In the Philippines, the gap between the rich and the poor is scandalous. Figures indicate that the economy is expected to grow approximately 7 percent this year. Although similar sources have indicated a decrease in poverty incidences, the effect has never been felt by the poor.
Perhaps as an effort to address the scandal, there has been an increase in social enterprises in the past decade. One report cited that, in 2007, there were an estimated 30,000 social enterprises operating in the Philippines.
The UK government defines social enterprise as: “a business with primarily social objectives…” In its report on social enterprise activity in the Philippines, the British Council defines it as “businesses that exist to address social and environment needs…”
There is no official definition of social enterprise in the Philippines. There are, however, two proposed bills that seek to define and shape social enterprise in the country.
The Poverty Reduction through Social Enterprise (PRESENT) bill defines social enterprise as a social mission-driven organization that “explicitly declares and pursues poverty reduction as its principal objectives”. On the other hand, the Social Value Bill requires the government to “include social value in competitive bidding criteria and requirements for public procurement of goods, services and public projects.”
Despite the lofty intentions, at least 75 percent of social enterprises fail. Perhaps asking the following questions could help:
Can it be profitable?
Amid the semantics, a social enterprise is a business. The business cannot be sustainable without profit. The social objective, like affection, is sentimental at most. It will not keep the business alive. In order to grow, the business has to be scalable. To depend on a community with limited production, despite efforts to help its residents, is foolish and will be unrequited.
Does it have real appeal?
Marketing collaterals of social enterprises often depend on compassion and pity. Customers are compelled to buy, but only once. In contrast, a local line of household products employs out-of-school youth, yet this hardly appears in its advertisements. Despite being priced at a premium, the products are constantly being sought and bought.
Are the benefits equitable?
Almost all products of social enterprises focus on a single beneficiary. A popular brand of mosquito repellent provides livelihood to a farming community that produces citronella plants. A growing brand of iced tea allocates part of its proceeds to the community. Both products use plastic containers. Where do all the used plastic containers go? Sales generated shall equal the waste contributed. Benefit to one but detriments to others.
According to “Failure in Social Enterprises” published by the University of Toronto, “survival should be harder for social enterprises and growth more difficult.” As a business, social enterprises sell products and services to cover costs. But more than profit, they have a social objective. In practice, balancing these seemingly incompatible objectives is schizophrenia-inducing. Fact is, competing with commercial for-profit firms puts them at a competitive disadvantage.
Does the failure of a social enterprise to accomplish social objectives make it a failure? The University of Toronto report argues that an enterprise or project “may be considered successful even if it does not meet its original goals.” Rather than the type of social impact, the success should be judged according to “how it benefited people…”
…And then, it will benefit the poor.
“They asked only one thing, that we remember the poor, which was actually what I was eager to do…” (Galatians 2:10)
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Real Carpio So lectures on strategy and human resource management at the Management and Organization Department of the Ramon V. del Rosario College of Business of De La Salle University. He is also an entrepreneur and a management consultant. He welcomes comments at email@example.com. Archives can be accessed at realwalksonwater.wordpress.com. The views expressed above are the author’s and do not necessarily reflect the official position of DLSU, its faculty and its administrators.