Defining social enterprises: main challenges and a way forward

Carlo Borzaga
University of Trento-Euricse

November 7th Riga, Latvia

Conceptual puzzlement
Multiplication of definitions with social suffix next to typically economic concepts:

o Some are new concepts:

Social Capital Social Entrepreneurship Social Business Social Enterprise Social Innovation

o Other revivals:
Social Economy

o Confusion calls for clarification

Conceptual puzzlement
Key concepts:

Social Economy Social Entrepreneurship Social Enterprise

Social Economy
French concept in origin, used also as a synonym of Third Sector Refers to collective organizations, democratically managed, set up and managed by stake-holders other than investors with the aim of benefiting members and sometimes the entire community Associations: wide category that comprehends also organizations that play non-economic roles (advocacy and participation) Coops: enterprises engaged in the production of goods and services in the interest of their members; ownership rights assigned to a specific category of agents other than investors Mutual aid societies: enterprises aimed at ensuring members against work disability, old age, sickness

Foundations: legal entities created to accomplish specific goals for the benefits of a specific group of people or of the community at large
Concept increasingly applied to countries that lack a consolidated social economy history

Social Economy changing role

Up until the 1970s, Social Economy organizations were confined to play a minor role in the socioeconomic model based on the interaction of the private (Market) and public sectors (State) From the 80s, following the crisis of the bipolar model and the decreasing ability of the public institutions to provide social and general interest services, in several countries some Social Economy organizations gained a more relevant role and went through an evolution
Associations stregthened their entrepreneurial stance Cooperatives stregthened their commitment towards the community

Social Entrepreneurship
Refers to a trend Covers a broad range of activities falling along a continuum Emphasis on extraordinary individuals Comprehends social initiatives of profitseeking businesses; practices that yield social benefits; entrepreneurial trends in non-profit organizations up to ventures developed within the public sector

Social enterprise
Developed to grasp new dynamic occuring within and beyond the Social Economy Social enterprises evolved both: o From old Social Economy organizational forms following their commitment in new activities addressed also to non members o As new types of enterprises explicitly aimed at pursuing social goals In Europe, a gradual convergence towars a common definition of social enterprise has taken place over the last years

Main dimension Entrepreneurial/ economic dimension

Defining social enterprise

General definition Social enterprises (SEs) are engaged in the carrying out of stable and continuous economic activities, and hence show the typical characteristics that are shared by all enterprises. The social dimension is defined by the aim and/or products delivered. Aim: SEs pursue the explicit social aim of serving the community or a specific group of people that shares a specific need. By promoting the general-interest, SEs overcome the traditional owner-orientation that typically distinguishes traditional cooperatives. Product: when not specifically aimed at integrating disadvantaged people to work, SEs must deliver goods/services that generate a beneficial societal impact. To identify needs and involve the stakeholders concerned in designing adequate solutions, SEs require peculiar ownership structures and governance models that are meant to enhance at various extents the participation of stakeholders affected by the enterprise. SEs often limit the distribution of profits. The non-profit distribution constraint is meant to ensure that the general-interest is safeguarded. The non-profit distribution constraint can be operationalized in different ways.

Social dimension

Inclusive governanceownership dimension (social means)

EU Definition
According to the definition of the European Commission a social enterprise operates by providing goods and services for the market in an entrepreneurial and sometimes innovative fashion and uses its profits primarily to achieve social objectives. It is managed in an open and responsible manner and, in particular, involve employees, consumers and stakeholders affected by its commercial activities (COM(2011) 682; Brussels, 25.10.2011)

Regulating social enterprise

Social enterprises (as previously defined) exist also if the legal environment is not fully enabling However, evidence from EU countries corroborates that law is a pre-condition for the adoption of other policy measures Importance of legal regulation highlighted by EC
Improving legal environment among the actions to be taken to promote social enterprises, COM(2011) 682 final, Social Business Initiative

Why is a law on social enterprise important?

Organizational law is essential to distinguish social enterprises from business organizations
o It recognizes the specificity of social enterprise and contributes to giving them a clear, precise and easy-toconvey identity

The definition of the identity of social enterprise by law permits to:

o Design and implement specific public policies for SEs, including measures under tax and public procurement law o Protect social enterprises stakeholders o Avoid abuses of the social enterprise brand o Set clearly the boundaries between social enterprise and other concepts (e.g. CSR)

How are social enterprises regulated across Europe?

Social enterprises can be regulated in one or more of the following ways: o Existing legal forms o Adaptation of existing legal forms o Introduction of social enterprise legal brands o Introduction of specific types of non-profit organizations (e.g. non-profit institute in Slovenia) A few countries have introduced a general legislation on Social Economy

Adjustement of existing legal forms

Country Italy Spain Legal form Social cooperative Social coop society Law/year 381/1991 National law 27/1999 and regional laws in 12 autonomous regions (19932003) Activities Social services (a-type); Work integration (b-type) Assistance services in the fields of health, education, culture, or any activity of a social nature Work integration

Labour integration coop society Portugal Social solidarity cooperatives Socit cooperative dinteret collectif Social cooperative

Cooperative Code (Law 51/96, 1996) and legislative decree 7/98 1998) Law 17 July 2001

Work integration of vulnerable groups Performs general-interest activities

France

Poland

Law on social cooperative 2006 Law 4019/30-9-2011 on Social Economy and social enterprises

Work integration of a wide category of disadvantaged workers Engagement in three fields: i)work integration; ii) social care; iii) services that satisfy collective needs/local development Create work opportunities and improve other social needs of disadvantaged members

Greece

Social cooperative

Hungary

Social cooperative

Law 2006. X.

Recognition through legal brands

Social enterprise legal brands have been introduced in selected countries (Belgium, UK, Italy) several/all legal forms can become social enterprises provided that they comply with key criteria
o o o o social enterprise in Italy; community interest company (CIC) in UK; socit finalit sociale in Belgium, social enterprise in Slovenia etc.

Data: Social Economy organizations (CIRIEC, 2012)

Data: Social Economy employment share (CIRIEC, 2012)

Key facts: social enterprises in Italy

Since approval of Law 381/1991 annual growth rate from 10 to 20% in 1993: 1,479 social coops (National Cooperative Department) in 2003: 6,159 (ISTAT) in 2005: 7,363 (ISTAT) 59% A-type; 32.8% B-type; 8.2% mixed or consortia In 2011 (Unioncamere): 12,647 social cooperatives, with 513,000 people employed more than 30,000 disadvantaged workers integrated more than 4,000,000 users more than 10 million euros turnover

Key facts: social enterprises in the UK

Number of CICs registered in 2005-2012: 7,891 98% of applications to become a CIC processed in CIC Office within 72 hours (2012-2013 CIC Annual Report) Main sectors of activity (90% of CICs):
o o o o Real Estate, Renting &Business Education Health and Social Work Other Social or Personal Service

20% increase in CICs on the public register (2012-2013) annual turnover at least 1 billion annually

Main fields of activity

Social services

Work integration
New fields of interest for the community (e.g. local development; cultural services; social farming; general-interest services..)

Closing remarks
Social enterprises have first emerged in the welfare sector Over the last years, expansion in new fields of interest to local communities Unexploited potential of social enterprises especially in new member countries Key factors contributing to social enterprise development o Adequate legal/fiscal framework o Networking within and among the families of the social economy o Clear partnerships with public authorities o Research

Thank you for your attention!

www.euricse.eu