Sustainability is key for the future of a company. Social enterprises, better known as “good companies” in Korea, are no exception. Management of social enterprises has to develop a sustainable business model ahead of making other business decisions.

According to the law on social enterprise promotion, a social enterprise in Korea is defined as a company that, while doing its business activities, pursues a social purpose of enhancing the quality of people’s lives by providing social services and creating jobs for the socially and economically disadvantaged.

The number of social enterprises in Korea dramatically increased to 723 at the end of November this year, a steep rise from 50 in 2007 when the law went into effect, but in reality, there are few social enterprises standing on their own without support from the government.

Regarding the gap between quantity and quality of a social enterprise, Poseco Housing president Park Sae-kwang says, “It is because most social enterprises put less time on developing a sustainable business model for future growth.”

Poseco Housing, an eco-friendly steel house construction company, was established in 2009 as the first social enterprise of POSCO, the nation’s steel giant. The company has grown into a model social enterprise in three years, achieving 15 billion won ($13.9 million) in sales in 2012 by supplying eco-friendly steel houses and steel-based construction materials in and out of Korea.

The number of socially and economically disadvantaged employees, including physically challenged and foreign workers, has increased to 34, which is 62 percent of the total full-time workforce.

“Socially and economically challenged employees tend to have greater loyalty to the company than other colleagues,” Park said.


Sustainable business model development

Behind the success of Poseco Housing is a sustainable business model and continued investment in technology along with rising demand for steel houses.

“Back in 2009, the top priority of the committee, launched to create POSCO’s first social enterprise, was finding a business model to seek sustainable growth,’’ Park said.

The committee found an answer in steel housing technology through research into POSCO’s resources and technologies. POSCO invented the eco-friendly steel house building technology in the 1990s and opened the technology to the public. Interest in the technology, however, fell rapidly due to a lack of profitability in steel house construction.

Continued advancement of technology changed the business environment for the industry.

“Demand for renewable, energy-efficient and long-lasting steel houses is expected to be restored domestically and globally as they are not so expensive to build,” Park said.

Furthermore, Poseco Housing applied the “modular system architecture” of POSCO A&C to the construction of steel houses, which shortens the construction process by up to 50 percent. The company manufactures modules with steel in its plant and transports them to the building site and assembles them.

“We have used steel-based modular buildings for construction projects linked to social contribution nationwide, such as classrooms in rural areas, child-care centers and centers for senior citizens.

“As far as I know, we are the only social enterprise to have a technology research center. I believe continued investments in research and development are also critical for sustainability of a social enterprise.”

Challenged by the prolonged slump in the domestic construction market, the company is endeavoring to expand its market share overseas.

“One of the target overseas markets is disaster-resistant house construction projects, in which steel houses have a competitive advantage. We are keeping a closer look at construction opportunities in disaster-prone areas in the world and the U.N. procurement projects,” Park said.


Vision for social enterprises

Park experienced an array of difficulties in nurturing Poseco Housing as a social enterprise in Korea.

“For the past three years, social enterprises have proven their potential to help improve deep-rooted social issues, including unemployment of the disadvantaged. “However, it takes more time for social enterprises to take root in Korea,’’ Park said.

“What is most needed is for the government’s promotion policy to become more practical and specific. It would be more effective if the priority of the policy was put to support social enterprises to stand on their own feet rather than to extend their lifelines by offering temporary financial support like tax benefits,” he added.

“For instance, it would be helpful if social enterprises could get an equal footing in bidding for public projects,” he said. 


Park Sae-kwang

•Graduated from Yeungnam University with major in architecture engineering in 1977

•Attained a master’s degree in technology management from Pohang University of Science and Technology in 2006

•Served POSCO between 1984 and 2009

•Appointed president of Poseco Housing in 2009

•Enjoys reading management-related books and listening to music

By Seo Jee-yeon  (jyseo@heraldcorp.com)