Redefining the Roles of Social Enterprises and the Korea Social Enterprise Promotion Agency Is Urgent

Recently, in the 4th Basic Plan for Social Enterprises ('23–'27), the Ministry of Employment and Labor pointed out the side effects of the government’s uniform, direct-support-centered fosterage policy over the past 16 years since the enactment of the Social Enterprise Promotion Act in 2007. It then announced reform measures aimed at restoring the identity of social enterprises and strengthening their competitiveness, and submitted to the National Assembly the 2024 budget proposal for fostering social enterprises, in which direct-support funding for social economy enterprises was reduced.

According to the diagnosis presented in the 4th Basic Plan for Social Enterprises, despite the government’s massive fiscal support for social enterprises, the long-term effects on job creation have been minimal, business growth and self-sustainability have remained weak, and cases of fraudulent receipt of subsidies have continued to occur.

It also noted that because the structure provides the same support based solely on certification requirements, regardless of the degree of social value created, there is insufficient incentive to enhance social value, and excessive fiscal and policy support for social enterprises results in reverse discrimination against ordinary SMEs.

The reform measures in the Basic Plan for Social Enterprises center on integrating and operating various similar support programs for social enterprises, including labor-cost subsidies, at the same level as those available to ordinary SMEs, and shifting from uniform support to differentiated support based on evaluations of social value and economic performance. In addition, public administrative tasks such as certification and designation, education, and consulting, which had been outsourced by the Korea Social Enterprise Promotion Agency, are to be carried out directly by the agency itself.

The reform measures in this 4th Basic Plan for Social Enterprises focus on strengthening fairness between social economy enterprises and non-social economy enterprises, improving the efficiency of budget execution, and enhancing the operational efficiency of the Korea Social Enterprise Promotion Agency as the supporting institution. In response, social economy enterprises have reacted strongly against the budget cuts.

While the backlash from social economy enterprises—the direct stakeholders whose previously supported budgets have been cut, led by social enterprises—is understandable, before arguing over reductions in support budgets, these firms need to reflect on whether they have fulfilled their responsibilities as beneficiary enterprises receiving various forms of support funded by enormous sums of taxpayers’ money. Above all, each enterprise must first examine whether it is maintaining an identity consistent with its founding purpose as a social economy enterprise, whether the social value it has created to address social problems is substantial enough to justify continued support, and whether it can grow while strengthening its competitiveness as a business. They must then independently seek ways to establish a clear identity as social enterprises and strengthen their self-reliance as businesses.

Today, the scope of social enterprises and the social economy extends across nearly every issue—employment, regional revitalization, welfare, the environment, population, startup support, and support for culture and the arts. Yet because the term “social” lacks specificity, ambiguity remains in both the concept and the role, and differences in understanding that role continue to produce confusion and conflict.

If social economy enterprises, including social enterprises, are to remain subject to government certification, designation, and management, then academia and government must step forward to examine the concepts and changed roles of social enterprises versus social ventures, social enterprises versus for-profit firms, and social enterprises versus nonprofit organizations. At this point, it is necessary to properly rectify the names and definitions (正名) of social enterprises and the social economy in ways that fit Korean society today. The role demanded of social enterprises more than 20 years ago in our society cannot be applied under the same standard today, when socially and environmentally responsible activities have become a universal corporate value in 2023.

In addition, the ambiguous nature of the Korea Social Enterprise Promotion Agency, which supports social economy enterprises, also needs to be reorganized. Just as social enterprises and the social economy themselves are ambiguous, so too are the agency’s target beneficiaries and role bound to be unclear. It is not clear whether the agency prioritizes employment, welfare, the environment, regional development, venture startups, or all of them. Because of this ambiguity, much of the agency’s work overlaps with that of other ministries, and there are limits to its ability to develop organizational expertise.

In line with a redefinition of the roles of social enterprises and the social economy, the time has come to adjust the role of the Korea Social Enterprise Promotion Agency or to dismantle it in a constructive manner. Now is precisely the moment to spark discussion on the role and identity of social enterprises and the social economy, properly rectify their names and definitions (正名), and foster social enterprises not as zombie firms but as sustainable growth companies equipped with expertise and competitiveness.

Hanjoon Cho

Senior Research Fellow, Center for Free Enterprise (CFE)

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Original title: 사회적기업·사회적기업진흥원의 역할 재정의가 시급하다

Author: Han-jun Jo

Date: 2023-11-09

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=press&idx=26127