Enabling social enterprise development

1. Enabling social enterprise development • UNDP Regional workshop in social enterprise • Roger Spear • Chair Co-ops Research Unit & ICA RC 6yrs • Founder member of EMES network • Joint Coordinator of Third System in Europe Project • EMES Network Projects and Books • See www.emes.net • Social entrepreneurship projects • EMES: Work Integration - PERSE Project

2. Outline of Presentation • Why support social enterprise: brief review • Social enterprise policy – EU & UK • Strategy for enabling SE development • Importance of institutions (national/local) • Institutions: policy and support themes • Institutions and Support

5. EU policy rationale for social enterprise • contributing to efficient competition in the markets • potential for job creation and new forms of entrepreneurship and employment • being largely founded on membership-based activities helps meet new users needs • favours citizen participation and voluntary work (citizenship agenda) • enhances solidarity and social cohesion (social exclusion agenda) • builds social capital (trust relations and civic engagement). • added value of third system delivery in public sector contracting-out • basis for micro-credit and community development institutions • facilitates transitions from informal economy • contributing to the integration of the economies of the candidate countries.

6. Key points in favour of social enterprise • development of high trust economies. • institutional pluralism in the market (consumer choice and public policy, and consumer protection • social justice. • trust dimension (especially welfare services) • citizenship/democratic agenda. • Jobs and social inclusion (multi-stakeholder structures) • social capital generator • Builds on self-help and informal economy • cheaper (social capital, volunteer labour)

7. The concept of social enterprise as a bridge between traditional approaches ? Non-profit organisations Co-operatives Advocacy Oriented NPO's Production Oriented NPO's NPO's transformed into social enterprises

8. => Social enterprise is both: • Social enterprises are new organisations • And existing organisations refashioned by new dynamics INSIDE THE THIRD SECTOR

9. Characteristics of new social enterprises • 1. Co-operative/mutual and voluntary sector • 2. Multi-stakeholder • 3. Resource mix • 4. Social Capital • - multi-stakeholder • - strong user linkages • - worker involvement. • See www.emes.net • for EMES research projects

10. 3 broad types of social enterprise • Value based goods/services esp. fairtrade • Delivering services – e.g. personal/welfare services, childcare, plus local/community services, environment/recycling [Delors 17 sectors] • Providing employment for disadvantaged and disabled people: work integration • And sometimes mix of these

11. social enterprise models that work • Fairtrade co-ops/mutuals/NfPs • NfP structures contracting for services + temporary/permanent employment • Health/social care mutuals/assns • Social co-ops (Italy, UK, Sweden, Spain) • Community owned structures for local services + training/employment initiatives • community business in the UK, Sweden, and Ireland, Régie de quartier in France • Unemployed associations & employment enterprises • Housing organisation services • Sheltered workshops for disabled people

12. UK policy and market drivers for social enterprise • Three policy drivers support the promotion of social enterprise: • Economic competitiveness – social enterprise contributes to help build an enterprise society in which small firms of all kinds thrive and reduce the persistent gap in growth rates between regions. • Social cohesion –the role of social enterprise in disadvantaged communities. • Service provision (public) – to improve the quality and efficiency of service delivery. • But relevance of the drivers varies across government departments, so nature and extent of departments’ commitment to support for social enterprise varies. • Two market drivers support the growth of the social enterprise: • Service provision – to fill a gap in the market to meet community needs or to add value to existing public service delivery. • The rise of new ethically-conscious markets; in fair trade and environmentally friendly goods and services.

14. UK Policy framework for social enterprise • The Social Enterprise Unit (SEU, now based within the Cabinet Office) • And Social Enterprise Coalition • Create an enabling environment for social enterprise; • Make social enterprises better businesses; • Establish the value of social enterprise.

15. UK Policy framework: social enterprise • Create an enabling environment for social enterprise • Government role (interdept, enabling, direct support to 3rd) • Legal and regulatory issues • Public procurement • Make social enterprises better businesses • Business support and training • Finance and funding • Establish the value of social enterprise • Establish the knowledge base (research) • Recognise achievement and spread the word • Create trust: social audit and quality: metrics

16. Classic development strategies • Promotion: outreach, awareness raising, opportunity structures, linking informal networks, mentors, sifting/selecting, communicating stars/models • Development of ideas/resources: (micro) finance, skills, information (good practice guides) premises, social capital, social franchises & replication • Building entrepreneurship: business planning, brokering expertise, networks/markets, (incubators, community assets) • Business strategy development: peer networks, learning groups, business groups/networks; • Infrastructure/network development: finance, training, markets (supply chains, CSR, fairtrade, public procurement); sector development & leadership

17. Importance of institutional context • Italian social co-ops • Late 1970s Initial social co-ops in Trieste; • 1981 law proposed, but not passed till 1991; several hundred SCs; • first consorzi (Brescia) 1984; Federation CGM founded 1987; • institutional contexts shape entrepreneurship: • different levels of recognition, identity, public policy frameworks, support structures, professional advisers • thus established institutions important

18. Europe: Social enterprise institutional development • Variety of forms/legal structures • Many use traditional SE structures, but new: • Italy 1991 social co-ops types A/B • Belgium 1995 enterprise with social purpose • Portugal 1996, Social solidarity co-ops (work integration) • Spain social initiative co-ops 1999 types A/B • Greece social co-ops • Finland 2004 social enterprise • CICs in UK (2005); SCIC in France (2001) • Italy social enterprise 2006

19. Variety of forms/legal structures • Themes in new legal structures • reshape structures for public service and work integration/community regeneration markets • multi-stakeholder • social reporting • asset lock • non-profit emphasis • financial partner

20. Institutions: support and policy frameworks • Support structures • Pattern of relations esp. markets/state relations • Policy framework • Legal/fiscal measures • Promotion/regulation • Shaping/enabling measures

21. challenges in all target countries: • TS organizations’ political recognition and institutionalization are still modest; • perception of a marginal role for SE/NPOs continues to prevail, coupled with a general mistrust towards economic activities carried out by NPOs; • the legacy of the past continues to have a strong and continuous impact on the development of the various forms of TS organizations; • existing legal frameworks are still not adequate for an effective functioning, fundraising and sustainability of TS organizations; • policies aimed at reforming and strengthening co-operatives are still insufficient or totally lacking – even donors’ programs exclude co-operatives; • the strong domination of neo-liberal policies in the first decade of transition has neglected co-operatives and failed to recognize the potential of associations and foundations as producers of goods and services.

22. challenges in all target countries: • a legal and political environment now more favourable to the development of SEs in new member countries, although this environment remains characterized by severe legal inconsistencies and deficiencies that hamper SEs development; • in the Balkans and former Union countries other than Baltic ones, the political and legal environment is not conducive to the development of SEs. • NPOs are not allowed to engage in economic activities and are still heavily discriminated against, donor-driven and politically oppressed (through harassment and strict regulations that heavily restrict their sphere of action and prevent their development into social enterprises). • Where not deliberately aimed at penalizing NPOs, severe inconsistencies of the legal frameworks even further hamper their action

23. Developing an Optimal Policy for Social Enterprise 1. a legal context which does not disadvantage SEs compared to business organizations – this means a legal framework that is not over-restrictive or over-regulated, but allows flexible entrepreneurial activity. 2. the social dimension of the activities carried out by SEs should be supported through fiscal measures. 3. the institutional context should ensure that SEs can have access to the same (financial, products and services) markets as SMEs, and in particular to public procurement markets 4. the institutional context for social enterprise should be supported so that self-regulatory federal bodies can represent the interests of the sector, and financial and business support bodies can be developed to increase the capacity and effectiveness of social enterprise. Such self-regulating federal structures might also take on the task of taking measures to reduce corruption and corrupt exploitation of foreign donors.

24. 1. Legal recognition of the various organizational forms appropriatefor social enterprises This implies adequate institutional structures for SEs - flexible enough, as rigid frameworks have been shown to hamper the development of social enterprises • Social enterprises ought to be legally bound to the pursuit of their statutory goal. • The statutory goal should be aimed at promoting the general interest • An adequate governance model presupposes the involvement of the stake-holders affected by the organization’s activity, including beneficiaries, workers and volunteers. • Limitations on the conduct of economic activities should be reduced. • Social enterprises are not profit-maximizing organizations, although some of them can distribute profits to a certain extent.

25. 2. Fiscal measures for social enterprises For two reasons: firstly, to compensate for the disadvantages that SEs accept to deal with, compared to traditional enterprises; and secondly, for the generation of collective externalities. These measures could include: • Fiscal and social security deductions for the disadvantaged workers employed (temporarily or permanently); • Reduction of indirect taxes where market income is insufficient to support the social activity; • Granting of aid to social enterprise development through tax reductions on donations received and/or consumers’ purchases. • where SEs produce goods for the market in the EU, advantages should be designed in order to comply with the EU competition law. • This also only applies where market income would be insufficient to support the social activity.

26. 3. Institutional context for inter-action with public agencies, especially in the production of general-interest services • The establishment of consistent and coherent policies towards SEs at all levels of government and with all public bodies; • Ensuring access of SEs to business support services so that business and management skills can be improved; • Ensuring access of SEs to procurement markets similar to those for SMEs; • Allowing independence of operation; • Allowing a certain degree of competitiveness, to strengthen efficiency; • Recognition of the social relevance of the activities carried out. • Giving consideration to government funding schemes to support the development of SEs where they serve government policies (e.g. low interest loans for creating rural enterprises, etc.).

27. 4. Supporting the institutional context for social enterprise • Developing self-regulatory federal bodies representing the interests of the sector and taking on the task of taking measures to reduce corruption and corrupt exploitation of foreign donors; • Developing financial and business support bodies to increase the capacity and effectiveness of SEs; • Establishing best practices for good business, governance • Promoting the image of SEs.

28. Summary: optimal policy framework for Social Enterprise • legal framework which does not disadvantage SEs compared to business organizations –not over-restrictive or over-regulated, for flexible entrepreneurial activity. • social dimension of the activities carried out by SEs supported through fiscal measures. • access to the same (financial, products and services) markets as SMEs, including public procurement markets • equitable institutional framework - business support, coherent policy frameworks • self-regulatory federal bodies to represent the interests of the sector, • financial and business support bodies developed to increase the capacity and effectiveness of social enterprise; and to reduce corruption and corrupt exploitation of foreign donors.

29. Strategies for key stakeholders • Private sector (CSR/supply chains) • NGO (third) sector • Public sector: National governments

30. Develop political recognition among national and local authorities of the socio-economic value of social enterprise: • increasing the awareness of the relevance of TS organizations (welfare systems, tools of work integration, vehicles for local development), • increasing the awareness of the relevance of TS organizations in creating social capital and a vibrant civil society; • increasing the awareness, among TS organizations, of their potential role in different sectors (such as welfare provision, work integration, and local development) through seminars and training programs addressed to policy makers and TS volunteers and workers; • enabling the re-emergence of historical continuity by facilitating research and publications aimed at pre-Soviet TS/co-operative history

31. promote appropriate support for social enterprises understanding and growth in the region developing institutional context to build capacity for social enterprise • setting up a standing conference on promoting cooperation between local government and TS/SEs in the region • setting up development agencies specifically designed for sustaining SEs; consorzi; incubators; national federal bodies to represent their interests); • developing a number of instruments that would assist the development of social enterprises, including: “seed money”, small grants, feasibility study grants, low interest loans schemes, setting up Social Enterprise Funds aimed at sustaining local innovative TS organizations in each of the sub-regions, and micro finance initiatives. developing good business and governance practices: • developing managerial skills of social entrepreneurs and local development leaders (through trainings/university courses); • organizing regular regional and sub-regional panels for SE managers/workers, public officials, local media, business communities; • facilitating research projects on SEs, especially in the countries outside the EU, and promoting best practice exchanges; • promoting networking activities among the various components of the TS (co-operatives, associations, etc.).

32. the international level • to build bridges with international organizations – i.e. ILO, OECD, World Bank – and INGOs to create an awareness of the role and potential of social enterprises; • to establish models of good practice for NGO intervention (linking with civil society organizations, avoiding corrupt organizations, helping to create infrastructure (loan funds); • to help to start up new social enterprise; • to support established social enterprise • to build capacity within the social enterprise sector (consorzi); • to build bridges between EU-15 national TS/co-operative movements and target countries’ TS/co-operative movements. • to create learning networks for sharing best practices.

33. Some questions for debate 1 • Impact of decentralization on SE development • government decentralization in several countries has contributed to development of local strategies to tackle local problems more effectively, favouring indirectly social entrepreneurial initiatives. • Can you provide examples of cooperation among SEs and local administrators stimulated by decentralization? • Ambiguities/contradictions in public policies? • Legacy of communism • are contradictory for SEs is concerned. • on the one hand mistrust towards cooperatives, networks and the volunteer ethos are negative legacies, • But continuing ideal of equity and solidarity in rural areas (strong social capital), and the survival of companies for the disabled in all countries of the region. • Could you provide some concrete examples of positive/negative legacies of communism in your countries? • Have positive legacies have been sufficiently exploited?

34. Some questions for debate 2 • Impact of aid – EU programmes • European programmes and pro-employment policies are supposed to strengthen sustainability of TS, but they are often blamed for negative effects. • Could you comment and provide concrete examples of EU policies positive/negative impact on SE development in new member and candidate countries? • Bridging between EU-15 and target countries TS organizations • fruitful cooperation between cooperative movements – such as the Raiffeisen and Desjardains movement – have reformed/revitalized the TSOs of some target countries. • Comments on such cooperation projects? • Networking capacity • low networking capacity between TSOs is blamed for hampering the political and legal recognition of SEs in target countries. • What are possible strategies for stronger cooperation among TSOs? • What are possible strategies for stronger cooperation among NGOs? • Hybridisation: poverty reduction and citizenship agenda?

35. Thank You

37. Summary: evolving institutional contexts • Different institutional landscapes based on different “welfare regimes”, different cultural traditions (family/church), etc. • Historical influenced spaces for entrepreneurial activity by traditional/new actors • Both: a revitalization of historical approaches (co-op/mutuals or assns). And: social movements, political networks embedded in civic environments etc. Using social capital • “public good arena” for “non-capitalist” stakeholders: public bodies, individual users, church/civic organizations i.e. social entrepreneurs eg making case to construction sector to train low skill workers • All this building a sector and its institutions (policy/support)

38. Some institutional stories • Italian social co-ops • Late 1970s Initial social co-ops in Trieste; • 1981 law proposed, but not passed till 1991; several hundred SCs; • first consorzi (Brescia) 1984; Federation CGM founded 1987; • German WISE • social movements of the 1970s shaped new non-profit/public partnerships for work integration, • which gradually became institutionalised in formal organisations, dominated by business rationales and professionalisation.

39. Challenges for social enterprise • Economic - jobs • Linking with Informal sector • facilitating entrepreneurship (linkages, transactions) • Leveraging resources (finance, skills) • Social • Community development • Citizenship and democratic agenda