Finding a way for social enterprises in the new situation

Friday, 2021-05-07 17:03:40
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Thao Thi Sung (first from left), head of the Cooperative for Lanh (flax) Planting and Brocade Product Development in Ta Phin village, Sa Pa town, Lao Cai province
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NDO - Operating for many years in Vietnam, social enterprises have made certain contributions to sustainable economic development thanks to their main goals of solving social and environmental problems and attaching importance to promoting initiatives and benefits for the community. However, for many different reasons, the social enterprise model in our country still faces limitations, has yet to be replicated, and has yet to achieve results as originally expected.

In particular, amid the complicated developments of the COVID-19 pandemic, most of Vietnam's social enterprises have encountered difficulties, requiring a new direction for their survival and sustainable development in order to continue to promote positive growth.

The concept of social enterprises remains quite new to many Vietnamese people despite the positive contributions of social enterprises to society. Originating in the UK in the 1970s, social enterprises are understood to be a business model that focuses on solving social and community goals. The majority of the profits earned from business (over 50%) are spent on reinvestment in the primary purpose or in the community.

Over the past decade, Vietnam has witnessed the promising growth of social enterprises. The number of social enterprises has increased 5 times from 200 in 2015 to about 1,000 at present, who are operating in various areas including education and training, agriculture, construction, tourism and others.

The State has also paid much attention to social enterprises through various regulations stipulated by law, decree, and circular in the field. The initiatives and successes of a number of social enterprises have also been recognised by the community including the Hoa Sua School of Economics and Tourism, Koto restaurants, mGreen project – a mobile phone application regarding waste sorting and collection that helps people redeem recycled waste in exchange for points and gifts, the adventure playground project “Think Playground”, and the Center for Creative Initiatives in Health and Population, among others.

In addition, many social enterprise models provide opportunities for disadvantaged groups and ethnic minorities to protect their voices and interests as well as promoting their creative ideas, such as the Tay Bac Safe Vegetable Cooperative in Hoa Binh, the Sapa O'Chau, the Cooperative of Dao Do ethnic minority groups in Ta Phin and Lao Cai provinces and others.

However, the positive signals from the social enterprise model are being seriously threatened due to the ongoing complicated developments of the COVID-19 pandemic. Reports and predictions about the fate of social enterprises recently announced have worried people interested in this model.

According to a survey from the Center for Social Innovation and Entrepreneurship (CSIE) under the National Economics University, only 68% of social enterprises remained in operation until the end of the second quarter of 2020 while up to 95% of social enterprises will face the risk of bankruptcy if the pandemic continues until the end of this year.

This negative scenario is said to directly affect 28,000 employees and more than half a million people benefiting from social enterprises. In fact, this number will be much larger if we estimate the difficulties and challenges facing 22,000 businesses (including 1,000 social enterprises). Therefore, solutions to remove difficulties and support social enterprises are considered a challenging and urgent issue.

Social enterprises in Vietnam include innovative business models with different business methods to solve social and environmental issues. Under this new definition, many social enterprises do not register to operate under the Law on Enterprises as before. Instead, they register under the models of cooperatives, non-governmental organisations, and charity organisations. Even so, many social enterprise owners also admit that they are charity activists but not the owner of a business operating to serve the community's interests.

Consequently, many social enterprises in Vietnam, especially non-profit social enterprises, exist with a complete dependence on aid sources, and without their own source of revenue. When their budget is depleted, it also means they have to stop operation and are dissolved.

As social enterprises do not register according to standard business law, they also face difficulties in asking for preferential policies and support from the State. Despite their goal of sustainable development, social enterprises themselves operate according to subjective thinking and spontaneous action.

The other disadvantage many social enterprises are encountering is a lack of qualified and skilled human resources. In fact, many owners of social enterprises have just undergone training courses with several domestic associations, non-governmental organisations or foreign government projects. They have no experience in business strategy and lack social initiative.

Moreover, some social enterprises consisting of disadvantaged groups and ethnic minority communities have yet to show their advantages over local small and medium enterprises. These social enterprises also lack links and have not created a closed value system or value chains for their common goals. A recent report by the women’s union of Lao Cai province and the famers’ association of Hoa Binh province showed that only 25 out of the 41 social enterprises surveyed had successfully accessed banking finance and only 18 social enterprises had achieved revenue growth of over 20%.

Another challenge facing social enterprises is the lack of attention from the media. Obviously, the mass media are still not interested in the existence of social enterprises despite their great contributions.

Many people say it is now the time for functional agencies such as the Ministry of Industry and Trade, the Ministry of Science and Technology, the Ministry of Planning and Investment, and the Ministry of Labour - Invalids and Social Affairs to join hands and implement strategic projects including building a fund to support social enterprises from socialised capital and community contributions; establishing a network and representative associations to support social enterprises; building support policies for the products of social enterprises; encouraging press agencies to build communication plans to promote social enterprises; and others.

In addition, it is necessary to outline new regulations to create an open legal corridor for the operation of the social enterprise model.

It is also important to supplement the specific conditions and regulations on the reception and use of aid from foreign governments and non-governmental organisations to avoid the building of models aimed at sabotaging the State of Vietnam.

The pressure from the COVID-19 pandemic is also an opportunity for social enterprises to re-examine their operations, business fields as well as their sustainable development goals for the community.

If they depend on investment, aid or the preferential policies of the State, social enterprises will not be able to develop in line with their commitments and principles.

With practical benefits brought to the community and society, the further development of social enterprises promises to bring about more positive results in society.

VIET QUANG