Institutional Frameworks for social enterprise: challenges for new member states

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Institutional Frameworks for social enterprise
challenges for new member states

• 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 Book
• See www.emes.net
• Social entrepreneurship projects
• EMES Work Integration - PERSE Project

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Outline of presentation

• Social economy in Europe (1510)
• Reasons for difference (welfare/family)
• Importance of institutions (national/local)
• Institutions policy and support themes
• Social enterprise policy UK EU (EE)
• Institutions and support

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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 WISEs
• 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.
• European WISEs

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Institutions case of WISEs

• Interaction between WISEs and public policies
  through progressive institutionalisation
• Multiple goal WISEs activating labour market
  policies
• Public finance and the collective dimension of
  the production
• Innovative capacity of WISEs mix of public
  support

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Some themes Social economy in new member
countries

• Pre-WW2 Vibrant co-op sectors
• Poland 22,700 co-ops credit/savings, consumer,
  housing, worker (disabled)
• Early transition reforms (neo-liberal)
• restitution, privatisation hostility to state
  dominated co-ops dissolution of co-op
  federations
• Response to severe recession
• Emergence of civil society (grass roots
  activity), associations and foundations reform
  of co-ops but distrust new legislation new
  mutuals (SKOS) role of foreign donors
• Legacies of communism integration of
  disadvantaged
• New legislation eg for social co-ops proposed in
  Poland

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Main points so far

• Considerable national diversity
• welfare regimes
• family and church
• But also between municipalities Middlesbrough
  vs Bristol
• So institutions historical roots, gradually
  shaped by dynamic interaction of diverse
  stakeholders

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Institutional contexts

• 3 types of institutional contexts that shape
  entrepreneurship
• New legal forms within structured public
  frameworks (Italy social co-ops)
• Self-labelling forms and networks co-ops, social
  firms, community business, social enterprise
• Ad hoc constructed contexts (with new types of
  social enterprise)
• Different levels of recognition, identity, public
  policy frameworks, support structures,
  professional advisers
• Thus established institutions important

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The concept of social enterprise as a bridge
between traditional approaches?
Non-profit organisations
Co-operatives
NPOs transformed into social enterprises
Production Oriented NPOs
Advocacy Oriented NPOs
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gt Social enterprises are both

• new organisations
• and
• existing organisations refashioned by new
  dynamics

INSIDE THE THIRD SECTOR
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Characteristics of new social enterprises

• Co-operative/mutual and voluntary sector
• Multi-stakeholder
• Resource mix
• Social capital
• Multi-stakeholder
• Strong user linkages
• Worker involvement.
• See www.emes.net
• for EMES research projects

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The term social enterprise

• Different definitions - SEL, DTI, USA
• EMES third sector organisations
• with enterprise characteristics
• trading in the market or contracting, employing
  people 25/50 income
• but with social goals
• participation, user involvement, community benefit

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3 broad types of social enterprise

• Value based goods/services esp. fair trade
• Delivering services e.g. welfare services,
  childcare, local/community services,
  environment/recycling Delors 17 sectors
• Providing employment for disadvantaged and
  disabled people work integration
• And sometimes a mix of these

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Social enterprises in the UK

• 15,000 social enterprises in the UK.
• Total turnover 18bn (27bn)
• Workforce of 775,000 people including 300,000
  volunteers
• Ref. Small Business Service survey 2005

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UK policy framework for social enterprise

• The Social Enterprise Unit (SEnU, now based
  within the Cabinet Office)
• Social Enterprise Coalition (SEC)
• Create an enabling environment for social
  enterprise
• Make social enterprises better businesses
• Establish the value of social enterprise

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UK policy framework social enterprise

• Create an enabling environment for social
  enterprise
• Government role (interdept, enabling, direct
  support to 3rd sector)
• 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

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Community Interest Company

• Important social enterprise structure
• Company structure (share or guarantee)
• Asset lock
• Non-profit
• Share issuing
• For community benefit
• Cap on distributions to members and interest
  payments on debentures

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Other CIC features

• Community interest test (reasonable person)
• Non-political - political organisations excluded
• Not charitable status but owned by charity
• Annual community interest company report
• Dividend-paying investor shares
• Regulator linked to Registrar of Companies

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Local level social enterprise implementation

• No specific budget for social enterprise only
  1/3 of London municipalities had secured finance
• But most municipalities supporting Soc Ents
• Driven by municipal officers concerned with local
  issues, rather than elected officials learned
  from conferences not policy directives
• Central government little influence in local
  development
• Top funding sources Europe, regeneration, local
  development ref. Ali Somers 2006
• Local level also key Middlesbrough vs. Bristol

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UK policy 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 social enterprise in
  disadvantaged communities.
• Service provision 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.

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EU policy for social enterprise

• Employment
• Third System and Employment
• third system organisations build social capital
  (trust relations and civic engagement).
• Tax systems should recognise TSOs internalise
  social costs, thus reducing public expenditure.
• Reduced social costs from improved employability
  could be recompensed by transparent social
  payments.
• Public sector contracting-out policies could give
  credit for the added value of third system
  delivery (if contract price is only criterion,
  quality will be sacrificed).
• Need for micro-credit and other community
  development finance institutions.

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EU policy for social enterprise

• Overall view
• 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
• meeting new needs
• favouring citizen participation and voluntary
  work
• enhancing solidarity and cohesion
• contributing to the integration of the economies
  of the candidate countries
• (Toby Johnson)

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Institutions support and policy frameworks

• Support structures
• Pattern of relations esp. markets/state relations
• Policy framework
• Legal/fiscal measures
• Promotion/regulation
• Shaping/enabling measures

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Support choices w/s themes

• Level and locus
• Focus start-up, established, spin-off
• Functions co-ordination, representation,
  services (development/training)
• Top-down vs. bottom-up
• Mainstream vs. specialist vs. braided
• Franchising/replication
• DIESIS models coalition, service centre, agency,
  networked enterprise

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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 e.g. making case to construction
  sector to train low-skill workers
• All this building a sector and its institutions
  (policy/support)

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Institutional framework required 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 bad practices

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Challenges for the 10

• Strong neo-liberal policies in transition phase
  neglected co-operatives failure to recognize
  economic role of associations and foundations
  producing goods and services.
• Third Sector organizations political recognition
  and institutionalization is still modest
• Perceived marginal role for TSOs
• legal frameworks still not adequate for fully
  effective economic functioning of TSOs
• General mistrust towards economic activities
  carried out by non-profit organisations
• the legacy of the past weighs esp. on co-ops
  (incl. dissolution of federal structures)
• lack of policies aimed at reforming and
  strengthening co-operatives

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Thank You