Social enterprise companies and foundations Alternative forms of ESG for sustainable development
I have previously written an article about setting up a social enterprise company from the perspective of establishment and tax burden. Finance and Banking Journal, when this draft of the Social Enterprise Act 2562 was passed into law
In addition, I have written before comparing the setting up of funds between a cartel and an association or a social enterprise company. For Family Business Members: Which format is good in the book Thai Family Business Success Formula for Sustainable Succession? To do public charity or care for a family member
However, when writing before The Social Enterprise Act 2562 will enter into force as law. In the book, I conclude that If the family business There is a desire for family members to participate in public benefit activities or charity (Philanthropy). It is a matter that should be considered. Choosing the form of a foundation or social enterprise company would be a good choice. and most suitable
Number and success of Thai social enterprises
After the Social Enterprise Act B.E. 2562 comes into effect Currently, social enterprises have been established. In doing business that is of public benefit to society, with a group of people who will do business as a social enterprise. There are either profit sharing schemes for society or maybe not sharing profits in small numbers. According to the data (2563), there are currently approximately 145 cases.
They are divided into 123 shareholders who do not share profits and 22 who share profits. As far as we know, currently there are approximately 178 shareholders, and in the past we have not found any social enterprises that have been successful in being able to thrive Can be profitable and will be able to expand the network to expand the enterprise model. for society to be greatly increased according to the spirit of the law
I think that the failure or failure to fulfill the mission of social enterprises established in Thailand This may be caused by many reasons.
- Lack of sufficient funds to carry out change activities and also have higher costs than general profit-making businesses.
- Lack of knowledge in good management in finance, management, and marketing (lack of an ecosystem that helps drive it)
- Lack of human resources Executives and employees who have the knowledge and ability to drive the organization
- Lack of understanding between customers and the beneficiary community. This will easily cause the burden of abandoning social missions (Mission Drift).
- The government sector is too involved in regulating and supervising.
For details, please study the information from the book of the Institute of Justice of Thailand. Knowledge extracted from the seminar on 27 November 2561, topic: “Thailand Social Enterprise: The Way Forward, Thai Social Enterprise How to move forward sustainably?”
In this article, I would like to propose that If any business organization or public charity organization wishes to conduct business for the public benefit in the areas of education, society, health, and the environment, it must be consistent with the mission of the business organization regarding the environment. (Environment), Society (Social) and Corporate Governance (Governance) or ESG. Choosing a social enterprise model without profits to share. It is probably the best and most effective form of working towards achieving our ESG mission and achieving concrete results.
This is because I had the opportunity to study the drafting of the Social Enterprise Act when I was a member of the National Reform Council and also had the opportunity to be a committee member of the drafting of the Social Enterprise Act during the consideration process in the House. National legislature in the year 2562, I believe that Social enterprise companies will play an important role in improving the environment. Reduce social inequality and create transparency for the business If promoted and supported in the right way
At present, the business operations of various business organizations There must be a mission to achieve ESG goals in creating a good environment. for the global society Environment to reduce inequality in society and must have good corporate governance. ESG is currently something that every organization must do and be aware of its importance and have a duty to do. Because domestic and international trade and investment regulations force us to do so. It is not a choice or a matter of what you should or should not do, because ESG is not just about corporate social responsibility (CSR).
In addition, I had the opportunity to work as the Chairman of the Board of Directors of Chewamit Social Enterprise Company. which is an organization that does not share profits It is considered quite successful after spending more than 5 years because we have funds from large companies and foundations that are famous shareholders and directors and are accepted by society. There are talented executives. and can answer the needs of people in a state of illness and medical personnel Therefore, it may be only a small sample of those who can be successful.
Along with having the opportunity to hold positions as directors of both registered and unregistered companies. including directors of the Stock Exchange of Thailand and was responsible for overseeing the work of ESG, therefore found that this matter is extremely important. Therefore, if a business organization wants to achieve its mission Whether it is promoting development in the areas of environment, education, health, society, in order to be able to answer the needs of all involved parties, there must be an organization that drives success.
In the past, business organizations tended to work in the form of corporate social donation (CSR) projects, which may not have closely followed up on performance and assessed results. And on many occasions, those groups of companies have to use foundations as a model for doing public charity activities for society. The company may give money to set up a foundation as a start. Or the company itself donates through other foundations. Or business owners who have wealth set up foundations. and donate their own money to charity But in the economic situation there are problems. Asking for donations is also difficult. This causes the foundation's mission for ESG to be delayed or canceled altogether.
Therefore, the model of using foundations to carry out public charity work to achieve ESG goals is not likely to be a good model and suitable for the current situation.
Therefore, I suggest that the current foundation mechanism that exists in today's business organizations should be used. together with business organizations to consider establishing It is a social enterprise to drive the mission of ESG or if the business organization does not yet have a foundation. You should consider setting up a social enterprise to work instead, so it will have better results and have a better chance of success than using a foundation.
Choose social enterprises instead of foundations.
In this regard, I would like to suggest that the reader should think about it. If the foundation that does public charity work that currently focuses on doing business for society or for all public charities in Thailand that have a sufficiently large fund Together with private companies that need to donate money through public charity foundations to do ESG work, consider giving foundations to private companies. Those that exist Let's try to set up a social enterprise company that doesn't share profits. Working for society as a whole Then let's evaluate whether it will have a positive impact on the nation and society and better achieve the mission regarding ESG or not.
especially If the establishment of social enterprise companies that do not share profits in order to use the efficiency of the private business sector in managing Whether in terms of capital, personnel, marketing, finance, laws that will drive those social enterprises to gain profits or income and expand their businesses with private partners in various sectors. In doing business in various matters Following their goals together with the community will benefit. Whether it's environmental or social work To achieve the goals and mission of solving environmental problems. Reduce inequality in Thai society and transparency in corporate governance.
Can the Foundation invest in social enterprise companies??
Have you ever had a question? Is it possible to use the foundation's funds, which currently have a reasonable amount, to invest in the company? Because the foundation's investment in the company may be against its objectives. Because of the legal purpose of establishing the foundation Must be established without profit and must have objectives for charity, public, religion, arts, science, literature, education for public benefit.
I have the opinion that Investing money in social enterprise companies that do not have the objective of sharing profits is possible. and consistent with the objectives
The establishment of a social enterprise company can operate. So that social enterprises produce and sell various products or services. or take any action with the objective To solve problems, whether it be to develop education, communities, society, and the environment Public health affairs. In this regard, the social enterprise companies established have broader objectives. and has a more efficient management mechanism than a foundation in management to achieve the organization's ESG mission
Considerations for changing the foundation's operating model To be a social enterprise company that does not share profits
1. Investment in purchasing shares of the foundation It is considered an investment type. It's not an expense. and if the company invests as well Later, the company was certified with tax rights and the investing company was able to write it off as an expense. Funds or shares and donations can also be considered expenses. Social enterprise companies can invest the money they earn to earn higher returns. compared to the foundation Because according to law, the foundation cannot take donations. or fund money to invest in various forms In order to receive a return higher than the deposit interest rate, the foundation must deposit with the bank only.
In the past, bank deposits Or financial institutions have rates as high as 7-15%, so foundations can use the profits to spend on their businesses. But at present bank deposits have very low interest rates (0.5-0.75% per year), causing the foundation's funds to begin to dwindle. Until there is no more funds to spend on administration and charity. and had to continually ask for more and more donations And getting donations is becoming more and more difficult. Until causing those organizations to be unable to continue working sustainably
On the contrary, if it is established as a social enterprise and has sufficient funds. You can use that money to manage your investments to gain benefits. and use the profits to spend on social enterprises and create sustainability in the future In addition to effective business management
2. Income of the foundation that has not yet been certified by the Revenue Department as a public charity organization exempt from taxation. Such foundations will still have to pay taxes on their charitable income, such as selling products and providing various services. You must pay 10 percent tax before deducting expenses. For income under Section 40 (1) to (7) and income under Section 40 (8) from selling goods at the rate of 2 percent before deducting expenses. Only money received from donations, member dues and money given out of kindness will be exempted.
Conversely, if established as a social enterprise company during the period that it has not yet been certified by the Revenue Department, tax will be paid on net profits only. Most social enterprises in the beginning are difficult to make a profit because they have more expenses than income. This company will not have tax costs to pay from income even if there is no profit.
3. In some cases, the company's donations to the foundation are subject to limitations on the donation amount (e.g. no more than 2% of net profits) or certain expenses that are prohibited by law. Using the mechanism of social enterprise companies is therefore much more flexible.
4. Later, if the social enterprise company that does not share profits has been exempted or certified by the Revenue Department. After operating for 1 year (with continuous operation for 5 years, if the business is closed before 5 years, all tax benefits will be revoked), the status of the said social enterprise company will be reduced. It will be no different from a foundation that has been certified as a public charity organization by the Revenue Department.
The tax advantages are Individuals who invest in stocks can deduct up to 100,000 baht. For juristic persons who invest in stocks Income will be deducted as actually paid. If it's a donation Donor companies will also be limited to a maximum rate not exceeding 2 percent of net profits.
5.Management of social enterprise companies You can hire talented executives and employees to manage the organization, whether in marketing, finance, investment, or research, to achieve goals like any other business organization and be able to respond to customer needs. Investors and those who benefit from social enterprises will not abandon Mission Drift.
6. If the said social enterprise company has a successful business in terms of income and results, and fulfilled the mission already laid out can also invest in a network of small social enterprises in the form of a Holding Company or creating a network of small social enterprises to continue to grow as partners as well
However, if a large business company can still bring in talented personnel in its core business to help plan and manage social enterprise companies, both profit-sharing and non-profit-sharing, to create growth and respond. social community
7. Social enterprise companies can raise funds with people who want to do good without being restricted by securities laws. About selling shares to the public
An offer : Necessary capital
This is because this Social Enterprise Act does not have direct government funding. Instead, there is a law that regulates profit-making social enterprise companies. Donate to the fund I believe that if you want to be successful, especially have a fund that will be gained from profits. Because small social enterprises where there are no big companies Helping is difficult to make a profit.
The original draft law would involve transferring part of the money owned by financial institutions or companies to the Social Enterprise Fund, which is called "hangover money" to support social enterprises like in England. Therefore, I see that if If you want social enterprises to succeed, the law should be amended in the future to include funding from the government.
conclusion
Therefore, nowadays, social enterprises that want to be successful Therefore, it will still have to rely on private companies to drive itself. in setting up a social enterprise company Come up and drive environmental, social and corporate governance work. by large private companies Especially companies listed on the Stock Exchange of Thailand must report their role in ESG in One Report.
I believe that using your own social enterprise company or jointly establish a social enterprise company that The Stock Exchange Foundation or another listed company will be established in the future. will be able to drive change to occur in Thai society
I would like to propose that big business organizations think about changing the way for big foundations with lots of money to set up social enterprise companies. Those business organizations also have joint investments. In establishing a social enterprise company to work together with an ESG mission to achieve good results.
If such company If you don't have a foundation yet and want to work on ESG, you should set up a social enterprise company that doesn't share profits instead. Foundation establishment
The proposed changes may be Thailand's hope for creating a good ecological environment for social enterprises to reduce social inequality, reduce environmental problems with good corporate governance. will be able to achieve the ESG goals for prosperity, stability, and sustainability of the company and Thai society in the future.
