Page 43 - Sustainability and entrepreneurship for CSO's and CSO networks Cambodia 1 November 2018

Social enterprise
Today, many CSOs develop earned income strategies to become independent, sustainable or to create better impact. Earned income is an important prerequisite for CSO sustainability. Earned income is a new challenge for CSOs, and it could work when choosing for services and products that require training, specific expertise or investments that cover a niche. Earning income requires entrepreneurial skills and an entrepreneurial spirit, which is in general hard to find in CSOs. Best is to separate your business, and social mandates in two different entities, with delegated responsibilities to the respective directors. Develop business activities close to what you can do and what you are good at. Keep in mind that earning money by doing business really means doing business: you need an entrepreneur to lead the business with one main assignment: to make money. Profit together with a social mandate may not work when you compromise on productivity when engaging people that cannot keep up with the requirements needed to make a profit. With a growing middle-class in Cambodia food security and green lifestyle products may be interesting entry points to start a social enterprise. Corporate Social Responsibility (CSR) movement among entrepreneurs and consumers caring for profit, planet and people (triple P) is growing in Cambodia. Entrepreneurs are aware that selling products is selling a lifestyle. They know that customers want to buy feel good products and can anticipate by emphasising the companies’ care for the planet. Their products come with a care-for-nature-feeling. CSOs are CSR organisations par excellence. They care for people, for rights, for environment, education and health. They employ disabled and encourage children to study. That already is a great contribution to society, but it has never been marketed as such.
Social Enterprise Cambodia gives you many suggestions and tips how to start a social enterprises: http://socialenterprisecambodia.org/#about
The Cambodian law stipulates that charitable activities and charity-linked activities are tax-exempt. In theory, a CSO can have commercial activities without paying taxes provided that these activities are directly linked with its mission. For example: a restaurant focusing on food&beverages, vocational training for the cook and waiters might be granted a tax-exempt status. The closer the activity is to the core mission of the CSO, the more likely it is to be tax-exempted. But this is only the theory. In practice, it depends on how the ministry officials of the tax department interpret the law. Instead, social entrepreneurs have to decide whether to operate their enterprises as a company or as an CSO. A possible better solution is that the CSO board, establishes a social enterprise as Ltd. and makes sure the enterprise can make profits. The shareholder, which is the CSO, will then decide to invest the profits in the CSO. As a matter of fact there will be two different entities: the CSO with its social mandate, run by CSO staff, and the company with a commercial mandate, run by experienced business people.
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