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  The word “Social Enterprise” is quite familiar to us now. About 10 years ago, “venture companies” prevailed in Korea. At that time, there was a start-up boom among the youth. Now the boom has been moved to the social enterprises.

 

  The “Social enterprise” refers to the companies that emphasizes corporate social responsibilities and pursue social purposes in operating business which slightly differs from the venture companies that operates business in one sector with expertise. 


Legal concepts of a social enterprise

Ÿ   A company which does business activities of producing and selling products and services while pursuing such social purposes as providing vulnerable social groups with social services or jobs to improve the quality of life of the local residents.

Ÿ   A company which reinvests profits in the business or the local community putting priority on pursuing social purposes rather than on maximizing profits for shareholders or owner of the company.

 




  There are some young people around me who are creating new companies as a social enterprise. Among them, some sells rice balls with the “fighting” message. Some others sell coffee and the space or make recycled wallets and bags from old clothes or leather sofas.

 

  In order to solve the problems of the unemployment, the central and local governments are currently promoting some projects that support social enterprises and young people launching their own business.  According to the Social Enterprises Report of the Ministry of Employment and Labor, there were 699 social enterprises and 1522 preliminary social enterprises in September 2012 which makes 2221 social enterprises in total. The number of the employees of social enterprises are 17,410 and 10,640 people among them are vulnerable members of the society.

 

  According to the same report, the budget is increasing; 154.7 billion won in 2012, 161.5 billion won in 2011 and 176 billion won in 2012. In 2013 the budget has been set at 162.7 billion won. (The reduction on the budget is due to the decreased labor cost)

 



  

  The average wage of the employees of the social enterprises can be found as below. The employees whose wage was 900,000 won before receive 107,000 won after working at social enterprises, which is up 170,000 won. The groups of vulnerable people, women and 20s showed a remarkable increase.






[Employment Type of Social Enterprise Employees]

(Unit: %)

Employment type

Employees of Social Enterprises

Total Employees

Vulnerable

Non-vulnerable

Average

Average

Regular

44.7

53.1

47.3

65.8

Temporary

55.3

46.9

52.7

34.2

(The employment type for total employees is from the website of the Ministry of the Employment and Labor/ The employment type for the employees of social enterprise is from the result of the survey on 315 social enterprises)

 

  However, the rate of temporary employees in social enterprises amounts to 52.7% and they account for 34.2% of the total employees. Considering the fact that temporary employees form a bigger portion in the vulnerable group, it is possible to notice that the vulnerable group receives more income after employment but they are still under a poor condition in terms of the types of employment.

 

 

[2007~2010 Social Enterprises Income Statement]

(Unit: 100 million won , %)

2007

2008

2009

2010

Rate of Change

Sales

464.67

1,342.57

2,345.80

3,764.70

59.9

Cost of Sales

130.92

552.28

1,099.73

2,073.69

88.6

Gross Margin

333.75

790.29

1,255.07

1,452.91

15.8

Distribution Cost and General Administrative Cost

333.73

1,034.26

1,814.77

2,290.35

26.2

Operating Profit

0.02

-243.97

-559.70

-827.46

47.8

Non-operating Profit

576.48

743.14

1,050.48

1,084.45

3.2

Corporate Tax

0.00

3.47

3.57

3.96

10.9

Net profit during the term

46.41

96.43

70.96

77.23

8.8

Net Profit to Sales ratio

9.9

7.2

3.0

2.0

(Data: Institute for Research & Industry Cooperation, PNU., 2012.4 Sustainability of Social Enterprises according to the stages of development)

 

  The social enterprises have significantly evolved in quantity but they haven't in terms of the profit-making structure. The sales of the social enterprises increased dramatically between 2007 and 2010, from 46.4 billion to 376.4 billion won. However, the net profit rate continuously decreased between 2007 and 2010, from 9.9 % to 2.0 %.


  This is partly due to the increase of small size social enterprises which was possible by the expanded basis of the social enterprises. But this shows that the social enterprises currently in operation are in a difficult situation.

 

  The National Assembly Budget Office (NABO), who was in charge of evaluating projects supporting social enterprises, points out that the following improvements are necessary for each social enterprise to secure their stability and to continuously operate the business. Although the quantitative increase of the social enterprises is important, this was only possible through the financial support of the government.

 

1.    As for the social enterprises, which are the companies by the commercial laws, the articles of the company should cover the regulation on the private disposal of remaining assets in case of the dissolution and liquidation.  However, the efficacy is low since the articles of the company allow some alteration. Therefore regulatory laws are required on this issue.

2.   Making a legal ground for supporting preliminary social enterprises should be considered.

3.  In terms of creating jobs for the vulnerable group, supporting the social enterprises, which have high sustainability, should be considered instead of providing public services and the result should be reported to the Standing Committee and the Special Committee on Budget & Accounts of the National Assembly.

4.    The minister of Employment and Labor consistently supports labor costs for the social enterprises that hire people having difficulties in finding jobs, consider plans to enhance supporting labor costs in case of hiring regular employees and report the result to the Standing Committee and the Special Committee on Budget & Accounts of the National Assembly.

 

  The problems of the youth unemployment are so severe that we even became numbed. The government has presented solutions for the youth unemployment every year. As the new government launched, Park also promised to foster social enterprises as one of the solutions for the youth unemployment.

 

  Why the young people in the nation have to despair because of the minimum wage, decide to commit suicide because of the unemployment and suffer from the business failure, when everyone cares so much about the labors of the youth? It is because the problems cannot be solved by making the start point same for everyone. It is necessary to have policies made from the perspective of the employees and their overall lives.

 

  One of the CEOs of a social enterprise I know held forth on how the governmental projects aimed to support social enterprises are heading to a wrong direction that there are too many categories that they cannot use with the support fund and the companies which received a negative result from the evaluation of the previous year are forced to leave. However, in the business it is impossible to make an immediate achievement in a year. The companies in a difficult condition should be supported even more to overcome their difficulties. But the people who took courage to start new business have to give way to despair.

 

  In order to develop social enterprises and corporate social responsibilities, it is vital to listen to the social entrepreneurs whose difficulties and requests should be embraced. 

 

  Below you can find more information on the projects supporting social enterprises which are evaluated by the National Assembly Budget Office (NABO).



사회적기업_육성사업_평가.pdf



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