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Estimating the Size and Structure of the Social Enterprise Sector in Japan Compared with the UK

Tue, July 16, 12:00 to 1:30pm, TBA

Abstract

1. Introduction
Social enterprises have played more and more important roles in Japanese civil society. However, information on the economic size and structure of the social enterprise (SE) sector is very limited, except for the report on the estimated economic size of the social enterprise sector commissioned by the Cabinet Office of the Japanese government. In this paper, we utilize basically the same set of definitions of social enterprise and then apply these to estimate updated the size of the social enterprise sector.

2. Revisiting the definition of social enterprise
According to the report, it must meet all the following seven criteria, to be classified as a social enterprise. Even though a part of the definition is not necessarily clear-cut, we would like to keep using this set of operational definitions to estimate the size of the social enterprise sector. Selected conditions are as follows: 1) The enterprise should have mainly social or environmental aims. 2) It should agree that it is a business with primarily social/environmental objectives, not with the pursuit of profit. 3) It should agree that it is a business whose surpluses are principally reinvested for that purpose in the business or community rather than mainly being paid to shareholders and owners. (only applied to for-profit corporations). 4) It should not pay more than 50 percent of profit or surplus to owners or shareholders 5) It should not generate less than 50 percent of income from trading.

3. Estimating the size of the social enterprise sector
The economic size of the social enterprise sector was estimated with a new dataset. We found that the paid employment by SEs was 6,724 thousand, which accounts for 10.1% of Japan’s total employment in 2021. The total annual operating revenue by SE in 2021 was JPY73.5 trillion (equivalent to approximately USD 565 billion), a 21% increase from 2014. Value added generated by SEs by type of corporations is shown in Table 3. The total value added by the SE sector was JPY 20.1 trillion (equivalent to approximately USD 155 billion), which accounts for 3.7% of Japan’s nominal GDP (JPY 549.4 trillion) in 2021. Comparing with the estimated size of the social enterprise sector in the UK based on DCMS (2019), we found that Japan has a much larger social enterprise sector than the UK.

4. Policy implications
We would like to suggest the following policy proposals. 1) Since social enterprises are not easily visible in economic and trade statistics, it is useful to flag if an entity is a social enterprise in the business establishment census. 2) Since social enterprises are not properly set in the System of National Accounts (SNA) statistics, producing a satellite account on social enterprises can be useful to make this sector visible. 3) Many organizations operate multiple activities or business units. In the case of hybrid organizations like social enterprises, should we include an organization as a whole or only a social business unit in the extended third sector? The choice of analytical unit has become important since organizational hybridity could widen the differences between the organization and the activity.


References for Paper 1
Cabinet Office, 2021, Survey on Specified Nonprofit Corporations 2020 (in Japanese).
https://www.npo-homepage.go.jp/uploads/R2_houjin_report.pdf
Cabinet Office, 2015, A Report on the Aggregated Activity Size of Social Enterprises in Japan, Mitsubishi UFJ Research and Consulting (in Japanese, but an English abstract is available).
https://www5.cao.go.jp/kyumin_yokin/shingikai/sanko/shiryou_3_3.pdf
Department for Digital, Culture, Media and Sport (DCMS) and Department for Business, Energy and Industrial Strategy, 2021, Social Enterprise: Market Trends 2019.
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1101560/Social_Enterprise_Market_Trends_2019_-_Middlesex_University.pdf
Kerlin, Janelle A., 2010, A comparative analysis of the global emergence of social enterprise, Voluntas 21: 162-179.
Salamon, L. M., & Sokolowski, W.,2016, Beyond nonprofits: Re-conceptualizing the third sector. Voluntas 27, pages 1546–1561.
Yamauchi, Naoto, 2016, Commentary on Re-conceptualizing the Third Sector from Japanese Viewpoints, in Voluntas Symposium: Comments on Salamon and Sokolowski’s Re-conceptualization of the Third Sector, Jacques Defourny, Kirsten Grønbjerg, Lucas Meijs, Marthe Nyssens & Naoto Yamauchi, Voluntas, volume 27, pages1546–1561.

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