Shen Dongshu, Leping Foundation: Why Mutual Benefit Enterprises?

Over the past 10 years, Beijing Leping Public Welfare Foundation has been devoting itself to the comparative study of promoting social innovation and the development of social enterprises. In 2012, the concept of "Mutual Benefit Enterprises" came into its

Shen Dongshu, Leping Foundation: Why Mutual Benefit Enterprises?

Release Date:2017-10-27 18:11:00

Shen Dongshu  Secretary-General of Leping Foundation

Over the past 10 years, Beijing Leping Public Welfare Foundation has been devoting itself to the comparative study of promoting social innovation and the development of social enterprises. In 2012, the concept of "Mutual Benefit Enterprises" came up. In the following four years, on behalf of Secretary-General Shen Dongshu, Leping Foundation has repeatedly discussed and examined the concept and certification standards of Mutual Benefit Enterprises, and officially started the certification promotion of Mutual Benefit Enterprises in China in 2016.

According to Leping Foundation, Mutual Benefit Enterprises "can enable enterprises to have diversified values, solve social problems in practice, and maintain the intrinsic vitality of constantly stimulating entrepreneurship."

"Significant changes are taking place in the field of social innovation in China, in which more people from diverse backgrounds and perspectives are participating... This urgently needs the construction of a identification system to identity participants from each other. Mutual Benefit Enterprise identity will lead more market forces to participate in social innovation and achieve higher economic and social value in this participation" Shen Dongshu said so In "Changing the Direction of Tides".


Mutual Benefit Enterprises have proposed a set of viable evaluation criteria.

Chinese Philanthropist:What is the basis of Leping Foundation's optimism of Mutual Benefit Enterprises?

Shen Dongshu:we heard the concept of Mutual Benefit Enterprises in 2012. Before that, we had a lot of observations on the global social enterprises' movement -- first, what are entrepreneurs thinking, what are their attitudes towards CSR (corporate social responsibility) and corporate citizenship; secondly, what are the reactions of these social enterprise movements in different countries and regions; thirdly, what are the disadvantages of NGO organizations? 。

In this process, we learned that there was a group of people working in B Corp. in the United States, so we have been inspecting it every year since then to see if it is forward-looking and whether it can survive. Later, we decided that its exploratory and feasibility were relatively balanced. I personally felt that the concept of Mutual Benefit Enterprises was the most advanced and effective. For example, at the BRICS Summit just held in Xiamen, compared with the previous G7 and G20, it was a new pattern of international power. It was a change of the original international basic system and the pattern of dialogue power. So was the emergence of Mutual Benefit Enterprises. Similarly, it presents a set of dynamic and interactive evaluation criteria, which is very rare.

For example, if we give you a question, what is the standard for a happy marriage? Then we define the mean data to decide the standard for finding the right husband or wife. Would this method guarantee the future? Impossible. The difficult part of marriage is to maintain a dynamic and interactive relationship with each other, and at the same time you can grow up. I would like to use this example to illustrate why I love this set of corporate standards, because it is a living thing, something that can grow.

Chinese Philanthropist:How do we understand the phrase "the evaluation criteria of Mutual Benefit Enterprises are dynamic and living"?

Shen Dongshu:The so-called dynamic and living means that it can adapt to a series of objective conditions such as local culture, values, aesthetics and environment in various countries and regions. It has local attributes.

I often ask students in business schools and industrial management schools to study what modern education is. The basic responsibility of modern education is to enable everyone to live in peace and understand each other. Looking back from 150 to 20-30 years ago, it is obvious that the western civil rights movement has been spreading to other places, but many things are not related to values, including its manifestations. For example, girls's kirts are getting shorter and their clothes are getting less. We might think this is a human right. But a few years ago, France suddenly passed a law saying that it is wrong for girls to who want to swim to wrap the whole body. It needs to be banned. This leads the problem to the other end. Why can't Muslim women cover themselves tight and go swimming?

When any thing comes to detail operation, the problem of abstract cultural values will be highlighted. Mutual Benefit Enterprises can discuss how to make enterprises beneficial to society and stakeholders at different cultural levels. It contains respect for local culture.

The trend of Mutual Benefit Enterprises is to localize further. The evaluation criteria of Mutual Benefit Enterprises ensures the feasibility of localization - I think it is very good, which is also the guarantee that Mutual Benefit Enterprises can finally form a global movement. At the same time, it also gives us a new understanding of globalization. Although the origin of Mutual Benefit Enterprises is in the United States, it has strong cultural adaptability, so that it has acquired a strong ability to promote in the world. If it always adopts a way under the control of headquarters, the vitality of the concept of Mutual Benefit Enterprise will not last long.

In 2012, the concept of "Mutual Benefit Enterprise" attracted attention from Leping Foundation. In the following four years, the foundation has repeatedly discussed and examined the concept and certification standards of Mutual Benefit Enterprises, and officially started the certification promotion of Mutual Benefit Enterprises in China in 2016.


Entrepreneurship is the Core of Mutual Benefit Enterprises

Chinese Philanthropist: The concept of "good enterprise" advocated by Mutual Benefit Enterprises seeks to be friendly to employees and communities. It seems to be the same as the former state-owned enterprises and collective enterprises in concept, such as the establishment of factory-run schools, factory-run hospitals and so on. Will Mutual Benefit Enterprises repeat the mistakes of the former state-owned enterprises?

Shen Dongshu: Mutual Benefit Enterprises and state-owned enterprises are essentially different. State-owned enterprises are characterized by lack of entrepreneurship, which provides public and monopolistic services. There is no need for innovation or too much entrepreneurship for competitive business with monopolized resources, because your resources are out of proportion to others, just like ordinary people can't fight with Tyson.

The core of Mutual Benefit Enterprises is a group of entrepreneurs who have special concern for society and need to reform the original market economic system. They have the talent, ability and spirit of entrepreneurs. This is the core difference between the Mutual Benefit Enterprises and other enterprises - it is different from the transformation from NGO. Many leaders of NGOs begin to pay attention to a social issue, starting from feelings, not from abilities. For example, NGO leaders care about the social problem of gender equality, but they do not know how to solve it. Unlike entrepreneurs, they are innovative and have the ability to solve the problem. Entrepreneurs have not been exposed to the problem of gender equality before. When they comes into contact with it, they can quickly find solutions to the problem and put it into action.

Chinese Philanthropist: You emphasized that entrepreneurship is the core of Mutual Benefit Enterprises. What is Entrepreneurship exactly?

Shen Dongshu: We are entrepreneurs in the basic sense of economics, or we can call them innovators - entrepreneurs are innovators who pursue results, and entrepreneurship refers to innovators who are responsible for good results.

The entrepreneur mainly deals with uncertain events. He wants to achieve his goals with limited resources, turn uncertainty into certainty, and be responsible for the results. He can be a president of a university or a dean of a hospital. In a sense, he can be a minister. Of course, in different situations, the conditions for applying entrepreneurship are different. Generally, it is easier to apply entrepreneurship in the company system, because that system can make him play best. If it's a one-person-one-vote system, entrepreneurs themselves have to spend a lot of energy to convince voters, but in a joint-stock system, they can fight for strong enough voting rights themselves. In this sense, I don't think leaders of state-owned enterprises are entrepreneurs because they are appointed.

But in China, we often associate entrepreneurs with successful businessmen, and business itself is often associated with fraud. Therefore, the image of entrepreneurs has become an extreme image in China, an image of successful people in wealth. It is a misreading of entrepreneurs and entrepreneurship.

Chinese Philanthropist: You say that the leaders of state-owned enterprises are not entrepreneurs. Can you give us two examples of entrepreneurs?

Shen Dongshu: There are many (good examples) in China, Ren Zhengfei, Ma Yun and Ma Huateng. They are all (good entrepreneurs). Personally, I prefer Wang Wei from Shunfeng. They are all doing innovative things. From the point of innovation, Liu Chuanzhi and Zhang Ruimin are also very good entrepreneurs.

The most important ability of an entrepreneur is that he can grasp the limited resources as far as possible and achieve his goals. Even if you're just the head of a supermarket, you're an entrepreneur who does a good job of it. As for scale success, it's a matter of luck.

On September 23, 2016, the Beijing Leping Public Welfare Foundation and the Hong Kong Social Entrepreneurship Forum jointly organized the "Forward-looking Forum for Mutual Benefit Enterprises across the Straits and in Four Places" with Renren Society and Social Innovation Partners.


It is the time for the development of Mutual Benefit Enterprises in China

Chinese Philanthropist: What is a Mutual Benefit Enterprise? How do we define it?

Shen Dongshu: First of all, there are two kinds of Mutual Benefit Enterprises: one is B Corp, which has legislation passed in various places. The enterprise itself has a mission and is engaged in solving specific social problems. It can get help, or the shareholders interfere less in the balance between its operation and the realization of social goals. The other is the enterprises certified by the Mutual Benefit laboratory. It is more radical, more organized, networked and globalized.

In practice, we are faced with three types of enterprises, one is the legal concept of the enterprise, which is only understood as a commercial enterprise in China; the other is the enterprise with social purposes, which we regard more as the enterprise transformed from the third sector; and the other is the Mutual Benefit Enterprise. They all intersect with each other. We make such distinction for the convenience of discussion.

In fact, two things are discussed when we define these three types of enterprises, one is social value, the other is efficiency.

Pure free market theorists will say that the world is symmetrical in information and the market is fully competitive. In that case, any enterprise is solving a kind of social demand. Social demand itself is a kind of social problem. So as long as there are enterprises, all problems can be solved.

But the traditional third sector holds the views that the free market theorists are wrong, because the market is not so transparent and the competition is always there. So on the one hand, enterprises should do some restrictions to prevent monopoly; on the other hand, there should be a third sector to supplement some government failure and market failure. This theory has also been popular for a long time, so many NGO organizations were born. Of course, some people will say that NGOs did not appear after enterprises. For example, there were many non-governmental social service organizations near churches during the time, which was wrong in terms of time order. I think this logic is actually the delusion of intellectuals. The fact is that the failure of both market and government leads to the emergence of the third sector.

Whether as the second sector of enterprises or as the third sector of NGO institutions, they are constantly improving after birth. The second sector is striving to close to the direction of social value, while the third sector is improving the level of efficiency. This is a process of running between each other. This middle zone is growing larger and larger, and eventually it runs out of a region called "the fourth sector" in foreign countries. It is not an independent department, but a more complex organization that were created by the joint efforts of the government, enterprises and NGOs. Some people think that the Mutual Benefit Enterprise is on the extension line of the second sector, but from an innovative point of view, I don't think we need to rush to define it as an extension of the second sector or a new fourth sector. Why? The reason is simple. Picasso's paintings are still being seen today, but who can remember today's critics of Picasso's paintings? So we need to look more at its development prospects.

The biggest risk for the Mutual Benefit Enterprise is that its experimental cycle is relatively long. It matters whether good partners can be found in various regions, and whether its business model can be maintained. Reviewing its development since 2012, we think it has gone very well so far.

Chinese philanthropist: You said that it is the time to promote the development of Mutual Benefit Enterprises in China. What factors do you consider for such judgment?

Shen Dongshu: First of all, in terms of the international environment, President Trump of the United States was in power and Britain left Europe, which made the globalization development and de-westernisation in a good environment.

Secondly, in terms of domestic demand, people are increasingly pursuing the emergence of efficient and social care. Now people's wisdom has improved, that you will find it more difficult for public relations jobs. In the past, public relations companies controlled information, which can describe a bad company as a good company. But today it can't. Any negative news of enterprises can't be hidden. From the consumption level, we have changed from the few consumption choices in the past to stimulating consumption, which makes a good company a scarce resource, who can win the consumers and investors.

Third, the supply of entrepreneurs' resources is adequate. A large number of private enterprises in China were born in the 1980s and 1990s. These entrepreneurs themselves are very open and courageous. Their children have grown up, have a global vision and have a good education. The new generation is under pressure to inherit the fathers' career and is not willing to do so. But if they are happy to start new businesses. For example, young people are not interested in a bearing factory, but if we transform this bearing factory into a super environmental protection, energy-saving bearing factory, and manage the supply chain, it will become an environment-friendly and social-friendly enterprise, which is very attractive to young people.

Fourthly, the threshold of Mutual Benefit Enterprises is not high. Leading ideas is Important. Unlike large enterprises, it is difficult for them to turn around and move.

Finally, from the point of view of the development of Mutual Benefit Enterprises themselves, foreign experiments have reached a relatively mature initial stage, and our country's policies also encourage such positive market forces and social forces.

Chinese Philanthropist: Some people think that the certification of Mutual Benefit Enterprises is only a marketing method. What do you think?

Shen Dongshu: I agree with the emphasis on means and methodology, but what is the significance of raising such a question? I don't understand.

The certification of the Mutual Benefit Enterprise is only a measure, and the enterprise will not go on a smooth road because of its own certification. Mutual Benefit Enterprises pay more attention to the innovation of technology, management and marketing. Sometimes, only good means can bring good processes, and good processes can bring good results.

Chinese philanthropist: Some people are puzzled about the fees required to certify Mutual Benefit Enterprises.

Shen Dongshu: The certification fee of the Mutual Benefit Enterprise is about $500 in two years, which translates into RMB less than 2,000 yuan per year. People have doubts about its income, which should be morally concerned. You should think that if he did all this work, he must have paid in silence. Instead, I would worry about whether they would survive. If these costs were not enough to support their operation, would the system collapse in the future?

From my point of view, I think their current charging model is more problematic. The current charging standards of Mutual Benefit Enterprises can alleviate people's worry about it as a profitable certification organization, but its real business model has not been established. More than half of its income comes from foundation donations. I think it is necessary to increase its charging ratio. In addition, as it now provides more and more services, it is more dangerous, because the consultation is free, and the certified enterprise only accounts for 10% of the total application. Its revenue can not cover its operating costs at all. This is why the Mutual Benefit Enterprise appeared in 2006, and we did not start to observe it carefully until 2011. We think it still has many problems to solve - some people think its business model is good and profitable, but we think its business model is not healthy, it is more like a NGO.

Within a decade, non-North American Mutual Benefit companies will double in number or even more than North American companies.

Chinese Philanthropist: Mutual Benefit Enterprises have put forward a very broad certification standard, from 80 to 200 points. Are there some hard indicators, similar to the one-vote veto system?

Shen Dongshu: I think there are objectively, but they haven't made it clear yet. This is actually a problem they are facing now. It's not unclear, but why not?

The use of the one-vote veto system should be very cautious, because in different cultural backgrounds and regions, it requires specific treatment of specific issues. We will also discuss this issue with the Mutual Benefit Laboratory in the future. In fact, we've asked similar questions before, and they're constantly looking for a balance. Judging from the certification results, those companies that have been certified still have a very low miscarriage rate.

For the current certification system of Mutual Benefit Enterprises, it is not perfect, and some explanations are reluctant, but this is the key point. The key point is to see the kinetic energy of its development and the curve of its rise. We don't want to see how good it is now, but to see its future. Now you criticize it, there are endless places to criticize, such as it has not solved its own survival problems, right?

Chinese philanthropist:Since the birth of Mutual Benefit Enterprises in 2006, although there are more than 2000 certified enterprises in more than 50 countries around the world, it seems that the volume is still very small in the whole business field.

Shen Dongshu: This is a difficult question. It is easier to answer from a simple, incomplete point of view. Leping has introduced a lot of things to China. We all think about China and its position. We don't think about American ideas. So I personally think that Mutual Benefit Enterprises will have great value in emerging countries, that is, BRICS countries, or countries in transition, or emerging economies. Now more than 2000 enterprises, 80% of them are in North America. I believe that advanced countries and Asian economies in Latin American economies will go much faster than those in Europe and the United States.

In fact, I would like to bet with the founder of Mutual Benefit Laboratories that in 10 years, non-North American companies will double, or even more times, the North American market. Because these countries are confronted with more conflicts of values, they also have more incentives for innovation and a stronger desire for self-improvement.

Chinese philanthropist:We have learned that Leping is not only actively committed to the promotion of Mutual Benefit Enterprises in China, but also invested in one of them. Can you give us some information?

Shen Dongshu: Leping has been continuously investing in domestic social enterprises. Now we are more looking for enterprises with entrepreneurship.

We have invested in Zhong Construction, whose cross-border innovation ability is relatively strong in improving the public problems of society as a whole and improving the welfare of the poor. In addition, we also feel that the design idea of them is useful in all social scenarios in China. It's more like a company that embodies methodologies vividly. At the same time, they have the ability to visualize the methodologies, which is the main reason why we invest in it. In addition, two institutions are also very compatible in feelings, that both companies feel good about each other.

For returns, we certainly expect it to be at least a good business. In addition, we offer them compound help, not only equity investment, but also donation and other financing assistance. We hope to help them develop better and faster, so that they can devote more energy to design thinking, innovative thinking and socialized design, design for the poor, and ultimately drive the development of cross-border thinking and design thinking in the whole industry.

Chinese philanthropist:Leping Foundation is also actively promoting the attention of investment institutions to corporate interests. What is the current progress?

Shen Dongshu: At present, we are mainly engaged in letting different investment institutions and commercial institutions know about the Mutual Benefit Enterprises. For the time being, we can't say what to do immediately, because it is easier for us to have a certain consensus on the concept and methodology before we talk. What we are promoting now is to invite them to participate in the forum and deepen their understanding.

Generally speaking, I think commercial investment funds are actually about asset allocation, so they are certainly willing to take out 1% to 10% of the proportion to test water for investment, perhaps in the future It will be very large. In the current situation, we don't need to do much argumentation, we just need to convince 10% of the people to find the right people, rather than obtain the consensus of the public.

Chinese philanthropist:What is the self-orientation of Leping Foundation for the promotion of Mutual Benefit Enterprises in China? What is the cooperation with B Lab?

Shen Dongshu: Leping Foundation is the introducer of the concept of Mutual Benefit Enterprise in China, and then a promoter. Did people say that your push was real or fake? Well, then we will invest in a company to prove our sincerity. We have entered the market and invested in it. In the future, we will find more suitable people to promote the sport, and then work with them to continue to promote the development of the sport. In terms of investment, we will continue to invest, of course, to select companies that are closer to our mission.

As for the cooperation with B Lab, both of us are constantly discussing this matter. We are currently pushing Hong Kong to dock with B Lab as soon as possible, so that the concept of common interest enterprises can be approached to the whole Chinese-speaking areas. In addition, we are also setting up a professional team. When the number of domestic certification enterprises reaches about 10, we will encourage them to continue to promote the certification promotion of Mutual Benefit Enterprises in China.

2017-10-27 Source: Charity Bulletin

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