Monday, June 3, 2013

Hong Kong's Social Entrepreneurs

Or is SE an oxymoron?

A new kind of business – some 400 of them in fact – has turned up in Hong Kong over the past decade. Social entrepreneurship is a relatively new phenomenon, defined as enterprises intended to solve social issues with performance based on positive return to society rather than merely profit and loss.

That is an oxymoron in Chinese culture, which traditionally has regarded business ventures as somewhat devilish and exploitative in the pursuit of profits, whereas genuine charitable acts and good deeds are self-sacrificing endeavors, best done by martyrs and not by the captains of industry. In other words, social entrepreneurship is perceived to have a self-conflicting concept and business model doomed for failure.

However, Hong Kong has helped to establish a number of unique businesses including a pioneer Beauty Care & Nails social enterprise providing job opportunities for young ex-drug addicts / deaf / ex-sex workers in collaboration with three beauty care groups. The city has also established a pioneer "Music Social Enterprise" for hospitals with the support from "Music Therapy SE", a project to get cancer survivors serving cancer patients and others.

Internationally, the past two decades have seen an explosion of such entrepreneurship and healthy competition in the social sector, which has discovered what the business sector learned from the railroad, the stock market and the digital revolution: Nothing is as powerful as a big new idea if it is in the hands of a first-class entrepreneur.

Increasingly, profit-making business establishments are urged to observe CSR —corporate social responsibility. They may make charitable gestures to deal with social issues. But one way to differentiate social enterprises (SEs) from regular business ones is through transparent evidence that the SE has social aims as its primary targets and profitability as a secondary concern.

There are skeptics. An article in the Hong Kong newspaper AM730 last December questioned whether there is room for SEs to even survive in Hong Kong and was critical of government funding of their development. Hong Kong has set up a number of initiatives since 2006 to facilitate development of the sector. The HK$500 million Social Innovation and Entrepreneurship Development Fund announced by Chief Executive C Y Leung earlier this year is one recent example.

The article also pointed out that the current business environment is harsh enough for any regular enterprises to survive, let alone companies with the extra burden of social missions, which would find it difficult to have any viable business prospects and thus are destined to go bust. In other words, any government support for them would be wasted and social missions are best left under the domains of NGOs (non-profit organizations) and not mixed with business targets.

The article obviously overlooked one important point. The success of an SE shouldn't be measured only by its profitability but also its social impact, which can be translated into monetary values. A good example is their jobs-generating capability.

Research by the Hong Kong-based Fullness Social Enterprises Society (FSES) shows 70 percent of the SEs in Hong Kong aim at hiring the disadvantaged, who otherwise would have to rely on substantial outlays of social welfare support from government coffers.

Kee Chi-Hing, the founder of FSES, has taken this social aim a step further through his Fullness Hair Salon. He stresses the generation of the "4C's" -- Capabilities (skill sets), Cash (salary), Confidence and CV (credentials) -- for young ex-convicts by hiring them as hair salon assistants and training them as hairdressers. The social objective is to rehabilitate these youngsters by reestablishing their roots in society. The effort also aims to keep them from committing new crimes, which ultimately translates into significant savings for the government -- considering that Hong Kong spends about HK$300,000 on each convicted criminal annually.

Social missions aside, SEs also strive for self-sustainability through financial success. After breaking even, they are expected to reinvest the earnings into the company. Data show that SEs, which receive funding from the government through the Enhancing Self-Reliance Through District Partnership Program, are able to generate $2.5 out of each dollar they have received over a six-year period. On the other hand, traditional charities on average channel only 78 cents of each dollar of funds donated to them to benefit their social targets. Therefore SEs offer a much more capital efficient model than traditional charities that depend on donations.

As a global comparison, the 68,000 SEs in the UK contribute around £24 billion in revenue and employ 800,000 people. American SEs are estimated to contribute about 3.5 percent to the nation's GDP.

This growing economic impact of the SEs has also attracted the business community to step up its focus on the sector.

For example, the Harvard MBA program has now incorporated a number of SE topics like finance and entrepreneurship into its core curriculum. Furthermore, the Social Enterprise Conference is the largest conference run by the Harvard Business School. This echoes what Nobel Peace Prize Laureate Dr. Mohammad Yunus has envisaged: "Soon a good part of business genius, creativity and innovation of the world will devote itself to this new goal of social good."

Social entrepreneurship is not a self-conflicting term. It has introduced, as Yunus put it, "a totally revolutionary dimension to the free market economy".

(Julia Ip is the founder of Project Artist X, which aims at cultivating artistic talents. Email:

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