A research study has found that the Social Progress Credit (SPC), a social impact incentive program proposed by SK Group Chairman Chey Tae-won, can improve both the social and economic performance of social enterprises.
The findings suggest that rewarding companies in proportion to the social value they create can encourage them to pursue greater social impact while also strengthening their financial sustainability.
The Center for Social value Enhancement Studies (CSES) said on July 23 that research supported by the organization was published in the June issue of Computational and Mathematical Organization Theory, an international academic journal indexed in the Social Sciences Citation Index (SSCI).
The study, titled "Responses of Dual-purpose Organizations to Economic Compensation: an Agent-based Model Approach," was conducted by Kim Sang-jun, a professor at Ewha Womans University’s School of Business.
The SPC is a performance-based incentive program that measures the social value generated by social enterprises in monetary terms and provides financial rewards based on the level of social impact created.
Chey first proposed the concept at the World Economic Forum in Davos in 2013 as a policy tool for addressing social challenges. He has emphasized that companies can be encouraged to participate continuously in solving social problems when social value is objectively measured and rewarded through market-based mechanisms.
Based on this approach, CSES has operated the SPC program since 2015, measuring the social performance of participating companies and providing incentives based on their results.
The latest study used data accumulated through the SPC program to examine how performance-based compensation affects the social and economic outcomes of social enterprises.
Researchers first conducted in-depth interviews with 23 social enterprises participating in the SPC program to understand their characteristics and decision-making processes. They then categorized the companies into four types based on their social and economic performance: early-stage organizations with low performance in both areas, socially oriented organizations, economically oriented organizations, and hybrid organizations that pursue both objectives.
The researchers subsequently created 4,000 virtual companies, with 1,000 representing each category, and used an agent-based model to simulate changes in corporate decision-making and performance over a seven-year period under an SPC compensation system.
The results showed that all types of social enterprises receiving SPC incentives experienced improvements in both social and economic performance.
According to the study, financial rewards linked to social value creation strengthened companies’ motivation to generate social impact, leading to improved social performance. Higher social performance then resulted in additional incentives, expanding the resources available to the companies. Those additional resources could subsequently be reinvested to improve both social and economic performance.
The researchers described the process as a virtuous cycle in which improved social performance leads to greater compensation, expanded resources and further performance improvements.
The study also found that the SPC had the strongest impact on early-stage social enterprises with low levels of both social and economic performance. The findings suggest that performance-based incentives can serve as an important catalyst for companies with limited resources and weak business foundations, helping them establish the conditions needed for sustainable growth.
The research is drawing attention in the social enterprise sector as it suggests that policy support could go beyond conventional subsidies or one-time financial assistance. By objectively measuring social value and linking it to economic rewards, policymakers may be able to encourage social enterprises to strengthen their social missions while simultaneously improving their ability to remain economically viable.
Industry observers say the findings could also contribute to discussions on developing more sustainable support systems for social enterprises. In particular, the study offers evidence that a compensation mechanism based on measurable social outcomes can influence corporate decision-making and resource allocation, potentially providing a policy framework for fostering sustainable growth in the social economy.
"Social enterprises have the distinctive characteristic of constantly balancing social and economic performance," said Kim Sang-jun, professor at Ewha Womans University. "This study demonstrates through simulation that social impact-based compensation, such as the SPC, can strengthen companies’ motivation to create social value and establish a virtuous cycle in which improved social performance leads to better economic performance."
Na Seok-kwon, president of CSES, said, "It is highly meaningful that the SPC data accumulated by the center has contributed to research published in an international academic journal."
"We hope that the finding that the SPC can improve both the social and economic performance of social enterprises and support sustainable growth will serve as important policy evidence in future discussions on institutionalizing the system," he added.
Meanwhile, data collected or supported by CSES has been used in approximately 130 studies, including papers published in domestic and international academic journals, books and dissertations.
