Social Enterprise in ChinaJuly 22, 2011

Agenda

What is social enterprise?How is social enterprise practiced in China?Examples of successful social enterprisesHow can Pentok use social enterprise?QuestionsResources

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

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

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

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

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

Agenda

What is social enterprise?How is social enterprise practiced in China?Examples of successful social enterprisesHow can Pentok use social enterprise?QuestionsResources

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

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

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

Agenda

What is social enterprise?How is social enterprise practiced in China?Examples of successful social enterprisesHow can Pentok use social enterprise?QuestionsResources

Shokay

Headquarters: Shanghai

Founded In: 2006

Founded By: Carol Chyau and 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

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

Amdo Craft and Cafe

Headquarters: Zeku County, 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

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)

Shambhala Serai 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

Agenda

What is social enterprise?How is social enterprise practiced in China?Examples of successful social enterprisesHow can Pentok use social enterprise?QuestionsResources

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

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!

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

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

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

Or Pentok can explore adding brand new social enterprise initiatives

Tourism Restaurant / Café Conventions, courses, and workshops

Agenda

What is social enterprise?How is social enterprise practiced in China?Examples of successful social enterprisesHow can Pentok use social enterprise?QuestionsResources

Agenda

What is social enterprise?How is social enterprise practiced in China?Examples of successful social enterprisesHow can Pentok use social enterprise?QuestionsResources

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

Chinese social enterprise resources

China Social Entrepreneur Foundation Narada Foundation NPI (Non Profit Incubator)