ENTR social enterprise conference 090306

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Social enterprise – more than non-profit business?

A report on the Enterprise DG's conference on the Study on Practices and Policies in the Social Enterprise Sector in Europe

Reprinted from New Sector June/July 2009

By Toby Johnson

The public sector tends to see social enterprises as a new sort of SME delivering social benefits, while those actually involved see them as self-supporting products of a social movement. A European conference made this contrast all too clear.

Participation – and whether it is a necessary part of social enterprise – was the juiciest bone of contention at a conference held by the European Commission’s Enterprise DG on 6th March 2009. The subject of the controversy was the recently published Study on Practices and Policies in the Social Enterprise Sector in Europe. Originally conceived of as a study of social co-operatives, the report’s scope was broadened to cover social enterprises. The contract to prepare it was won not by an organisation with expertise in the social economy, but by KMU Forschung Austria, backed up by national correspondents in 31 countries, who failed to consult organisations on the ground and, many people thought, missed the point entirely.

The study identified 82 support measures, which it grouped into five categories: legal regulations, financial support, business support, measures fostering co-operation, and finally EQUAL projects. It shows a very partial view: in Britain, for example, the report allows a glimpse of the Social Enterprise Unit, the CIC, the DTA, Co-Enterprise Birmingham and the Social Enterprise Partnership – and that’s it.

Criticism across the board

Representatives from social enterprises across Europe were not slow to comment. Against his better nature, Professor Jacques Defourny of the University of Liège, who is also the co-ordinator of the Europe-wide EMES research network, set out seven trenchant criticisms of the report’s approach and results. The study makes the profound mistake of trying to analyse social enterprises in isolation, uprooting them from their context. It ignores the motivations, social processes, networks and support organisations that enable social enterprises to grow, and reduces them to just another sort of SME. It thus fails to grasp their development dynamics and the source of their competitive advantage, and attributes their upsurge to public policy alone.

Moreover, the fact that the national correspondents in some cases evidently knew little about the sector resulted in a very random choice of case studies. This led to some astonishing gaps – for instance the most inspiring examples such as the consortia that have enabled over 7,000 social co-operatives to grow up in Italy were totally omitted, and no mention was made of social enterprises in educational and culture.

Bob Cannell of Co-operatives UK backed up this view, cautioning that the apparent boom in social enterprises in Britain (the government’s estimated total of 55,000 comes from extrapolating from a sample survey of SMEs) is largely the result of a massive rebranding exercise, as organisations that previously thought of themselves as charities switch to the new term.

Katharine Purser of the UK's Office for the Third Sector presented the government’s view, citing the examples of Hackney Community Transport, Sunlight Development Trust and Divine Chocolate. She pointed out some key features such as the importance of the ethical market and the tiny gender wage differentials, and made the interesting point that SROI could be a way of demonstrating whether participation has an added value or not. She also seeded the conference recommendation that EU governments should work together through the Open Method of Co-ordination to promote convergence among their policy approaches.

Googling is not enough

The whole debate showed up the fundamental differences of interpretation and resulting misunderstandings that the term ‘social enterprise’ has gathered around it. “If you just google the words ‘social enterprise’, you will miss two-thirds of the reality on the ground,” said Professor Defourny. “The EU is much more diverse than the English terminology.” In his view the best way to view social enterprise is as a dynamic tool through which to look at the social economy, a huge sector that is developing fast and accounts for between 4% and 15% of all jobs in the EU countries.

Opening the conference, Maive Rute, Director of Enterprise Policy, had expressed the hope that the current global economic crisis might, through a process of creative destruction, give new energy to social enterprises. Unfortunately this study does little to square the circle. It attempts to dumb down the phenomenon of social enterprise, so that it can be contained in the framework of enterprise policy. But in so doing, it ignores just those things about social enterprise that make it different and make it a useful resource in times of crisis: its underlying values of participation and democracy, and its movement and networking behaviour.

Conference website: http://ec.europa.eu/enterprise/newsroom/cf/itemshortdetail.cfm?item_id=3323

The Study on Practices and Policies in the Social Enterprise Sector in Europe – Final Report (76 pp, ISBN 978-92-79-07324-3) and its 31 supporting national profiles (462 pp) are downloadable from: