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June 17, 2016

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‘More the merrier’ in profit philanthropy

IN traditional Chinese culture, good deeds are their own reward. The ancient poet Li Bai (AD 701-762) famously wrote of heroic swordsmen who came to the rescue of those in peril and then “left no traces of their deeds of names.”

Today, helping the needy isn’t quite so anonymous, and charity is succumbing to the profit motive in a concept called “philanthrocapitalism,” or “social enterprise,” in China.

One of the most high-profile examples of late is the Chan Zuckerberg Initiative by Facebook founder Mark Zuckerberg and his wife Priscilla Chan.

To honor the birth of their first child, the couple announced the formation of a limited liability company with an investment of up to US$1 billion in Facebook shares in each of the next three years. The more Facebook prospers, the more the shares are worth and the more money there is for what the initiative calls advancing “human potential and equality” in realms such as health, education, science and energy.

Of course, billionaires embracing good causes isn’t particularly new. The US alone has produced famous philanthropists like Carnegie, the Rockefellers, Warren Buffett and Bill Gates.

In China, which has the world’s most rapidly growing population of billionaires, the idea of allocating part of one’s fortune to help the less fortunate is just catching on.

“In general, Chinese society is still at an early stage when it comes to philanthropy, and most people consider it equivalent to donating, to giving, to supporting, to caring for,” Cai Shiyin, who brought the German social enterprise Dialogue in the Dark to China in 2011, tells Shanghai Daily.

“However, what needy people need is respect and equal opportunities,” Cai says. “Like the old Chinese saying that teaching someone to fish is better than just giving him fish.”

Many of China’s current social issues, like pollution and care for the elderly, coincide with the popular causes of social enterprises.

“Social enterprises are different from usual companies or nonprofit organizations,” says Dr Hsu Chi-chih, director of Hong Yi Social Impact Center. “They pursue a balance between commercial and social profits. If there is a conflict between the two, social value is always prioritized.”

How does it work on the ground? Hsu points to the Chengdu-based Wikifactory, which his center is sponsoring. One of its projects is to make artificial limbs for children, using 3D printing.

“The 3D printed limbs will be much more affordable for children, but the company can still make profit from selling them,” Hsu explains. “You will want them to sell a lot of limbs and make a lot of money because the more they sell, the more children they will help.”

China has no national registration system for such enterprises, or even a legal definition of what they are. The southern city of Shenzhen in Guangdong Province launched a trial project last year, laying out a regulatory framework for social enterprises. The rules stipulate that a company can register as a social enterprise if more than 50 percent of the income comes from sales, trade or services, and at least two-thirds of profits go to social causes.

Shenzhen hosted the nation’s first China Social Enterprise and Investment Forum a year ago, drawing about 600 participants. A second forum is scheduled in Beijing next week, with 1,000 people expected to attend.

“A major challenge for this sector to thrive in China is the social environment — changing the attitude that if you do good deeds, you must not make money or your good intentions will be called into question,” Hsu explains.

“Our goal is to find and promote successful cases of Chinese social enterprise and let the activities speak for themselves,” he adds. “You can create commercial and social value at the same time, and the more money you make, the more people you help. So, the more the merrier.”

There’s still much that is unknown about the development of social enterprises in China. Research on the sector is woefully lacking.

In 2012, the Foundation for Youth Social Entrepreneurship released a report based on interviews with 52 Chinese social enterprises. It showed that 66 percent of them were companies, 20 percent of them were nongovernmental organizations, and 14 percent weren’t registered as anything.

Dialogue in the Dark is one example of philanthrocapitalism that has survived and thrived, though Cai is quick to point out that the China chapter only breaks even. It started in Hamburg, Germany, in 1988 as a social business involved in helping the blind. Over the years, the organization has conducted hundreds of workshops worldwide, with a broad mandate to change public attitudes toward those who are disabled or “different” from the norm.

Cai says one of the reasons that Dialogue in the Dark isn’t making money in China is high management cost. Up to 80 percent of its employees are visually inconvenient to some degree. Most haven’t had equal opportunities in education and spend a good deal of their time in training paid for by the company.

“Making profits is not our primary goal, of course,” Cai says. “But to become a successful social enterprise, you ought to make profits to keep the business attractive and sustainable.”

Among the company’s activities is guiding visitors through well-designed tours in absolute darkness, giving them insight into the world of the blind. It has also recently started helping the visually inconvenient prepare and register for running competitions.

The Foundation for Youth Social Entrepreneurship report estimated that about half of the social enterprises surveyed had been in existence only three years or less. It also said some of the enterprises that were set up have fallen by the wayside.

One of the more successful enterprises is the publicly listed company Can You. The name means “friends of the handicapped” in Chinese, and also refers to “you can” in English.

In the late 1990s, Can You founder Zheng Weining invited some handicapped friends to study computer software development and website-building together in a home where they could live with respect.

Today, the Shenzhen-based group operates 13 social enterprises around China, extending its reach into sectors such as trade, logistics and travel. About 90 percent of the employees have some sort of physical impairment. Operational costs are high because the company provides stipends to employees who are no longer physically able to work.

Hsu says now is an ideal time for Chinese social enterprises to start up, with US$70 billion in the United States and more than 60 billion British pounds (US$85.52 billion) in the United Kingdom looking to find “good” companies.

By “good” companies, he says he means those that create additional social value as they develop.

“China is at the stage for both industrial and social upgrading,” he says. “We are moving away from primary development mode. The core value of social impact investment is in line with the social and economic targets in the next stage of development in China. We need to take advantage of this opportunity.”




 

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