Social Enterprise in Focus : New Leaf, Cambodia

Siem Reap, Cambodia holds a very special place in our heart as Michael spent 20 months working and volunteering there. He will never forget the huge smiles of the locals, the connection to nature, the rainy and the dry season and the friends he has there. Siem Reap is quite a hub when it comes to social enterprise, with a few examples dotted in and around the town.

One of these is New Leaf, a restaurant in Siem Reap that was established to provide financial support to charities engaged in education in Siem Reap province. It was set up solely for this reason as Ian & Georgina (the founders) had no other reason to establish a business here. We caught up with Ian to find out more:

Cambodia is a developing country, what’s the legal situation for social enterprise and how do you work?
As no legal framework exists for social enterprises in Cambodia, New Leaf was established as a sole proprietorship. As such New Leaf incurs tax as a normal business would. Setting up as an NGO was not an option as the primary activity of New Leaf is food & beverages, with only occasional direct engagement with those in need.

So what makes New Leaf a social enterprise?
New Leaf donated 100% of its profits to local charities until end 2016. Now New Leaf donates 30% to charity and 20% is shared by New Leaf’s Khmer staff. To date New Leaf has donated around US$40,000 to 15 charities.

What were the initial steps in starting the business and how does it run now?
Georgina and I worked on a business plan to assess the financial viability and subsequently the restaurant was fully financed by myself, Georgina and Eugene (a friend of mine). The idea was to create a business that was run by Khmer (Cambodians) to help Khmer. Neither myself nor Georgina planned to stay in Cambodia though – so we planned to manage it from overseas with periodic visits.

What challenges have you faced since setting up?
As a social enterprise, New Leaf operates as a responsible employer (fair wages, staff training etc) and champions environmental responsibility. Finding the optimal balance between these responsibilities and maximising its impact through profits adds to the challenge of being successful as a restaurant.

For example, the minimum compensation levels at several charities are significantly higher than a standard waitress wage. Therefore the decision to pay 20% of profits to our staff was (in part) driven by this.

What advice would you offer social entrepreneurs?
My advice to social entrepreneurs would be to focus on the business side first. If you are successful as an entrepreneur, then your ability to deliver social benefits is significantly improved. Before we opened I would say “if New Leaf loses money then we are just a loss-making business with no social impact.”
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Another example that no matter what your business is, it can be a social enterprise with the right planning and goals. As Ian said, making sure your idea is financially viable is so important, and we can work with you to test your idea. Lots of people have big hearts, but we need to make sure the business head is there too.

Interview with Michael Freer, founder of ensoco

ensoco wants to build both a local and international presence and support social entrepreneurs wherever needed. However, as with any legal entity it has to have a base somewhere, and therefore was founded in Split, Croatia by Michael, a British national.

Split currently has an underdeveloped social entrepreneurship scene and therefore ensoco has been working with local partners in promoting and developing the sector. More recently, ensoco founder Michael attended Shift, a conference that focuses on professionals and businesses in the IT sector, to network and learn about how they’re actively promoting the sector and to share experiences.

ensoco is now working closely with startup.hr to encourage more startups to Split, and in turn hopes to see more role models and mentors that can encourage people to develop their own business ideas here. Here’s Michael giving a bit more information about why you should come to Split, with your idea and see what you can develop in this beautiful place on the Adriatic coast.

How socially responsible is your organisation?

At the same time as the social enterprise sector has risen, so has corporate social responsibility. Some people see the value in it, and recognise the great work being done, whilst others say it’s a token effort by companies trying to appear to be more socially or environmentally aware.

While this argument continues, there are various ways for companies to improve their social responsibility. So what about your organisation? Here we list a few examples of how organisations can start and continue to be socially responsible.

Donations + Sponsorship

Probably the most common way that organisations support their community, you may see company names appear at locally organised events such as fairs or fetes. Some NGOs also have regular corporate donors.

Implementing inclusive and equal HR practise

What’s the difference between your lowest paid and highest paid? How diverse is your company? Is there a gender pay gap? Different countries are tackling these in different ways by regulating companies, but certain companies are already publicly reporting on these areas.

Corporate Volunteering

Aside from money, hands and knowledge are also needed by the local community and NGOs, which is why some companies provide a match service. They may encourage employees to volunteer regularly, say once a month, whilst being pay, some also match any donations their volunteers raise, and finally other companies offer pro bono services which NGOs sometimes can’t find the funds for.

Certification

A few organisations go the whole hog and work to become social enterprises by following standards, such as BLab or Wirkt. Whilst others still need to meet their shareholders needs first and instead get certain international standards like SA8000 or ISO14001 to show they are acting in a socially or environmentally responsible way.

These are just a few examples of what organisations include in their corporate social responsibility strategy to work towards more socially and environmentally sustainable organisations. If you’re interested in finding out other ways, get in touch!

Social Enterprise in Focus : Balloon Ventures, UK

In this post we will learn more about Balloon Ventures, a social enterprise based in the UK with overseas operations, thanks to Jade Rogers, who recently volunteered for them in Kenya as part of ICS.

So Jade, tell us a bit about Balloon Ventures?
Balloon Ventures exist to support the growth and development of micro businesses and small-scale entrepreneurs to ultimately create sustainable development in Kenya, Ghana, Uganda and the Philippines. They achieve this by up-skilling entrepreneurs through business and financial training as well as offering them the opportunity to pitch for an interest-free loan to support their business.

Excellent! So what did you do during your volunteer placement?
My placement started off with a full week of curriculum training which we were to learn and later share this knowledge with our group of entrepreneurs. The curriculum mainly encourages you to think about business in a different way, looking at everything from entrepreneurship to creativity, innovation, added value and finance.

After an intense week of this training, we met our entrepreneurs. These were the 5 people we were going to be working alongside over the next 7 weeks, the people that were openly welcoming us into their lives and their businesses for support. My team consisted of a salon owner, a poultry farmer, a start-up hoping to create and sell fish aquariums, a fruit juice seller and a start-up hoping to have a successful dog-breeding business). There were a great variety of businesses and skills in my team and to me that was one of the positives of Balloon Ventures – the programme applies to variety of people.

We spent a good week getting to know each of our entrepreneurs individually, their businesses, their likes and dislikes and we quickly built a friendship with each of them.

From week 3 the programme began to get pretty intense, right up until the final week (week 8) with the entrepreneurs. We were required to spend 8 hours weekly with each entrepreneur working on their business and their pitch documents (a 30-page business plan that was needed if they were to pitch for a loan at the end of the programme). A lot of admin, idea testing, customer research, finance, data collection and even more admin happened within those weeks, all leading up to our final week with them.

Four of my entrepreneurs were pitching for the loan – granted this was not their priority, each of them joined the programme for the skills and free training that was available to them, this was an unheard of opportunity in their community, but the loan would be a nice bonus to boost their business. On that final week we ran through every detail in their pitch document with them, created our own public speaking workshop for them and made sure they felt fully confident to go forward in front of the pitching panel. I also happened to be on the pitching panel (for other entrepreneurs) and got to see the creativity and hard-work committed from everyone else on the programme. After an absolute rollercoaster of a week, the panel put forward their recommendations to Balloon’s loan officers and we held a farewell event with our entrepreneurs before leaving Nakuru.

That does sound pretty intense, but impressive at the same time. What were the main challenges facing entrepreneurs?

From working so closely with our entrepreneurs for 7 weeks, their challenges became our challenges and it was our role to provide solutions for them. A lack of capital was an obvious challenge for most business owners and start-ups in Nakuru, but from completing this programme it became apparent that their biggest challenge was the lack of business education and opportunities available to them. There is a huge copycat culture in Kenya – walk down any main street in any urban city there and you’re bound to find at least 5 – 10 of the same M-Pesa stores, phone shops, shoes shops and even pharmacies, not to mention the vast amount of tuk-tuk drivers all competing with each other for your service.

What the entrepreneurs needed most was the knowledge to increase their value proposition and to thoroughly understand the needs of their customers. I believe this is the most valuable and sustainable lesson the Balloon curriculum teaches the entrepreneurs throughout the programme.

That’s a great insight, and one that we’ve seen across the world. Finally, what did you learn about entrepreneurship during your placement?

I learnt to look at entrepreneurship in a different way. I learnt how important failure and risk taking is to the success of any business idea. Creating an idea can be easy, replicating existing businesses is also easy, but for a business idea to be original and to succeed, a fear of failure can’t be present. It sounds so simple but once implemented it can be so effective.

Aside from this, my team taught me the value of passion and dedication within entrepreneurship – when those failures took place and things didn’t go to plan for us it was their passion and dedication that made us start over with a fresh outlook.

Some excellent tips for any of our ‘wannabe’ entrepreneurs there Jade, thanks.

What struck us after interviewing her was the similarities shared around the world, especially in areas where there is a lack of business education or coaching. Balloon Ventures certainly help to fill the gaps, and we also aim to support this, albeit mainly for social entrepreneurs. Finally, as Jade mentioned at the end, failure often stops people trying, but if you look at any of the successful people in the world today, they all have experienced failure at some stage, and may do so again in the future. The key is to never give up, and learn from your mistakes.

Legal entities for social enterprise

Last blog post we explained how the definition of social enterprise varies greatly, and the rules in each country usually also change. Therefore we thought we would go a bit further and show you an example of two legal forms of social enterprise.

In the U.K.

The first is the “Community Interest Company”, a legal form of business that has existed in the United Kingdom since 2005. As of March 2017 there were more than 13,000 CICs on the register (CIC Association), quite a small number in our opinion when you consider it has existed for 12 years. That said the idea of being able to set up a legal social enterprise is fairly unknown, and something we hope to share.

As a CIC you can set up in a number of different ways – such as limited by shares or by guarantee, just like a ‘normal’ company. However, there are three additional rules. Please note we’re giving a basic overview, so for more information you can head to the Government website about social enterprise.

Firstly, you need to make a community interest statement. This sets out what activities you will carry out as well as who your beneficiaries are. You also have to state how your company will make a surplus.

Next, you have to ensure there is an asset lock, so that 65% of your profits are reinvested in your social or environment goal.

Finally, you have file a community interest report to demonstrate that you are meeting what you set out in the statement.

As you can see, the rules aren’t too detailed, making things fairly straightforward to understand and set up.

In the U.S.A

The other legal form we are showcasing today is the Benefit Corporation. This legal entity started in the United States (though not all states!) and now exists in Italy and soon in Australia. Please note that a Benefit Corporation in the legal sense is different to BCorp, a certification process we will look at another week.

Benefit Corporations enforce the idea that decisions should be made for the benefit of all stakeholders, not just shareholders, so goals other than profit can be considered. It has made it a key legal element to consider stakeholders. This is written into the constitution into the corporation making it essential that operations produce a public benefit.

Also, there is a large element on reporting around transparency, therefore carrying out an annual public benefit assessment report. This shows both internally and externally what you are doing and can be used as evidence to prove you are a Benefit Corporation, for example to investors or courts. This must be audited by an external independent standard. Most states require this to be publicly and openly shared.

Since legislation can vary from state to state, it’s important you check what applies to your state here.

For both countries, you can choose to start as one or you can convert to one. Please review the websites linked above for more information. Legal forms do not exist in every country yet, but there is definitely a strong movement across the world to create something that will not only promote social entrepreneurship but provide a legal framework for them.

What actually is a social enterprise?

It’s a question we often get asked, and it’s never an easy answer.

That’s not because we don’t know, but because depending on where you are there are normally different ideas of what exactly constitutes a social enterprise.

Let’s start with some generalisations to get the ball rolling anyway:

  1. A social enterprise must be transparent and open. Social entrepreneurs effectively put the way they act into their organisations – or they should do.
  2. A social enterprise should have a triple bottom line. This involves having social, environmental and financial goals and making sure they’re all taken into consideration when making business decisions.
  3. A social enterprise should make some money through trading on the open market. If all your money comes from government grants or contracts, then you may not be a social enterprise – more of an charity or NGO.
  4. A social enterprise has to reinvest a proportion of its profits into its social/environmental goal. This doesn’t mean reinvesting it into the business and buying yourself an Aston Martin Vanquish though.

Whoever we speak to in the social entrepreneurship sphere, they always provide us with those four themes. If we take a closer look at some areas, you will see how the definition varies from person to person, organisation to organisation and country to country.

  1. In some countries, social enterprises must publicly report on their social and environmental impact, as well as their financial accounts. They must engage all stakeholders in decision making and have open membership.
  2. In certain countries, you must explicitly state what each of your goals are (for people, planet and profit) when setting up, in others you have to have one main goal, be it environmental or social, and not be too clear elsewhere.
  3. We have seen that the percentage of money coming from trading changes from country to country. Some stating a minimum of 25% gives you social enterprise status, others 50%. There’s normally special dispensation for start-ups or NGOs converting over though.
  4. This has the biggest range. In Croatia, their strategy states 75% of profits should be reinvested, in the UK CiC’s (social enterprise legal form) is 65%, and the scale goes all the way down to not stating how much of your profits should be reinvested.

Furthermore, and outside the general rules, some countries state you must employ people from vulnerable groups to qualify and others state the government can never be the owner of a social enterprise.

Now you have a bit more insight into the complexities we sometimes face in explaining, but there are a few organisations trying to make things more precise and clearer, which we will discuss next time.

Social Enterprise in Focus : VITA ANST, Croatia

This week we head to Split in Croatia to meet a local social enterprise.

Social entrepreneurship is a growing concept in Croatia. In 2015 the government launched a five year strategy which aims to develop and promote social enterprise across the nation, creating it in partnership with some key players such as ACT Grupa and CEDRA HR. A number of initiatives over the last couple of years have seen more funding opportunities for start-ups, which has also enhanced the reputation and knowledge of existing social enterprises.

One such social enterprise (in this case a social co-operative) is VITA-ANST. Founded in 2009, they have experienced ups and downs over the years, nevertheless they continue in their commitment to support people with addictions. They run both an NGO (ANST 1700) and the social co-operative to enable them to run support programs as well as work in the rehabilitation and reintegration of people recovering from addictions. The social co-operative produce bright and colourful souvenirs for the tourist market, as well as bespoke frames for pictures or posters for the home.

We caught up with Gabrijela Frakić, Vice President of the NGO, to tell us more about VITA-ANST.

Why did you decide to open a social enterprise (socijalna zadruga)?
From the very beginning we offered therapy in the form of art and craft. Through this we realised we could create a self-sustainable model and therefore the need to open a social co-operative arose. It enabled us to separate the business (in terms of product placement) and social activities. It also meant it was easier to promote and sell things since at the time it wasn’t possible to do this through NGOs.
 
What has been the most difficult thing in running a social enterprise in Croatia?
There are a few current issues regarding social co-operatives generally in Croatia. There isn’t a defined status of social co-operatives in the tax system and furthermore there’s a general lack of support from local administration. In addition to this there is insufficient knowledge of social entrepreneurship generally. Finally, there’s a lack of development support such as training or workshops around capacity building and there aren’t many financial tools available for market expansion.
 
What advice would you give to individuals thinking of opening their own social enterprise in Croatia?
In terms of a co-operative, make sure all members have common interests and there is someone who can lead or manage everything with excellence and professionalism. Then, with the right vision, there are possibilities out there but you have to persevere and learn how to deal best with external issues such as the legal and economic situation. Finally, whether you offer a service or a product, ensure you are always improving the quality of what you offer. It may be slow at times but it will enable you to expand and reach wider markets.
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In our next blog post we’ll be explaining more about what a social enterprise is.

The start

I spend a lot of my time browsing the internet for news about social entrepreneurship (in between the obligatory checking of Facebook and e-mail). Hearing about other people’s ideas, experiences and hopes motivates me on a daily basis, and I like to share these ideas at every opportunity, be in a workshop or lecture.

Now I will be doing it online. I have toyed with the exact medium for a while now, debating whether to do it by video, blog or podcast, and since I couldn’t decide then I thought it should be all three and whichever suits the news best.

If you are a social enterprise or entrepreneur, I would love to talk to you and share your good news, so please get in touch.

For now I’ll leave you with a few websites for social enterprise action:

Social enterprise magazine
www.tiltmag.org

Great online courses
http://plusacumen.org/courses/

Best named social enterprise?
https://au.whogivesacrap.org/