[Plaza] Alternatives for Evaluation and Compensation of Social Enterprises

Social enterprises, once considered a means for some politicians to show off or a distant topic, are now right beside us. Leading the way is "Areumdawoon Gage," which obtained the first official certification in 2007, and by 2020, the number has reached an impressive 3,200. The author’s heart is warmed by this market approach to solving social problems and the passion of its members.

For the sustainable development of the social enterprise ecosystem, appropriate compensation for their creation of social value is essential. So far, compensation related to social performance has been driven mainly by investments from some large corporations. For example, the Social Value Research Institute has supported a total of 18.8 billion KRW to 188 companies from 2015 to 2018 through the Social Performance Incentive (SPC) system. While these minority sponsor programs have greatly contributed to the early development of the impact ecosystem, considering the rapid qualitative and quantitative growth of social enterprises, such incentive-based systems will soon reach their limits.

Therefore, establishing a compensation system based on a systematic economic framework is urgent. Here, issuing and trading cryptocurrencies as a form of compensation is proposed as an alternative. Considering the inherent purpose of blockchain?decentralization and scalability?and the ideal of token economy as a compensation system, its combination with social enterprises seems natural. An alternative that simultaneously solves the two challenges of evaluating and compensating social performance of social enterprises is now within sight.

First, through cryptocurrencies, social enterprises can independently secure business funds. Social enterprises face difficulties becoming publicly listed companies, and loan windows at commercial banks appear increasingly limited. Given these constraints, issuing cryptocurrencies is an excellent alternative. Considering blockchain’s open resources and interoperability, if technical support from these communities follows, accessing the cryptocurrency market is merely a matter of perception and will, aside from government regulations.

Second, the genuine value evaluation of social enterprises can naturally emerge through the balanced price formation of cryptocurrencies. Given the diversity of social enterprises, the current document evaluation method conducted by some experts has limitations in scalability. For example, education and employment for people with developmental disabilities (Testworks, Donggubat), environmental issues (Triple Planet, Root Energy), and youth problems (Jump Foundation) are all important issues, but value assessments can vary greatly depending on individual circumstances. With various social enterprises traded simultaneously in the market, information exchange and value evaluation will occur, ultimately enabling social performance evaluation through a democratic measurement method based on the collective intelligence of market participants.

Third, through coin trading, the general public can easily participate in financially supporting social enterprises’ activities. Voluntary participation leads to awareness of the company’s business and social contributions, creating a mutually reinforcing effect between consumers and companies, thereby expanding the impact ecosystem further. Conversely, companies not supported by positive social value will naturally be eliminated from the market.

The author believes that the technical infrastructure for securing funding and establishing a compensation system for social enterprises using the cryptocurrency market is already sufficient. What is needed now is timely government regulation and the execution will of the cryptocurrency community.

Kyuil Kim, Professor, Department of Economics, Michigan State University