Social economy in the Czech Republic

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Social economy in the Czech Republic
Viewed by NTN C CIP EQUAL projects

See also: Study of the Infrastructure of the Social Economy in the Czech Republic, Nov 2011

14 April 2008

Social entrepreneurship has become quite frequently discussed topic in the Czech Republic within the last few years. Most of its activities were concentrated around the CIP EQUAL programme financed by the European Social Fund (ESF). The programme financially supports a group of innovative international projects focused on social economy and the establishment of a common platform for individual projects in the framework of the so-called National Thematic Network. Definitions of social economy, social entrepreneurship and social enterprise including its principles have been developed within the initiative, with the assistance of invited experts active outside the network. Submitted conclusions are result of teamwork of representatives of NGOs, cooperatives and academic institutions who found a consensual agreement over what the social economy concept in the Czech Republic should be. It would be a combination of the so called Anglo-Saxon concept emphasizing the business features, and the so called Southern concept focused on reciprocity, solidarity and self-help. Support and development of social economy in the Czech Republic will stem from historical and political specifics without deforming its basic principles.

Contents

Definition of social economy

It is a complex of autonomous private activities realized by different types of organizations that have the aim to serve their members or local community first of all by doing business. The social economy is oriented on solving issues of unemployment, social coherence and local development. It is created and developed on the base of concept of triple bottom line – economic, social and environmental benefits. Social economy enables citizens to get involved actively in the regional development. Making profit/surplus is desirable, however is not a primary goal. Contingent profit is used in preference for development of activities of organization and for the needs of local community. Internal relations in the social enterprises are headed to the maximum involvement of members/employees in decision-making and self-management while external relations strengthen social capital. Legal form of social economy entities is not decisive – what is crucial is observing public benefit aims as listed in the articles. Subjects of the social economy are social enterprises and organizations supporting their work in the areas of education, consulting and financing.

Definition of social entrepreneurship

Social entrepreneurship develops independent business activities and is active on the market in order to solve issues of employment, social coherence and local development. Its activities support solidarity, social inclusion and growth of social capital mainly on local level with the maximum respect of sustainable development.

Definition of social enterprise

Social enterprise means "a subject of social entrepreneurship", i.e. legal entity or its part or a natural person which fulfils principles of the social enterprise; social enterprise must have appropriate trade license.

The above mentioned definitions stem from the four basic principles which should be followed by all social enterprises. Standards with a commentary were settled for each principle. These standards were settled as the minimum so that they should be observed by all legal entities and all types of social enterprises. Specific types of enterprises, that are undergoing pilot verification within CIP EQUAL projects and that are already functioning in the Czech Republic, are social firms employing seriously disadvantaged target groups, and municipal social cooperatives as a suitable form of entrepreneurship with the view of development of local communities and microregions.

The legal form a social enterprise takes is not important, however they must be subject of private law. According to the existing legal system, they can function in a form of cooperatives, civic associations, public benefit associations, church legal entities, Ltd., stock companies and sole traders. Budgetary organizations and municipalities should not be social enterprises as they are not autonomous - they are parts of public administration.

Social entrepreneurship is defined very broadly. Beside employment of the people disadvantaged at the labour market it also includes organizations providing public benefit services in the area of social inclusion and local development including environmental activities, individuals from the disadvantaged groups active in business and also complementary activities of NGOs destined to reinvest profit into the main public benefit activity of an organization. Social entrepreneurship defined in such a wide way should not be directly bound to legal benefits and financial support because the concept of social entrepreneurship might be then threatened by misuse and disintegration. Conditions of eventual legal and financial support should be discussed by experts.

PRINCIPLES OF SOCIAL ENTERPRISE

1. Public benefit aim defined in the articles or statuses

STANDARDS

  • Social enterprise is oriented at solving issues of employment, social inclusion and local development.
  • It is built on the concept of the so called triple bottom line - economic, social and environmental.

COMMENTS

  • The public benefit aim is achieved by economic activities defined in the business plan, in the articles, statuses and/or in other documents.
  • Social enterprise is active in all spheres of economy.
  • Legal entity of the social enterprise is not decisive.

2. Participation, democratic decision-making and social capital

STANDARDS

  • The role of internal and external relations of social enterprises is strengthened:
a) Internal relations of the social enterprise facilitate maximum involvement of members/employees in decision-making and lead to autonomy.
b) External relations strengthen social capital of the social enterprise and of local communities.

COMMENTS

  • Social enterprise is neither directly nor indirectly controlled by public or private institutions and its eventual dependence must not violate any of its principles.
  • Social enterprise emphasizes balance between democratic decision-making (strategy) and management (supervision).
  • There is 1 member = 1 vote principle in organizations founded on membership principle (e.g. cooperatives).

3. Specific financing and profit utilization

STANDARDS

  • Financial relations and management of the social enterprise are subordinated to the public benefit aim defined in the articles/statuses/foundation charter.
  • Management of the social enterprise leads to long-term economic stability and sustainability (both internal and external).
  • Contingent market profit is preferentially used for the development of the social enterprise and/or for fulfilment of its public benefit aims.
  • Social enterprise bears the economic risks.

COMMENTS

  • Social enterprise strives to create profit/surplus which, however, is not the primary aim of its business activities.
  • Most of the profit is not divided among shareholders, partners, managers, members or owners.
  • Depending on the legal entity, contingent members can bear the economic risks by sharing property, financing and through decision-making.
  • Social enterprise can have multiple sources of financing.

4. Local dimension

STANDARDS

  • Social enterprise satisfies preferentially local needs and utilizes preferentially local resources.

COMMENTS

  • Social enterprise enters local initiatives and partnerships, contributes to local development of disadvantaged areas.
  • It supports a sense of social accountability on the local level.

Conclusion

Many discussions were dedicated to the definition of principle related to participation and democratic decision-making and its effort to formulate it in the way enabling its practical fulfilment and, at the same time, in the way that this basic principle of the social entrepreneurship would not be omitted. At the end, the standard was formulated as a recommendation to proceed that way as much as possible. Another move from ideal towards reality in standards is enabling the option not to reinvest the whole profit in the public benefit aims (so called asset lock) because starting the social enterprise is usually loss-making and condition of the full profit reinvestment back in the business activities might be demotivating for private owners. The work on standards is going to continue by working out their identifying criteria in order to find out whether an enterprise is really the „social“ one.

In this document, the concentrated results of a two-year work and of many debates of people involved in social entrepreneurship are submitted. Every involved partner has succumbed to others and made compromise in order to reach mutual accord and beside the principles and standards themselves, the ability to find a mutual agreement is another valuable result of the teamwork. Our working group hereby submits its results for a debate to a concerned public.

Signatories

The following persons and organizations participated in the settlement of definitions, principles and standards:

  • Brančíková Lucie, The Union of Czech and Moravian Production Co-operatives (Svaz českomoravských výrobních družstev)
  • Černá Milena, SKOK - The Associaiton of Non-Governmnetal, Non-Profit Organizations Active in the Areas of Social Assistance and Social Health Care
  • Dohnalová Marie, Faculty of Humanity Studies of the Charles University (FHS UK)
  • Dvořák Alexandr, Association of Foster Families (Sdružení pěstounských rodin)
  • Francová Petra, civic association Nový Prostor
  • Hunčová Magdaléna, Faculty of Social and Economic Studies(FSE), The University of Jan Evangelista *Purkyně (UJEP) in Ústí n.L.
  • Krejčíková Stanislava, Parish Charity Starý Knín (Farní Charita Starý Knín)
  • Mácha Jan, civic association Fokus Praha
  • Mudrochová Soňa, Center of Community Work Ústí nad Labem (Centrum komunitní práce Ústí n.L.)
  • Pavlík Roman, Parish Charity Starý Knín (Farní Charita Starý Knín)
  • Rychtář Karel, The Union of Czech and Moravian Production Co-operatives (Svaz českomoravských výrobních družstev)
  • Sztarovics Robert, civic association Nový Prostor
  • Šagátová Jarmila, Kazuist s.r.o.
  • Šťastná Jaroslava, Faculty of Philosophy and Arts, Charles University (FF UK)
  • Tuhá Helena, Labour Office in Chrudim
  • Vanický Josef, Orfeus
  • Vosmíková Hana, Foundation VIA (Nadace VIA)
  • Würtherlova Markéta, civic association Fokus Praha