What is a social enterprise
Generally speaking, a social enterprise is a business that targets a specific social mission, such as creating jobs and providing training for underprivileged groups, supporting ethnic communities, promoting fair trade, and building a harmonious community. It aims to address social problems through commercial means. Its profits are primarily reinvested in the business to create a broader social impact, rather than maximizing profits for shareholders. In Hong Kong, there is no formal definition of a social enterprise, nor is there a formal registration system or legal form for social enterprises.
SE FAQ
The term "social enterprise" first appeared in the late 1970s in the United Kingdom and has been around for over 40 years. The Hong Kong government has actively promoted cross-sector collaboration and established various funds to encourage different sectors to embrace social innovation and contribute to society.
In 2001, the Social Welfare Department launched the Enhancing Employment of People with Disabilities through Small Enterprise Project, providing funding to non-governmental organizations to start small businesses and support the employment of persons with disabilities. This was a crucial step in the development of social enterprises in Hong Kong.
The Home Affairs and Youth Bureau has also been actively promoting the development of social enterprises in Hong Kong through various channels. For example, since 2006, they have implemented the Enhancing Self-Reliance Through District Partnership Programme, which provides funding to social enterprise projects to assist vulnerable communities in becoming self-reliant and improving their skills and employment capabilities. Since 2008, they have also funded the Hong Kong Social Enterprise Challenge organized by the Chinese University of Hong Kong. This inter-collegiate competition, pioneered by the Chinese University of Hong Kong in 2007, promotes the spirit of social entrepreneurship among tertiary institutions and nurtures young people in conceptualizing and implementing social enterprise projects. They also sponsor events like the annual Social Enterprise Summit organized by the Hong Kong Social Entrepreneurship Forum, playing an important role in promoting the development of social enterprises.
Social enterprises operate on a self-sustaining basis, primarily generating income from product sales and services, which distinguishes them from traditional non-profit organizations or charitable groups that rely mainly on donations or sponsorships for their operations. However, individual social enterprises that have been recognized by the Hong Kong Inland Revenue Department as charitable organizations exempted from tax under Section 88 of the Inland Revenue Ordinance can accept donations or sponsorships.
Like businesses, social enterprises need to be financially sustainable. However, earning profits is not their sole objective. Social enterprises have restrictions on profit distribution and asset lock-in. The remaining profits are reinvested in business development, resulting in a greater social impact.
Social enterprises that adhere to good corporate governance practices are allowed to allocate bonuses or incentives to their employees based on decisions made by the company's board of directors. To qualify for inclusion in the SE Directory, social enterprises must sign a declaration affirming their compliance with two key criteria:
- Dividends distributed to shareholders do not exceed 35% of the annual net profit; and
- Assets purchased or owned by the social enterprise are not transferred to other private companies or individuals.
By adhering to these criteria, social enterprises demonstrate their commitment to responsible and sustainable business practices, ensuring that profits are fairly distributed and that the organization’s assets are preserved for the benefit of their social mission.
Social enterprises are obligated to pay taxes unless they are recognized as a charitable institution or trust of a public character under section 88 of the Inland Revenue Ordinance (Cap. 112).
Although there are currently no specific laws or registration systems for social enterprises in Hong Kong, the public can access products and services provided by social enterprises through various channels. The Social Enterprise Directory (SE Directory) serves as a widely referenced platform. Other channels include the “SE Tree Mark” launched by the Home Affairs Department and the “SEE Mark” social enterprise accreditation scheme introduced by the Hong Kong General Chamber of Social Enterprises. Additionally, the public can gain more knowledge about government-funded social enterprises through different funding programs, such as the Home Affairs Department's “Enhancing Self-Reliance Through District Partnership” programme and the Social Welfare Department's “Enhancing Employment of People with Disabilities through Small Enterprise” programme.
We often refer to the "triple bottom line" (social benefit, economic viability, environmental sustainability) to illustrate the distinctive value of social enterprises. This relationship among the triple bottom line elements forms an ongoing and interactive cycle. Unlike traditional social service organisations, social enterprises have clear business objectives to ensure their sustainability, while also placing growing emphasis on environmental sustainability. The social goals embraced by social enterprises, along with their concern for the environment, act as driving forces for their continued development. Therefore, "social goals," "business objectives," and "environmental sustainability" are all indispensable elements.
Ethical consumption and responsible procurement are crucial concepts that consider social, environmental, and ethical factors when engaging in purchasing and procurement activities.
Ethical consumption refers to consumer behaviors in which individuals consider social, environmental, and ethical factors when buying goods or services. By opting for products that adhere to standards such as environmental friendliness, fair trade, protection of human rights, or animal welfare, individuals can support social enterprises and local small businesses while avoiding products that contribute to environmental destruction, unfair labor conditions, or unethical business practices. Through their consumption choices, individuals can promote sustainable development and social progress.
On the other hand, responsible procurement emphasizes that businesses should consider not only price and quality but also the social responsibility, environmental impact, and ethical standards of suppliers when engaging in procurement activities. By selecting products or services that meet sustainable development criteria, supporting social enterprises or local small businesses, and adhering to labor rights and environmental protection standards, businesses can foster social and environmental sustainability while practicing corporate social responsibility.
The significance of ethical consumption and responsible procurement lies in their ability to promote sustainable production and consumption patterns, protect the environment, uphold social justice, and align with personal values. These behaviors have a positive impact not only on businesses and organizations but also on individuals, contributing to the creation of a better world.
