Many people think that social enterprise, non-government organization (NGO) and charitable organizations are the same. Actually what is the difference between the three?
Social enterprise
Social enterprises refer to “enterprises that solve social problems through business innovation.” The original intention of the establishment of social enterprises is to make up for the shortcomings of the government and non-profit organizations. A social enterprise has a social purpose, takes a commercial approach, seeks innovative ways to generate profits, and is a synthesis of business and philanthropy.
We can understand social enterprise as a new business model that simultaneously pursues economy, environment and society, and operates sustainably. By providing competitive services or products, a part of the surplus is invested in the desired social goals or directly given back to the community to improve or solve social problems.
In terms of operation, a social enterprise is an organization with operating income; in terms of organization nature, a social enterprise can choose to establish a company or a non-profit organization, including foundations, associations, and cooperatives. In the broad spectrum of social enterprises, social enterprises operating in the form of companies are included, as well as non-profit organizations that generate revenue through products or services.
NGOs
The key difference between NGOs and social enterprises is the source of funding. Financially, NGOs are mostly funded, including government grants or donations. A social enterprise, on the other hand, is a self-financing business that focuses on sustainable development.
NGOs mainly rely on findings to maintain their operations, and the funds can be roughly divided into three sources: the public, the government, enterprises or enterprise funds. In order to obtain findings, NGO teams need to actively carry out social communication and advocacy, so that the public, government departments and enterprises can understand their vision and mission. Different government departments have planned subsidies every year, and NGOs can apply according to the issues they care about. And companies usually reserve some budgets every year to fund social issues and fulfill corporate social responsibilities. In recent years, the business community has particularly advocated ESG, that is, Environmental, Social and Governance. ESG can be said to be a substantive action for companies to practice social responsibility, allowing companies to “create shared value” in the long run.
Charitable organizations
While all charities are not-for-profit, not all non-profit organizations are charities. How do you differentiate between nonprofits and charities? In Hong Kong, charitable organizations need to obtain tax exemption from the Inland Revenue Department in accordance with Article 88 of the Inland Revenue Ordinance, commonly known as “88 licenses”.
Many organizations, such as associations and owners’ corporations, are considered not-for-profit organizations. Although their purpose is to help those concerned, they are not charities. Examples of charitable organizations are often churches, educational institutions, hospitals, and institutions that provide support to universities or colleges and other government entities.
Case study: Operating an affiliated social enterprise
Taking Tung Wah Group of Hospitals as an example, in order to encourage the employment of people with disabilities, iBakery was established. Although NGOs also provide care services for the disabled, most of them only focus on daily life care, and there is less support for the employment of the disabled. iBakery can just fill in the gap in this regard.
iBakery employs people with disabilities to work, and will assign suitable positions according to their strengths. iBakery also provides additional training, so that employees can learn to make coffee and latte art, and change the public’s perception of people with disabilities. In terms of operation, iBakery earns income by selling bread, cookies, coffee, light food and other products.
It is precisely because social enterprises have to take into account their social mission and make money at the same time, it is more difficult to operate than ordinary enterprises. According to the survey by the Federation of Social Services, “lack of management talents” is one of the challenges encountered in running social enterprises. They need more knowledge of sales, marketing, and management so that social enterprises can accumulate more business experience.