Social economy & social innovation

From Wikipreneurship
Jump to navigationJump to search

The European commission's Guide to Social Innovation contains the following section on the social economy:

4. The social economy

Social enterprises can play a unique role in identifying unmet needs and in developing new types of service. According to the EU Social Business Initiative, the social economy employs over 11 million people in the EU, accounting for 6% of total employment. It covers bodies with a specific legal status (cooperatives, foundations, associations, mutual societies).

The social economy can clearly play a role in regional development. The Emilia Romagna region recently published a study on the importance of the social economy for territorial and social cohesion. Its main conclusions are that public policies are the fruit of the combined contribution of public authorities and social economy organisations in the provision of public utility services, in which the joint participation of both players is an essential requirement to ensure quality; and that public private partnership is a tool to deliver more effective and efficient primary social services, which have so far been historically provided by the Welfare State. At the same time it helps identify and deliver services in new and additional fields. In so doing, new forms of co-operation are established with the civil society and stakeholders.

The social economy and social entrepreneurship are also a tool for social inclusion. They often provide employment opportunities for people facing disadvantages or provide social services and/or goods and services to persons in risk of poverty or exclusion. They are also often involved in civil society initiatives aiming at social change and social innovation.

Social enterprises are positioned between the traditional private and public sectors. Although there is no universally accepted definition of a social enterprise, their key distinguishing characteristics are their social and societal purpose combined with the entrepreneurial spirit of the private sector. Social enterprises devote their activities and reinvest their surpluses to achieve a wider social or community objective either in their members' or in a wider interest.43 However, it constitutes a misnomer to refer to them as ‘not for profit’ (as is customary in the United States) as any enterprise needs to make a surplus in order to have a long term future.

Many social enterprises operate a relatively complex ‘hybrid’ funding model. They do this by mixing income from grants, contracts and other revenue-generating activity such as the sales of goods or services. Some make sufficient income from their revenue generating activity to finance their whole operation (e.g. social enterprise shops, pubs, restaurants etc.). Others use assets such as property to generate rental income that cross subsidises their other operations (e.g. local development trusts and incubators). Community transport social enterprises often use some commercially run bus contracts to cross subsidise services for the disabled. There is no single financing model and this can cause difficulties when social enterprises approach banks and public funding agencies for support as they are perceived as being either complex or inexplicable.

ERDF can support the development of social enterprise in a number of ways similar to the ways in which it supports other types of businesses. These include finance for:

  • business advice and guidance (business planning, coaching and mentoring, support with


  • premises for start-up centres, incubators and single enterprise business premises
  • innovation to develop new products, services or ways of working
  • helping to open up new markets for social enterprises by improving the commissioning and

procurement process (e.g. through the inclusion of social clauses in public works and services contracts)

Financial support can be delivered directly to individual companies, through social enterprise intermediaries, such as social enterprise or cooperative development agencies, and through financial institutions. There are increasing numbers of financial institutions that specialise in investing in social enterprises and many of the new ethical banks specialise in this type of investment. The UK’s recently announced ‘Big Society Bank’ will be capitalised from the interest on dormant bank accounts and will invest only in social enterprises.

The European Social Fund can also support social enterprises. Firstly, it can strengthen administrative capacities and support structures which promote social enterprises. This can be carried out in particular through education and training, for example, by the integration of social enterpreneurship in the curricula of specific vocations, or the provision of training improving the business skills of social enterpreneurs. Networking and the development of partnerships, as well as the setting up of business development services for social enterprises can be supported too. Secondly, the ESF can mobilise extra funds targeted at the development of the social economy and the promotion of social entrepreneurship and easily accessible for social enterprises.

The social economy has different traditions in different parts and Member States of Europe. Some countries, like France, have a strong tradition in "économie sociale et solidaire", the social and solidary economy as they call it. They are gearing up with social innovation in its "newer" meaning and initiatives are sprouting, often linked with the structural funds. For example, Avise, an official ESF intermediary, has launched a call for proposals with the aim to accelerate social innovation in the social economy, and thus help to find new answers to unmet needs in fields like employment, housing, ageing, childcare, etc.

Market access for social enterprise is still restricted. Sometimes they are unable to compete for the award of public tenders against other SMEs because of interpretations of national rules. Member States and Managing Authorities and other public contracting bodies can use the purchasing power of large and small ERDF projects to stimulate social innovation in employment and inclusion of marginalised groups. The example from the City of Nantes below illustrates how a procurement framework has opened a space for social enterprises to work directly with the private sector in helping disadvantaged people into employment. Similar examples exist in other parts of the EU. The social enterprise Fusion 21 in the UK46 places apprentices and other workers from Merseyside’s disadvantaged neighbourhoods and gives them a start in employment.

The EQUAL-funded BEST Procurement project looked at public procurement and social clauses across the EU to deepen understanding of the existing regulatory framework.

There are also social enterprises and cooperatives whose aim it is to save energy and reach a more sustainable society. An example is