A "social enterprise" is a business that pursues a business model oriented toward solving social problems. Possessing characteristics of both for-profit and nonprofit organizations, social enterprises differ from for-profit companies—which serve the goal of generating profits for shareholders and owners—in that they are operated as organizations that prioritize public benefit, such as providing social services and supporting vulnerable populations. As the representative form of enterprise in the social economy, a social enterprise is defined by South Korea's "Social Enterprise Promotion Act" as "a business entity certified by the Minister of Employment and Labor that engages in commercial activities such as the production and sale of goods and services while pursuing social objectives, such as enhancing the quality of life for local residents by providing social services or jobs to the disadvantaged."
Considering the significance and context of social enterprises, their origins can be traced as far back as the 1800s, but the approach to social enterprises in the form we know today dates to the 1970s and 1980s. Research by scholars such as Bill Drayton, who founded the Ashoka Foundation in the United States in 1980 to support innovators in civil society areas such as education and human rights, drew attention to the concept of social enterprise. In South Korea, as the 2000s brought the structuralization of jobless growth and rising demand for social services, concrete discussions on social enterprises as a model for job creation and the provision of quality social services through nonprofit corporations and organizations gained momentum, resulting in the establishment of the Social Enterprise Promotion Act in 2007. To operate a business as a social enterprise, certification must be obtained from the Ministry of Employment and Labor in accordance with the Social Enterprise Promotion Act, and the following requirements must be met.
1. The organization must take a form prescribed by Presidential Decree, such as a corporation or association under the Civil Act, a company or limited partnership under the Commercial Act, a corporation established under a special act, or a nonprofit private organization.
2. It must employ paid workers and engage in commercial activities such as the production and sale of goods and services.
3. The realization of social objectives—such as enhancing the quality of life for local residents by providing social services or jobs to the disadvantaged or by contributing to the local community—must be the organization's primary purpose. The specific criteria for this shall be prescribed by Presidential Decree.
4. It must have a decision-making structure in which stakeholders, such as service beneficiaries and workers, participate.
5. Revenue generated through commercial activities must exceed the threshold prescribed by Presidential Decree.
6. It must have articles of incorporation, bylaws, or equivalent documents as required by the Promotion Act.
7. If distributable profits are generated in a given fiscal year, at least two-thirds of such profits must be used for social purposes (applicable only to companies and limited partnerships under the Commercial Act).
8. It must satisfy other operational standards prescribed by Presidential Decree.
According to the Korea Social Enterprise Promotion Agency, social enterprises in South Korea are classified into five types: job creation type, which supports employment for the disadvantaged; social service provision type, which supports social services for the disadvantaged; community contribution type, which contributes to improving the quality of life for local residents; mixed type, which simultaneously provides both jobs and social services to the disadvantaged; and other (creative/innovative) type, which requires separate deliberation as it is difficult to determine its primary purpose solely by the standard criteria.
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