Nurturing Social Impact Business paves the way to sustainable development

November 09, 2023 - 06:24
SIBs make up only 4 per cent of the private sector in Việt Nam, but they play a crucial role in achieving Sustainable Development Goals.
Harvesting coffee beans in Buôn Ma Thuột City, Đắk Lắk Province. Miss Ede showcases the beauty of Ede women. — Photo

By Mai Hương

HÀ NỘI — In a world where businesses are increasingly recognised for their role in addressing global challenges, Social Impact Businesses (SIBs) are emerging as a powerful force reshaping the landscape of traditional business models. These enterprises do not only prioritise profit but also commit to making a positive impact on society and the environment, making them a hallmark of 21st-century business.

According to a study conducted by the United Nations Development Programme (UNDP) and the National Economics University, SIBs make up only 4 per cent of the private sector in Việt Nam, but they play a crucial role in achieving Sustainable Development Goals.

SIBs in Việt Nam, numbering around 22,000, often operate on a smaller scale but lead the charge in promoting diversity and inclusivity in business. Notably, nearly all SIBs have a predominantly female workforce, and three-quarters of them employ individuals with disabilities.

The research indicates that SIBs are not just socially responsible; they are also financially sustainable. Approximately 70 per cent of SIBs in Việt Nam are profitable, with 59 per cent striking a balance between social and economic goals, and 34 per cent focusing primarily on social impact.

Dr. Nguyễn Phương Linh, Director of the Management and Sustainable Development Institute, emphasises: "This is a vital trend. Large corporations worldwide, including those in Việt Nam, are increasingly showing interest in creating social impacts and engaging in non-profit activities. This model represents a multi-value approach - where entrepreneurs create economic value for themselves, have a positive impact on society, and minimise environmental impact."

Consumers, more than ever, expect brands to contribute to the common good. As per a recent Harris Poll survey commissioned by Google Cloud, consumers today (52 per cent) show a particular interest in backing sustainable brands. In fact, 66 per cent of shoppers actively seek out eco-friendly brands, and 55 per cent express a willingness to pay a premium for products that are more sustainable.

"Doing good is good for business," says UNDP Resident Representative Ramla Khalidi. "Social Impact Businesses have a tripple bottom line - they are looking at Profit but they are also looking at People and the Planet. These are the businesses that care about the environment, the society, but they also have commercially viable business model."

It's not just large corporations; an increasing number of startups aspire to bring greater benefits to society.

Hoàng Danh Hữu, founder of Miss Ede Chocolate & Coffee, one of the 30 SIBs supported by the ISEE-COVID programme, shares that besides focusing on products, Miss Ede is committed to gender diversity, supporting vulnerable labour, and particularly, empowering indigenous women in the Central Highlands.

Miss Ede, dealing in chocolate and coffee, preserves the flavours of cacao from the five Central Highlands provinces and showcases the beauty of Ede women. The company is committed to sustainable coffee production, aiming to balance carbon emissions by 2025.

“In a world seeking unity among diverse ethnicities, Miss Ede stands as a beacon of unity, reflecting the brand's commitment to fostering harmony and ethnic solidarity,” Hữu told Việt Nam News.

Hồ Nhật Phương, Director of SBC Royal Co Ltd, started her business with products made by the Pa Kô ethnic group in A Lưới District, Huế City. Established in October 2021, the company has grown from sourcing raw materials to developing and expanding products related to the specialties of Huế, with a primary focus on ginseng. Operating in highland and impoverished rural areas, the company has successfully created 10 product lines, including OCOP (One Commune One Product) products. Some items have gained market acceptance in the United States, Japan and Australia.

“As a SIB, the company is actively supporting local communities by providing livelihoods for farmers. This involves supplying seeds and crops to improve economic conditions, offering training sessions to enhance skills, and enabling local residents to access markets for commercialising their products. This strategic approach aligns with the company's current direction and commitment to sustainable business practices,” Phương said.

Hồ Nhật Phương, Director of SBC Royal Co Ltd, showcases the company's products at a training course under the ISEE-COVID programme. — Photo courtesy of UNDP

Building a robust ecosystem for SIBs

In 2014, Việt Nam officially recognised the concept of social enterprises in its Business Law, followed by the inclusion of the term in the revised Civil Code in 2015. Despite these developments, there remains a lack of specific policy incentives for this business model.

Nguyễn Thị Thanh Uyên, an expert in policy analysis providing consultation and support to SMEs, highlighted the absence of a comprehensive legal framework for the holistic development of innovative entrepreneurial enterprises. Policy trial mechanisms have not been widely applied across various sectors, particularly failing to cater to tech-driven businesses, especially in the SIB domain.

As a result, SIB activities currently lack a structured approach, failing to create a significant impact on both businesses and society. The startup ecosystem of SIBs exhibits disjointed value linkages, lacking essential elements for ecosystem development. Challenges include a fragmented entrepreneurial culture within the SIB community, limited market development due to information constraints, and insufficient support and guidance systems, demonstrating a need for improved policies.

Additionally, Uyên identified a lack of enthusiasm among angel investors in the SIB startup ecosystem due to the absence of encouragement policies from relevant authorities. Poor interconnectivity among business communities also hampers growth, as local activities are heavily reliant on limited resources. This situation leads to SIBs operating mostly in isolated clusters within the innovative startup community, without efficient connections to multinational corporations in Việt Nam or institutions globally.

Việt Nam currently boasts more than 880,000 businesses, serving as a crucial driving force, and contributing to production, budgetary contributions, job creation, poverty reduction and social welfare. Despite this, nearly 98 per cent of Vietnamese businesses are categorised as micro, small or medium-sized enterprises, and face limitations in resources for transitioning towards more sustainable business models.

In surveys on sustainable business practices using the Environment, Social, Governance (ESG) criteria, larger enterprises, including FDI companies, publicly traded corporations, and export-oriented businesses, are leading in ESG application. Small businesses considering proactive ESG adoption face challenges due to resource constraints, technological limitations, and the lack of supportive policies.

To address these challenges, several initiatives and projects supporting SIBs, have been launched.

The prominent project is the ISEE-COVID backed by Ministry of Planning and Investment, Global Affairs Canada and UNDP. This initiative provides technical and financial assistance to SIBs, contributing to feasible business models with significant impacts on agriculture, tourism, education and healthcare.

Launched last year, around 30 SIBs have received this support each year. The winners will undergo intensive training and receive VNĐ100 million (US$4,208) each to reform their business models and products, and recover after the pandemic.

Other projects include the competition "Nurturing Social Impact Startup Ideas 2023" by the National Startup Support Centre in collaboration with the Social Impacts Village, the National Economics University, the Institute of International Economics and Law and Campus K Ventures, and the "Supporting Businesses for Development Purposes" project, implemented by Oxfam Vietnam, the Centre for Social Initiatives and Community Promotion (CSIP) and the Centre for Supporting Green Development (GreenHub).

However, the current efforts have proved inefficient.

Uyên has suggested the issuance of a decree guiding trial mechanisms and regulations for SIB startup models, the establishment of evaluation criteria for participating organisations, and the creation of standards for assessing project participation. She also recommended prioritising the development of SIB innovation ecosystems in socio-economic regions, forming SIB innovation centres, and fostering networks of angel investors for SIB ecosystems.

Additionally, she suggested enhancing advisory services for SIB startup models, creating a national startup innovation fund for disadvantaged groups and women, and improving communication activities to facilitate SIB growth.

Meanwhile, Ramla Khalidi highlights the UNDP's comprehensive ecosystem approach, addressing all aspects influencing social impact businesses, from the businesses themselves to intermediaries like incubators and investors. By considering the entire ecosystem, the aim is to enhance impact and raise awareness about available services and resources. Additionally, Khalidi looks forward to strengthening partnerships for a vibrant social impact business ecosystem in Việt Nam, prioritising women and vulnerable groups in its design and implementation. — VNS