Social enterprises, the beginning of a revolution

by Maddalena Plebani

It is not a niche. For her, the social enterprise is a revolutionary agent.

37 years old, a degree in International and Diplomatic Studies and a Master on non-profit organizations, Giulia Galera coordinates the research on cooperatives and social enterprises at the EURICSE, the European Research Institute on Cooperative and Social Enterprises in Trento.

For her, the social business has revolutionary characteristics: “It is an effective tool of welfare, development and poverty reduction that questions the traditional definition of enterprises as organization promoting the exclusive interests of their owners, in which profit maximization is no longer an essential condition”, she claims.

“The potential of cooperative and social enterprises is significant”, she explains. “Given the failure of the traditional dichotomous model centred around the state and the market, cooperatives and social enterprises are expected to develop further in contemporary societies as welfare and development agents”.

 

What revolution have social enterprises brought on?

The development of social enterprises has implied radical changes. First, the shared conception of enterprises as organizations promoting the exclusive interests of their owners is questioned by the emergence of enterprises supplying general-interest services and goods, where profit maximization is no longer an essential condition. Second, the basic criteria for acknowledging fiscal benefits, which is normally considered to be the legal form and not the social relevance of the activities run, has been put under question; last, the role played by the state in the production of general-interest services has been modified.

 

Yet, despite this revolutionary capacity, the third sector is still considered a niche…

There is a conceptual confusion which has a negative impact upon the visibility of the third sector in general and of social enterprises specifically. The use of different terms (social economy, solidarity economy, non-profit sector, etc.) suggests a ‘niche phenomenon’ that cannot be generalized and is bound to remain marginal. Furthermore, the use of blurring terms such as social entrepreneurship, covering a broad range of activities and initiatives (both for and non-profit), adds to the confusion.

 

In Europe, a European Statute of Foundation is under debate. As far as social enterprises are concerned: would you be in favour of a unified European legislation on the topic?

Given the country-specificity of the phenomenon dealt with, I think it would be more advisable to keep national characteristics, provided that some general criteria are observed. First and foremost, national policies should support an enabling legislative framework and fiscal measures, allowing for a full recovery of the different organizations that compose the third sector and the development of social enterprises.

 

What kind of legislation concerning social enterprises can we found in the European countries?

At the beginning of their development, most social enterprises were set up through the use of the legal forms of cooperative and association. The latter form was adopted in those countries where the legal form of association allows for a degree of freedom in selling goods and services on the open market (e.g. France and Belgium). In countries where associations are more limited in this regard (Nordic countries and Italy), social enterprises were more often created under the legal form of cooperative.

Then, specific legal forms were adopted, either via the adaptation of the cooperative formula (Italy, Portugal, Spain, France, and more recently Poland) or through the introduction of more general legal frameworks for social enterprises, with respect to both the activities run and the legal forms admitted. This latter trend first appeared in Belgium, where the “social purpose company” was introduced in 1995. This legal form can be used by any commercial company; yet, this legal status has so far met with only limited success, owing to the considerable number of requirements in addition to those envisaged for the traditional company and to the absence of specific fiscal benefits.

More recently, legislators in Italy and the United Kingdom have favoured a shift towards more general legal forms. This trend is contextual to the expansion of the set of activities carried out by social enterprises, which are increasingly committed to supply general-interest services (including cultural and recreational services, activities aimed at protecting and regenerating the environment, social housing, services aimed to support the economic development of specific communities) other than welfare ones.

 

Is there a website you would like to suggest to our readers?

www.euricse.eu: website of the European Research Institute on Cooperative and Social Enterprises, where I currently work

www.emes.net: website of the European Research Network

www.unisonojazz.it: website of a non-profit organization engaged in music activities (organization of concerts, music school). I contributed to set it up during my university studies.

 

To read an article on social enterprises in Italy and its comment by Carlo Borzaga, President of Euricse, on 7th September’s Il Sole 24 Ore edition, click here.