EESC hearing 110728
EESC looks at the human side of social entrepreneurship
At its hearing on 28th July 2011, the European Economic and Social Committee opened up the current policy debate on social entrepreneurship to the people who are actually doing it – the social economy. Perhaps it has countered the risk that the Commission’s communication, when it is published in the autumn, will look too much at the financial aspect and too little at the human one.
Swedish rapporteur Ariane Rodert had prepared a background paper which cut a swath through the conceptual jungle by describing social enterprise as the central part of a continuum, which ranges from voluntary organisations at one end to CSR at the other, with charities with trading subsidiaries, social enterprises (including social firms) and social businesses in between. Ms Rodert distinguished social enterprises, being essentially non-profit-distributing, from social businesses, which she described as “businesses with a social profile”. She cited the example of the Body Shop, which is stock-market quoted and owned by Oréal. As for social entrepreneurs, they are simply the people inside the social enterprises.
She outlined five areas for EU action:
- an enterprise policy for social enterprises
- creating a social investment market (e.g. hybrid capital)
- modernising public financing (public procurement, state aid etc.)
- the support system (business development, premises, education & training)
- awareness (label, research, observatory, impact measurement)
Alain Coheur, President of Social Economy Europe, made the essential point that social economy enterprises are based on the primacy of the person over capital. Society’s problems cannot be remedied by individual entrepreneurs, he said: this requires the size and organisation of the social economy. An added virtue is its multistakeholder model: it involves its users, rather than treating them as passive consumers. It was a point echoed with elegant simplicity by Patrick de Bucquois of CEDAG, the EU federation of associations, who said it is difficult to reconcile the non-profit-distribution criterion with the role of shareholder companies. Granted that there is a continuum, but there is still a very big distinction between enterprises that are owned by people and private equity in search of short-term profits.
The Commission communication
The majority of speakers showed some unease with the position the Commission seems to be taking. Emmanuel Vallens, the policy co-coordinator at the Internal Market DG, said he was still in a phase of listening. This resulted, as one committee member put it, in a very good crescendo but a disappointing finale.
Mr Vallens devoted a good deal of time to describing the motivations for the Social Business Initiative – the Europe 2020 strategy promotes inclusive growth and, as a response to the financial crisis, wants to rebalance the single market so that everyone is a winner. When he started discoursing on the benefits of competition, the chair, Brenda King, cut him off. Between times, he explained that a communication on social entrepreneurship is to be published in the autumn, in parallel with one on CSR. It will include the social economy in such matters as the European statute for foundations, which will facilitate such matters as cross-border tax relief on donations and mergers between foundations. It views social entrepreneurship as a matter of activity not statutes. It recognises the great diversity of social enterprises/businesses, but sees them as sharing two principles. The first is the primacy of a social objective. Secondly, profits must not be distributed to shareholders (if any). A variant would be where investors give up a significant share of their dividend in order to achieve a social objective (as is the case of Triodos Bank, which was presented later in the hearing).
Further detail on the shape of the future communication came out in response to questions:
- The Commission will carry out studies on the issue of a label for social enterprises: options on the table include mutual recognition, an EU certification system and a database;
- A formal stakeholder consultation procedure will be set up – and it will take in not only social enterprises themselves but also actors who need to know more about them, such as banks and public authorities;
- The way the Structural Funds are used might be influenced through the process of ‘conditionality’ – using them as a lever to achieve the Europe 2020 objectives (for instance a region might be required to have a social enterprise strategy in place before it could receive funding);
- On the interplay between state aid and SSGIs, the watchwords will be proportionality and flexibility.
Social entrepreneurs under our noses
The absurdity would be if the Commission, in its restless search for innovative solutions, was to ignore what is beneath its very nose. Bruno Roelants, Secretary General of CECOP, told the story of social co-operatives in Italy, which have grown from 1,000 in 2001 to 7,000 in 2005 and 14,000 today. They are by far Italy’s largest provider of care services and jobs for disadvantaged people. How did they do it? – Romanian committee member Ana Bontea asked. The co-operative movement invested the resources to set the ball rolling, the legal framework for multi-stakeholder co-operatives was agreed, the consortium system enables ‘strawberry patch’ replication, there are sector-specific financial instruments, and finally there is no shortage of demand for care and inclusion services. The result is a strongly entrepreneurial, innovative and non-indebted sector.
It’s a sector that is intensely involved in delivering services of general interest and social services of general interest, and anxiously awaits the adoption of a regulatory framework.
The importance of a European policy to promote social enterprises was shown by Ionut Sibian, another EESC member from Romania. As his country has no support policy for social enterprise, it relies on the Structural Funds, especially in areas such as Roma integration.
As inevitably happens whenever social enterprise is mentioned, a good deal of time was spent discussing definitions. Rafael Chavez from CIRIEC suggested that the EESC would benefit from adopting a clear definition of social enterprise, but Jef Tavernier of FEBEA asked why the committee was not using the definition drawn up by the European Parliament at the time of the Toia report two years ago. EESC opinions are very limited in length, and so the rapporteur seems likely to focus on those three areas where most of the interested organisations converge:
- the primacy of a social objective
- no or limited distribution of profit to investors
- democratic decision-making
Mr Chavez also set out the scope of recent Spanish and French laws on social enterprise, which cover not only the definition, but registration, statistics, a development policy and recognition as a social partner. As regards conceptual recognition, he described the two main clusters of Member States: whereas Spain, Portugal, France, Belgium and Ireland are strong on social economy, the UK, the Netherlands and Finland are stronger on social enterprise.
EESC working document INT/589 on Social Entrepreneurship: http://www.toad.eesc.europa.eu/AgendaDocuments.aspx?pmi=ha5jDW%2bOWSEChPsrVwre%2fQpLYK1u0DaeoJJ4tL7WYIw%3d
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Excerpt from Toia report:
- J. whereas the social economy gives prominence to a business model that cannot be characterised either by its size or by its areas of activity, but by its respect for common values, namely, the primacy of democracy, social stakeholder participation, and individual and social objectives over gain; the defence and implementation of the principles of solidarity and responsibility; the conjunction of the interests of its user members with the general interest; democratic control by its members; voluntary and open membership; management autonomy and independence in relation to public authorities; and the allocation of the bulk of surpluses in pursuit of the aims of sustainable development and of service to its members in accordance with the general interest;