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-Andersen’s 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 country’s 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.