ESG (Environmental, Social, and Governance) management led by large companies is rapidly spreading to small and medium-sized enterprises, ventures, and startups. The European Union plans to require companies to report ESG management from 2024, and our government recently announced K-ESG guidelines and ESG venture investment standards one after another. Large companies are boldly reorganizing partner supply chains from an ESG perspective. A series of macro-trends require active social value creation at the present time rather than the gradual introduction and transformation of ESG by small and medium-sized enterprises and venture companies. This clearly acts as a burden for small and medium-sized enterprises with limited business scale and budget.
However, there are also companies that have gained an advantageous position in ESG management because they are inherently closely linked to the realization of social value. It's a social economy enterprise. Korea institutionally defines four types of social economy enterprises: social enterprises, cooperatives, village enterprises, and self-supporting enterprises. According to statistics from the Social Enterprise Development Agency, the number of established social economy enterprises in Korea increased rapidly from about 160,000 in 2017 to surpassing 280,000 in 2021. It is expected that the social economy ecosystem will continue to expand with the advent of the ESG era in the future.
In the case of a certified social enterprise, which is one of the representative types of social economy enterprises, social value creation goals and results are disclosed on an autonomous disclosure system. In terms of governance structure, the composition of the board of directors, holding status, and equity structure can be confirmed, and from a social value perspective, social services and product sales status, employment of vulnerable groups, and social returns are disclosed in detail. In a way, social enterprises are already implementing ESG management reports at the SME level. If so, are these social economy companies' sustainable management practices actually leading to enhanced business competitiveness?
There are various support projects from public and private institutions on the market to promote social value creation of small and medium-sized enterprises and induce a soft landing of ESG management. I often review the company status and business performance of various startups, social ventures, and social economy companies that have applied for support programs as judges. Through the screening process, social economy enterprises and other business groups are compared based on objective standards, and I often see cases where social economy companies receive lower evaluation scores than general small and medium-sized enterprises or start-ups and are not selected for support projects.
What's the problem? The social values that social economy companies pursue were clear, but I think this is because there are few solid business models that can distribute that value to the market or technology development activities that can innovatively multiply the size of value. I think the opinion was reflected that no matter how high the value represented by a company is, it is useless without business and technical skills that can visualize it as a significant market impact. From an ESG perspective, the ability to generate profits and growth potential as a company is still as important as social value.
“Greenwashing” and “ESG washing” companies that disguise themselves by not creating social value or implementing sustainable management at all are also a problem, but it is also dangerous to only emphasize value and neglect financial or technical performance. I think this is a problem that social economy companies need to solve. The ESG era may be a paradox for social economy enterprises. General small and medium-sized enterprises, ventures, and startups that have overlooked social values join the social economy ecosystem by implementing ESG management. Social economy companies must now compete with them.
ESG management is a means to achieve sustainable corporate growth. The argument is that if value creation from an environmental, social, and governance perspective does not go hand in hand, the economic growth of a company cannot be sustained. I think the opposite is also true. Social value creation is also difficult to sustain if a company's financial or technical performance is not supported. It is hoped that social economy companies will gain wings in the upcoming ESG era by being reborn as an “Ambidextrous Organization” (Ambidextrous Organization) that can simultaneously achieve both “social value” and “economic performance.”
[Money Today Startup Accelerating Media Platform Go to 'Unicorn Factory']
