Developing social enterprise: Lessons from Korea


Excerpt from the Keynote Speech of Dr. Kim Jae-Gu, President of the Korea Social Enterprise Promotion Agency (KoSEA), to be delivered at the Opening Ceremonies of the Social Enterprise Advocacy and Leveraging Conference in Asia (SEAL-Asia) on November 25, 2014. KoSEA is the government body set up by the Social Enterprise Promotion Law (2007) to foster social enterprises in South Korea.


Customers shop at a traditional food market ahead of the Chuseok holiday, or the national harvest festival, in Jangheung, some 400 km southwest of Seoul, South Korea, 14 September 2013. Yonhap/EPA

The social enterprise phenomenon in Korea evolved from a bottom-up movement and a top-down culture.


We are experiencing several problems such as aging, polarization, and insufficient high quality jobs resulting from the slowdown of growth in the world economy. Without exception, Korean society’s demands for welfare and employment have intensified while facing problems of increased polarization of wealth. Korea has shown unprecedented growth and has entered the league of the top ten economic powers of the world.


However, this economic success has not been accompanied by a harmonious system of growth and distribution. Korean society could not resolve fundamental social problems with a highly competitive economic atmosphere where increasing taxation seemed obsolete and unrealizable.


In this context, social enterprises began to grow in Korea. They started to provide high quality jobs to vulnerable people. Without having to increase taxes, government and civil society cooperated to change the welfare delivery system. In order words, social enterprises resulted from the need to effectively create social value. Social enterprises are an innovative form of enterprise for solving social problems.


Social enterprises have grown in stature all around the world. Specifically in Europe, social enterprises are expected to grow far beyond Corporate Social Responsibility (CSR). This is expected to be the trend in Korea as well.


The Social Enterprise Promotion Act of 2007 in Korea provided the framework for developing policies and giving social enterprises official status. The Ministry of Employment and Labor is in charge of this and fulfills such duties with a five-year plan. The Ministry, through the Korea Social Enterprise Promotion Agency (KoSEA) certifies social enterprises, and if they meet the requirements, provide administrative and financial support to them.


The social enterprise phenomenon in Korea evolved from a bottom-up movement and a top-down culture: the concept and practice had already developed in the field when the government intervened to establish the Act.


As of November 2014, the number of certified social enterprises in Korea has reached 1,165. Government aims to promote more than 3,000 certified social enterprises by 2017. Government policy has had a great effect on the quantitative growth of social enterprises in Korea. However, now it is also time to promote their qualitative growth.


Social enterprises are significant in many ways. First, social enterprises get involved in areas of the market where traditional enterprises are unwilling to get involved, and in the process, even make profits. Second, they provide marginalized people with opportunities to participate not only as part of the labor market, but also as part of the broader society. Third, social enterprises suggest new solutions to social problems, through a commercial business. Fourth, social enterprises are able to more effectively and efficiently provide high-quality social services. Lastly, social enterprises bring ethical consumption behaviors to a competitive society at large.


Looking to the future, there are certain areas for action that need to be pursued for the development of social enterprises. These would have great implications for Korea, the West as well as Asia, as we increasingly experience financial pressures in providing for social welfare amidst various social problems.


First, social enterprises should be developed in a private-friendly and market-friendly manner. The development led by the government may be effective in the short term but may be obstructive in establishing viable social enterprises in the long term. Social enterprises can be viable and sustainable with the voluntary participation and support of citizens.


Second, social enterprises should be built on their respective communities -- they should reflect their community’s characteristics including their needs and demands. Establishing community-based markets based on the residents’ needs and demands is creating a viable social enterprise model.


Third, social enterprises should be equipped with a sustainable business model. For this, they must be prepared to develop their core abilities to effectively seize market opportunities and to communicate with their customers constantly.


Finally, social enterprises need an enabling ecosystem at the national political level. The ecosystem is inclusive of public policies and social atmosphere. In order to build an ecosystem where social enterprises can be viable and sustainable, we need policies on public procurement and promotion, a supportive financial infrastructure, and a pervading atmosphere friendly to social enterprises.


To some degree, we have partly realized some of these in Korea. Social enterprises could be further developed to greatly contribute to overcoming the limits of both the government and the market in pursuing their social purpose of job creation and social service provision.


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