Social enterprises run by and for their communities, integrate social, economic, and environmental goals into their business models. Prioritising the "Triple Bottom Line" - social, economic, and environmental benefits, these organisations not only seek financial success but also reinvest profits to drive positive change.1
As economies worldwide increasingly recognise the importance of social responsibility and sustainable development, the role of social enterprises becomes ever more vital. In the context of Vietnam, this paper delves into the regulatory landscape of social enterprises in Vietnam, exploring the practical implications, inherent challenges, promising prospects, and viable solutions within this dynamic economic context.
I. AN OVERVIEW OF REGULATIONS GOVERNING SOCIAL ENTERPRISES IN VIETNAM
The Notion of Social Enterprise
The notion of social enterprise was officially recognised under Vietnam's Enterprise Law 20142 . A social enterprise is not defined as a distinct company structure under this law; rather, it serves as a designation bestowed upon any legally permissible company structure outlined under the Enterprise Law 2020 (including limited liability company, corporation, sole proprietorship or partnership) that commits to pursuing social and environmental objectives. Hence, a social enterprise has all the characteristics, functions, rights, and obligations of a typical enterprise, alongside preferential rights and obligations vested in social enterprises as follows:3
| Preferential Rights | Unique Obligations |
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Application For The Social Enterprise Designation
"To apply for the social enterprise designation, a company is required to specify and register social or environmental matters that the company commits to addressing"
To apply for social enterprise designation, the company must submit an application to the local Department of Planning and Investment. This application must contain a Commitment to the Implementation of Social and Environmental Objectives (referred to, in short, as the Commitment), under which a company is required to make the following pledges:
Firstly, an undertaking to tackle its registered social and environmental matters for the sake of the community. The company must specify each social or environmental matter that the company aims to address. For each listed matter, the company must describe the business strategy and methodologies the company will adopt to tackle the social or environmental matter that it commits to resolving. As required by law, the description should specifically identify the company's relevant products and services, the source of profit, measurable targets to assess social and environmental impact through qualitative and quantitative indexes, beneficial groups, and rationale for the positive social and environmental outcomes stemming from such business activities. All the social and environmental matters specified by the company in its application for social enterprise status will become the company's registered objectives that the company must carry out.
Social enterprises must commit to retaining at least 51% of the company's annual EAT to reinvest in their registered social and environmental objectives
Secondly, an undertaking regarding the Commitment implementation timeframe. The company has the option to choose between an indefinite or definite timeframe. If a definite timeframe is chosen, the company must specify the start and end dates.
Thirdly, an undertaking to retain at least 51% of its earnings after tax (EAT) to reinvest in the registered objectives. The company must specify the proportion of annual EAT (in case the company successfully generates EAT) to reinvest in the registered objectives.
Fourthly, an undertaking regarding handling outstanding sponsored funds or other financial aids. The company must establish principles and methodologies governing handling such funds upon its dissolution or the expiration of the commitment implementation timeframe.
After the application for social enterprise status is approved, the company's Commitment will be published in the National Business Registration Portal of Vietnam.
Footnotes
1 Freer Spreckley, "Social Audit: A Management Tool for Co-operative Working", 1981
2 Enterprise Law no. 68/2014/QH13 of the National Assembly dated 26 November 2014
3 Article 10.2.(a) and 10.2.(b) of Enterprise Law no. 59/2020/QH14 of the National Assembly dated 17 June 2020 (Enterprise Law 2020)
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