Page 242 - Social Enterprise A New Business Paradigm for Thailand

Gleißner, Günther, and Walkshäusl (2022) also propose two dimensions for measuring financial
sustainability: (1) the value dimension and (2) the risk dimension. These are evaluated through
the following criteria: (1) the organization’s genuine growth, that is, its ability to withstand

financial strain or scale down operations during expansion without incurring significant
negative impacts; (2) the probability of the organization’s long-term survival; (3) the
appropriateness of its overall risk level; and (4) the characteristics of risks and returns that affect
the organization’s equity. These scholars emphasize two closely related dimensions, value and
either continuity or risk, as critical for strengthening an organization’s financial position in a
sustainable way, ensuring its survival or keeping risks within manageable bounds.

In this chapter, financial sustainability is assessed through the financial performance of social
enterprises, using accounting-based indicators as the primary measurement tools. A detailed
examination of financial performance will be presented in the subsequent sections.

8.1.1 Performance of Social Enterprises

Social enterprises possess the ability to address social issues affecting target groups that
government agencies either cannot reach or can support only in limited ways. However, many
social enterprises operate with low-risk business models that fail to generate sufficient income,
thereby hindering their ability to achieve their social objectives (Bugg-Levine, Kogut, &
Kulatilaka, 2012). This challenge became especially pronounced during the COVID-19 pandemic,
when many social enterprises experienced liquidity and cash flow shortages due to reduced
donations and fundraising. In the aftermath of the crisis, these enterprises must not only

recover but also continue supporting marginalized target groups, making policy, social, and
financial support more critical than ever (Farhoud, Shah, Stenholm, Kibler, Renko, & Terjesen,
2021).

The performance of a social enterprise refers to its ability to achieve defined objectives and to
enhance outcomes in alignment with those goals. Assessing this performance involves
evaluating the organization’s outputs or observable behaviors, which are reflected in its
products and services, business value, scale of operations, financial data, or social impact.
Before assessing the performance of social enterprises, it is essential to understand how they

generate income. The primary aim of income generation is to ensure sufficient resources, such
as personnel, funding, knowledge, and products, are available to fulfill both economic and
social objectives. Social enterprises typically derive their revenue from two main sources: (1)
traditional sources, including donations, welfare funds, and government subsidies; and (2)
market-based sources, which involve selling goods and services to customers in the
marketplace (Kannampuzha & Hockerts, 2019).

Social enterprises vary in their priorities. Some place greater emphasis on social returns,
pursuing investments aimed primarily at achieving social outcomes (social return on investment:

SROI). Others prioritize financial returns (return on investment: ROI), focusing more on
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