examples of successful social enterprises • How can Pentok use social enterprise? • Questions • Resources

19. Traditional crafts class in Hainan vocational school • We have the opportunity to potentially partner with a vocational school in Hainan to create a class on traditional Tibetan handicrafts • Pentok will provide a stipend to ~30 students and teachers’ salaries • The crafts that the students create will belong to Pentok to sell for profit

20. Pentok needs to perform a needs assessment and clarify many details before investing in the crafts class • What kind of crafts will the students manufacture? • How long will the class last? • AmdoCraft mentioned that it took almost two years for their craftspeople to manufacture sellable crafts. If it takes the same amount of time for us, it may be a long time before we see any value, especially if the turnover of students is very often. • Approximately how many crafts do we expect to receive? • How much money will we pay to the students and instructors? • Where do we intend to sell the products? Who is our target market? • Who is responsible for transportation of raw materials and finished goods? • Who are the instructors and what are their credentials? • … And many more questions!

21. Pentok has already explored the use of social enterprise • Motorcycle Repair Shop • Built a motorcycle repair shop in Mukbo Village and provided tools and parts • 90% of shop profit goes to the shop management, 10% goes to girls’ education • However, it has not yet been profitable

22. How can we make the motorcycle shop profitable? • Were the low revenues due to… • Lack of interest from the target market? • Expensive labor and/or materials? • Poor management? • Repairmen who were not trained well? • Inadequate publicity and marketing? • There are many more questions we need to ask to determine how to fix the problems

23. Pentok can explore adding social enterprise to existing projects • Yak Loan Project • If the borrowed yak has more than one calf during the loan period, require the family return the extra calves to us, or promise us a constant portion of the yak wool and milk • We can resell the yak calves, or sell the products as raw materials or finished goods • Allow the family to keep the yak past three years if they agree to give us a constant portion of the yak products • Solar Cooker • Act as an intermediary between our solar cooker factory and non-Chinese companies and charge for consulting services

24. Or Pentok can explore adding brand new social enterprise initiatives • Tourism • Restaurant / Café • Conventions, courses, and workshops

25. Agenda • What is social enterprise? • How is social enterprise practiced in China? • Examples of successful social enterprises • How can Pentok use social enterprise? • Questions • Resources

26. Agenda • What is social enterprise? • How is social enterprise practiced in China? • Examples of successful social enterprises • How can Pentok use social enterprise? • Questions • Resources

27. General social enterprise information • Bloomberg Businessweek: Social Entrepreneurship Takes Off • Social Enterprise Coalition: Social Enterprise Explained • The General Report of Social Enterprise in China • Social Enterprise Overview: a UK and China Perspective

28. Chinese social enterprise resources • China Social Entrepreneur Foundation • Narada Foundation • NPI (Non Profit Incubator)