How social enterprises can drive local development
Roberto R. Calingo, PEF Executive Director (Remarks for Social Development Celebration, 11 November 2015, Lapu-lapu City, Cebu)
Civil society enables a space, an arena, where people—quite separate from the state and the private sector—organize themselves to create public good. From small associations and cooperatives, to people’s movements and development NGOs, initiatives in civil society could set out to help end poverty and strive for development, to reduce social exclusion and engage people in public life, to ensure people’s rights, and to increase their choice and free them from want.
Yet every initiative in civil society is set apart by the conditions that brought forth such initiative. A collective responds to such conditions characteristically, in terms of the goals that its members pursue, the principles they believe to be of value, and the means they see could work. It is in the conditions out from which the initiative was born, and it is in the characteristics of such an initiative, where we realize the potential of a civil society organization to make meaningful changes for others.
Today I would like to turn your attention to a speciﬁc initiative in civil society: the social enterprise. The social enterprise has been at the heart of Peace and Equity Foundation’s work for the past ﬁve years, and it will be so for the ﬁve years to come. I would like to share with you how the social enterprise may have found in its deﬁning characteristics the potential for positive change, and how—in three ways—the social enterprise fulﬁlls such potential.
What is a social enterprise?
It is similar to most civil society organizations.
Like other initiatives, a social enterprise employs its members’ knowledge, organizational, and material basis to fulﬁll their shared mission of contributing to the public well–being. And similar with many civil society organizations, a social enterprise often:
- Operates in full public view;
- Is associational, relying on social capital such as trust and engagement of its target beneﬁciaries; (Eversole, Barraket, & Luke, 2014, p. 246)
- Prioritizes putting people at the center of its decision making;
- Has less bureaucracy and more practicality in delivering services compared with more complex organizations;
- Has community–based, satellite structures or mechanisms that enable it to effectively assess the needs of its targets, and to meet those needs; and
- Relies on supportive interactions, for example with ﬁnancing bodies and government agencies, in fulﬁlling its development objectives.
Constantly a social enterprise faces conditions and changes, whether these are internal, such as organizational structure and capacity; or external, such as risks that might come in the way of fulﬁlling the organization’s objectives. A social enterprise might ﬁnd that to survive and thrive, it has to adapt to structures that affect it, including laws and standards.
But a social enterprise is also singular among civil society organizations.
While there might be a lot of discussion on what a social enterprise essentially is, allow me, for now, to describe it for you as: an autonomous organization or venture, led by multiple stakeholders and actors, that is driven by a social or environmental mission and uses business approaches, for example delivering goods or services, to create positive changes and address issues in deﬁned communities.
A social enterprise enables the participation of groups who are or are likely socially excluded, and it prioritizes reinvesting its proﬁts and surpluses to sustain its work for its social or environmental goals.
Glowcorp as an example of a social enterprise.
To give you an example, let me share with you brieﬂy about one of the social enterprises that the Peace and Equity Foundation has worked with. In 2010, nine farmers gathered to form the Global Organic and Wellness Corporation or Glowcorp. Their social mission has been to create jobs and increase incomes of target households. And they have intended to do so through farming.
The nine farmers, along with their respective groups, worked with a senior program ofﬁcer from an NGO, the Philippine Development Assistance Program, to help them link their products to retail stores and other strong buyers. While previously the farmers would sell their products wholesale, they approached the retail consumer market, designing both the packaging and distribution of their products. Glowcorp, now consisting of farmers and their cooperatives, produces organic rice, muscovado, and coconut sugar products under the line of Prime Organics.
Here we see how Glowcorp seeks to help farming households earn more sustainably. There were many challenges for Glowcorp in its ﬁrst few years of pushing products to the market. And even up to now it has to overcome challenges such as completing its organic certiﬁcation for export markets, developing the capacities of its second–line managers and making its ﬁnance and operations more efﬁcient, among others.
But you see the potential. From 400 farming households in 2010, Glowcorp now has a network of 2,500 (beneﬁciary) farming households and small–scale producers from several provinces in the country. These include Abra, Nueva Ecija, Batangas, Camarines Sur, Antique, North and South Cotabato, and Sultan Kudarat. Its products reach as many as 306 outlets nationwide and Glowcorp looks to pursue overseas markets as it has so far begun in South Korea.
It is through social enterprises such as Glowcorp that PEF has chosen to transform poor households and communities, and through which PEF has deemed that these households and communities could eventually become self–sustaining.
What enables social enterprises to make a real difference in communities and households, or essentially, in local development?
There is perhaps a more crucial potential in social enterprises beyond what we observe they could do, such as providing sources of income or jobs.
Social enterprises are strongly embedded in the communities, or the social groups and exogenous conditions, that have given rise to them. (Eversole, Barraket, & Luke, 2014, p. 246)
- This means that the mission of social enterprises, along with their strategies, are tailored to their communities. Community members have primarily deﬁned their needs and acknowledged the gains in the outcomes that they hope to achieve through the social enterprises. Social enterprises’ being embedded in their communities enables ownership, appreciation, and in more successful cases, sustainability of social mission at the local levels.
- Members of the communities likely have immediate familiarity with the social enterprise activities, too. The services and goods to be produced are relevant to local resources such as labor and environment (Eversole, Barraket, & Luke, 2014, p. 246), and capacities such as tapping knowledge systems are likely already present in the communities. For example, an Indigenous Peoples’ Organization, Nagkakaisang mga Tribu ng Palawan or Natripal, helps provide better income for indigenous peoples by consolidating, buying, processing, and marketing wild honey. Gathering wild honey is a traditional livelihood for many members of the organization, and Natripal has become a major buyer of wild honey from gatherers. Instead of introducing a new economic activity, because of its rootedness to its communities Natripal has pursued its work by focusing on what its members know well and do well. Social enterprises have an acute awareness of the what business goals and methods may be feasible and relevant to their respective communities. (Eversole, Barraket, & Luke, 2014, p. 246)
- Social enterprises are further able to leverage an important resource—social capital. Because social enterprises can generate their members’ ownership of the mission, tap local capacities, and lead people toward outcomes that are important to them, social enterprises could garner incredible support from communities. And many of them do, thriving in the commitments that they establish and maintain with their members, volunteers (Eversole, Barraket, & Luke, 2014, p. 251), ﬁnanciers, and customers. Social capital rests within the afﬁliation, participation, and trust among members of local communities where social enterprises operate. Social enterprises can socialize their resources, and as the Organization for Economic Co-operation and Development or OECD (n.d.) notes, this enables them to cope with the challenges that for–proﬁt ﬁrms and public welfare systems have difﬁculties overcoming. By establishing relations with their communities, social enterprises can engage in alternative forms of economic transactions. They appropriate non–market resources and can be involved non–market engagements, for example, pooled resources, voluntary work, and upcycling (Eversole, Barraket, & Luke, 2014, p. 259). They can focus more on distributing social goods and services, and have less propensity to keep competitive positions (compared with private ﬁrms) or overcome contract incompleteness (compared with public welfare systems) (Noya, 2009).
Social enterprises are driven to mobilize latent resources (Amin, 2010, as cited in Eversole, Barraket, & Luke, 2013), leverage on tacit relations, reduce costs and increase efﬁciency and productivity, and innovate to cope with the challenges in meeting of their social mission alongside their business objective.
Social enterprises can thus be more attuned to the capacities and needs of their respective communities not by proximity, but because their mission and organization, as well as activities, processes, and outcomes, are deeply linked to their communities.
How can social enterprises contribute to local development?
Now I shall share with you three streams, or three ways by which social enterprises could fulﬁll their potential to drive local development.
First is through development outcomes for communities.
Social enterprises could provide goods and services that the public welfare system might have gaps in giving, and that for–proﬁt ﬁrms might see as problematic when it comes to proﬁtability. They help services and goods reach groups that may be socially excluded, or with the low ability to pay. Social enterprises can generate local development outcomes such as employment, training and skill development, and service such as rural transport.
Let me give you two examples from overseas.
In North West Tasmania, a large social enterprise, the Devonﬁeld Enterprises, offers training and support for those who experience disadvantage in the labor market, for example people with disabilities (Eversole, Barraket, & Luke, 2014, p. 251). It operates in an array of businesses, from gardening and forestry, hospitality, catering, and administration, among others, providing around 150 jobs within the businesses. Some of its outcomes include education for disadvantaged children, employment–related training, and local businesses. Devonﬁeld considers people from its regional community as its primary beneﬁciaries, but remains open to extending its program to other areas according to the community’s needs. It recognizes that while it supports the community, the community also supports it. (Eversole, Barraket, & Luke, 2014, p. 251).
The Work Integration Social Enterprises in Europe do something similar. They seek to provide lasting occupational as well as social integration of persons, especially those with disabilities, through activities such as trainings (Spear & Bidet, 2004, p. 8, as cited in Kerlin, 2006, p. 254). In 2004 WISEs in France enabled work– integration services from 2,300 registered structures and employed around 220,000 persons (Defourny & Nyssens, 2008, p. 9).
Second is through capacity building and engaging support that might beneﬁt local communities.
Social enterprises are means by which local capacities may be strengthened, and support to local communities may be channeled. Here I would like to emphasize social enterprises less as drivers of outcomes, and more as vehicles for bringing support to developing communities.
Peace and Equity Foundation or PEF has seen through the development of such potential of social enterprises through its Accelerating Capacity of Enterprises or ACE Program.
The ACE Program in 2014 consisted of a four-module course that lasted four months, with the goal “to develop highly capable social enterprises who are partners of PEF, and who will bring their enterprises… to maturity while fulﬁlling with PEF the social mission” of helping transform poor households and their communities. Module by module the participants from enterprises would deﬁne their business models and growth trajectories, and they would learn more about designing business strategies, ﬁnancing, analyzing and managing risks, and managing organizations for enterprising.
By the end of the ACE Program, a total of 41 managers, ofﬁcers, or board members of social enterprises were trained. We hope that all of them would bring to their communities what they learned, and apply those lessons in their respective enterprises. Having completed the ACE Program, eight of the ten initially selected social enterprises were able to successfully present their business proposals to PEF and the Peace and Equity Holdings. “PEF approved a combined initial investment of PhP85 million for the eight enterprises.” The gains of these social enterprises could bring about activities that could also beneﬁt their respective communities.
Third is through policy.
Social enterprises can make lasting contributions in and beyond local development outcomes. As participants in civil society, social enterprises are involved in making development a reality, and making key inputs to policies that involve their work and their beneﬁciaries. The signiﬁcance of social enterprises has been recognized; in some countries, for example UK and Italy, legal deﬁnitions of social enterprises exist (Kerlin, 2006).
Perhaps more importantly, social enterprises have the potential to contribute to governance and development that is inclusive and sustainable. Social enterprises can create demand for sustained poverty reduction and development programs. They can form powerful coalitions that could push for bills, and help ensure that policies meet the needs of their partner communities and groups. And social enterprises, similar with other civil society organizations, can provide policy–makers with useful information—data, for instance—and guidance including practical insights on realizing development on the ground.
In the Philippines, social enterprise leaders and networks established the Poverty Reduction through Social Entrepreneurship Coalition in 2012. The Coalition has pushed for the Magna Carta for Social Enterprises, which would be toward recognizing, supporting, and incentivizing social enterprises who are helping the poor.
Since a few days ago, NGOs’ “fostering [of] local enterprise development and social entrepreneurship” has been recognized more concretely, following President Aquino’s signing of the Microﬁnance NGOs Act (Soria, 2015). The law enables qualiﬁed NGOs to engage in microﬁnance operations for availing government incentives. This could be a meaningful step to strengthening social enterprises, too.
These are some of the best potentials of social enterprises to drive local development. I hope that these insights will bring us closer to understanding the respective initiatives in civil society where we work and have engaged ourselves, and see how such understanding might lead us to the many potentials of our sector to realize development.
Social enterprises, perhaps as much as any other civil society organization, offer a distinct strength that central development actions, programs, or decision–makers have limits in offering. Social enterprises and other CSOs fulﬁll a crucial role in responding to a kind of development that might be disembodied—one where social welfare is reduced because other sectors cannot provide them, or one where central or national development programs fail to reach local places and speciﬁc groups. As the OEDC notes, “social enterprises, and if I may add, other CSOs represent a more rooted and permanent source of development…” (Noya, 2009, p.198).
Defourny, J., & Nyssens, M. (2008). Social enterprise in Europe: Recent trends and developments. In Community Wealth.Org. Retrieved from: https://docs.google.com/viewerng/viewer?url=http://community-wealth.org/sites/clone.community-wealth.org/files/downloads/paper-defourny-nyssens.pdf
Eversole, R., Barraket, J., & Luke, B. (2014, April). Social enterprises in rural community development. Community Development Journal, 49(2), 245–261. http://cdj.oxfordjournals.org/content/49/2/245.full.pdf+html
Kerlin, J. A. (2006, September). Social enterprises in the United States and Europe: Understanding and learning from the differences. Voluntas, 17, 247–263.
Noya, A. (ed.). The changing boundaries of social enterprises. Retrieved from http://www.oecd-ilibrary.org/employment/the-changing-boundaries-of-social-enterprises_9789264055513-en. doi: 10.1787/9789264055513-en
Organisation for Economic Co-operation and Development (OECD). (n.d.). The social enterprise sector: A conceptual framework. In Local Economic and Employment Development Programme. Retrieved from https://www.oecd.org/cfe/leed/37753595.pdf
Soria, F. S. D. (2015, November 18). Strengthening microfinance NGOs. Business World. Retrieved from http://www.bworldonline.com/content.php/www.bworldonline.com/content.php?section=Opinion&title=strengthening-microfinance-ngos&id=118780