Social Economy and Social Entrepreneurship: a conflation of two different concepts that is sparking economic and political debate at the national and European levels.
Summary
– Considered to be at the forefront of social innovation, the social and solidarity economy is positioned as an alternative solution to the multiple challenges posed by economic, social, environmental, and moral crises.
– The social and solidarity economy and social entrepreneurship in the form of social businesses have experienced significant growth in recent years, with the proliferation of a wide varietyof social enterprises and new « social entrepreneurs. »- In France, on July 21, 2014, the National Assembly adopted the » Social and Solidarity Economy Act » to legally define the scope of the SSE for the first time.
– Today, the conceptsof social economy andsocial entrepreneurship are increasingly used to refer to the SSE in general, but these terms refer to different visions of social enterprise.
– The debate between the European approach and the Anglo-Saxon approach explains why social enterprises are not recognized in the same way in all European countries.
In France, on July 21, 2014, the National Assembly adopted the » Social and Solidarity Economy Act, » more commonly referred to as the » SSE Act. » Today, the social and solidarity economy encompasses a multitude of very diverse social enterprises, bringing together traditional players such as associations, mutual societies, cooperatives, and foundations, but new hybrid structures such as commercial companies pursuing a social utility objective are also emerging. The aim of this law is to define the scope of the SSE for the first time.
The social and solidarity economy aspires to « place people at the heart of the economy and put economic activities at the service of social commitment. »[1]. Considered at the forefront of social innovation, it positions itself as an alternative solution to the multiple challenges posed by economic, social, environmental, and moral crises in developed countries, first and foremost, but also in developing countries. It places social enterprises at the heart of the movement, as key actors of change.
The SSE has experienced a boom in recent years at both the national and European levels. In France, since 2000, the government has recorded a 24% increase in additional jobs in social economy enterprises, compared with a 4% increase in private sector employment. This sector currently comprises 215,000 enterprises with more than 2 million employees and accounts for 10% of paid employment. This is a significant figure given the important role of volunteering within the SSE. At the European level, the social economy accounts for 10% of all businesses, or 6.5% of paid employment. There are now 2 million businesses employing more than 14 million people. Between 2003 and 2009, paid employment in the SSE increased by 26.8% in the European Union.[2].
Although the concept of the social and solidarity economy originated in Europe, social enterprises are not recognized in the same way in all European countries. This difficulty stems from the difference in approach to social enterprises between Europe and the Anglo-Saxon world. The notion of the social economy (i.e. , social economy enterprises) refers to the former, while that of social entrepreneurship refers to the latter. However, these terms are increasingly used today to refer to the SSE in general, thus complicating the categorization of « social enterprises. » In practice, this is reflected in the great heterogeneity of the structures that make up the SSE.
Today, we are witnessing a rise in the Anglo-Saxon vision in Europe, which is leading to political and economic questions about the concept of the social economy and, more specifically, social enterprises. This explains why this movement is struggling to gain recognition and support from both SSE actors and political authorities.
We return to these two concepts in order to better understand the issues they raise in current discussions on the social and solidarity economy.
1. A look back at the social and solidarity economy: a term little known to the general public
1.1 Definition and history of the SSE in France
Historically, the social and solidarity economy emerged inthe 19th centuryduring industrialization in order to meet the new social needs of the working classes. Originally, these structures were created by poor workers with the aim of implementing collective solutions to better address issues such as health, housing, and exploitation. Initially, they took the form of consumer or production cooperatives.
In the French tradition, the social and solidarity economy was « born out of the desire of citizens to build a different, more egalitarian society, where the economy serves the people. »[3]. The four main types of structures that make up the SSE are associations, cooperatives, mutual societies, and foundations[4]. Their main differences from traditional businesses lie primarily in their democratic and participatory management style.
The principles governing these structures are as follows: non-profit-making for individuals, with profits distributed among employees or members and, in the case of associations, reinvested; democratic management, with each member participating in all decisions relating to the enterprise;the social or collectiveutility of the structure; and their independence from public authorities, as they have mixed resources ( private and public).
In France, it was in 1980 that SSE actors drafted the first Social Economy Charter. The aim was to define the objectives and scope of action. Following the 1981 decree, the social and solidarity economy was officially recognized, enabling the creation of a delegation to the Prime Minister. Following the economic crisis of 2007, a new wave of initiatives was launched to create jobs for victims of mass unemployment, through microcredit or business and employment cooperatives. These actions also aimed to promote fairer forms of trade through fair trade, or to develop more environmentally friendly production methods using renewable energies, organic farming, and short supply chains.
Recently, the SSE Act was enacted in July 2014 with the aim of raising awareness among civil society of the scope of the social and solidarity economy and its contribution to changing the economic and social system. The idea is to encourage citizens to get involved in this movement and to initiate a real change of scale.
In recent years, the emergence of new categories of social enterprises has led to a shake-up in the traditional definition of the SSE. This is particularly the case for commercial companies, which choose to focus their activities on a social utility objective and apply the principles of the SSE to themselves. It was therefore necessary to recognize these new players and redefine the economic, legal, and social contours of this rapidly evolving sector.
In this context, the main objectives of the law are:
– « To recognize the social and solidarity economy as an innovative and sustainable way of doing business, and also to direct more public and private funding towards these enterprises;
– To consolidate the network of SSE actors in order to ensure their long-term viability;
– To give employees back the power to act;
– To bring about a cooperative shock, so that within cooperative societies of collective interest (SCIC) and activity and employment cooperatives (CAE) in particular, employees, producers, users, local authorities, and entrepreneur-employees join forces to create jobs;
– Strengthen sustainable local development policies and local initiatives to encourage non-relocatable jobs in the regions. [5]«
1. 2 Definition at European level
At the European level, the definition[6]was first established in 2002 by Social Economy Europe, an organization representing actors in the social and solidarity economy. Successive waves of change in the SSE led the European Economic and Social Committee (EESC) to redefine its scope in the 2012 report on the social economy. Governed by the same principles as in the French definition (cited above), the aim is to include the greatest possible diversity of entities that make up the SSE in European countries, particularly private companies. Given the scale of the SSE movement within the EU, in January 2014 the European Commission organized the first conference entitled « Social Entrepreneurs: Have Your Say » to address the issue at the political level.
Despite the recent attempt to establish a European reference framework to set criteria for determining which entities are part of the SSE, the concept of social enterprise[7]remains little recognized in many European countries. The International Center for Research and Information on the Public, Social and Cooperative Economy (CIRIEC) « identifies three categories of countries:
– countries where the concept of the social economy is widely accepted, namely Spain, France, Portugal, Belgium, Ireland, and Greece;
– countries where the concept of the social economy has a moderate level of acceptance: Italy, Cyprus, Denmark, Finland, Luxembourg, Sweden, Latvia, Malta, Poland, the United Kingdom, Bulgaria, and Iceland;
– countries where the concept of the social economy is little recognized or not recognized at all: Austria, the Czech Republic, Estonia, Germany, Hungary, Lithuania, the Netherlands, Slovakia, Romania, Croatia, and Slovenia. [8]«
If this sector is still struggling to find its place in Europe, this can be explained in particular by the differences between the European and Anglo-Saxon traditions regarding the origin and meaning of the concepts of social economy and social entrepreneurship.
2. Social economy and social entrepreneurship: differences between two concepts that refer to fundamentally different realities
2.1 Social entrepreneurship: European vision versus Anglo-Saxon vision
Social entrepreneurship first appeared in the United States in the 1990s. The pioneers in its design and implementation came from affluent circles of American society, such as Harvard Business School, for-profit companies, and foundations. Their primary goal was to support actors who were engaged on a daily basis in combating a multitude of social problems.
In a broad sense, social entrepreneurship refers to « market-based economic activities that serve a social purpose. » [9]. » It uses the methods of traditional venture capital but focuses more on social return on investment. Thus, while market-oriented, the profits generated from commercial revenues are reallocated to the development of social projects. It is these operating mechanisms that gave rise to the « social business » movement.
The Ashoka organization, created in the 1980s by Bill Drayton (former minister under Jimmy Carter), built the first support network for social entrepreneurs. The aim was to create a new category of social entrepreneurs that emphasizes the individual on the one hand and the social nature of projects on the other, while relying on the traditional functioning of capitalist enterprises. According to the organization, a social entrepreneur « is someone who carries out and develops a social project using a reasoned and pragmatic entrepreneurial approach. »
In Europe, the concept of social entrepreneurship takes on a completely different dimension. Social economy enterprises are part of the social economy tradition. The sole objective of the enterprise’s economic activity is to serve the social mission of the projects, with profit taking a back seat.
As Ariane Dewandre, project manager at SAW-BE, explains[10], « the dynamic does not evolve at the heart of the market but rather at the crossroads of the market, civil society, and public policy. »
The definition given by the European Commission in 2011 is as follows: » enterprises […] for which the social or societal objective of common interest is the raison d’être of their commercial activity, which often results in a high level of social innovation, whose profits are mainly reinvested in the achievement of this social objective, and whose organizational structure or ownership system reflects this mission, based on democratic or participatory principles, or aimed at social justice . »
2.2 Main differences between the social economy and social entrepreneurship
The differences in the origin and meaning of social entrepreneurship between the European and Anglo-Saxon traditions highlight a major difference in the vision of social enterprise.
In the European approach, the social economy is positioned as a real alternative to the capitalist model, while defending the importance of a strong welfare state capable of providing quality services to all citizens, including the most disadvantaged. Here, social enterprise is defined in a « normative » way by legal statutes and fundamental principles that govern how it works and its collective entrepreneurial dimension.
In the Anglo-Saxon conception of social entrepreneurship, on the other hand, it is the state that acts as a subsidiary of the market. The economic model governed by market logic is therefore in no way called into question. In this case, social enterprise is defined by criteria that are more flexible and less demanding than those of the social economy. It thus encompasses private-public initiatives with a social purpose, individual for-profit initiatives that bring about social innovation, and corporate activities referred to as « corporate social responsibility » (CSR).
Examples include Exki and Chipotle, restaurant chains that offer a new fast food concept using fresh, natural products in their recipes. By promoting an image that is more respectful of the environment and the health of its customers than its competitors, these companies do not, however, call into question the way fast food restaurants operate.
For Ariane Dewandre, project manager at SAW-BE, this approach to social entrepreneurship amounts to giving a « social touch » to lucrative commercial activities without challenging the capitalist model. The prevailing logic within these social enterprises is therefore to « repair with the left hand the damage they cause with the right hand. » One of the criticisms put forward is that this form of social entrepreneurship does not aim to structurally transform the functioning of the current economic model, but rather to « salve its conscience. »
In this context, the question that many advocates of the social economy ask themselves is how a company that sets itself a social goal while maintaining a traditional commercial operation can achieve and guarantee its objective and social quality.
In recent years, the Anglo-Saxon concept has tended to predominate over the European one, leading to a conflation of the notions of social entrepreneurship and social economy, giving social enterprises a more individualistic and less collective character. The Anglo-Saxon influence has notably manifested itself in the proliferation of entities of all kinds and varieties calling themselves social enterprises. The opposition between these two trends explains the major difficulty, first in defining and recognizing social enterprises, and second in bringing together all the players in the social and solidarity economy to take the movement to the political and economic level.
3. Risks and challenges for the social and solidarity economy in the face of these differences
3.1 First challenge: the issue of measuring the social impact of social enterprises
For advocates of the Anglo-Saxon approach, social entrepreneurship in the form of social business must adopt the tools and management methods of the traditional capitalist economic model. This contrasts with the European vision, where social enterprises must necessarily equip themselves with instruments that are adapted to the primary social goal they pursue, as well as to their specific mode of operation and governance.
Given the growing number of capitalist enterprises turning to projects with a social dimension, this debate aims to raise a fundamental question at the European level: that of the various measures of social impact.
In recent years, various private investment mechanisms for financing social enterprises have been developed, such as venture philanthropy and social impact bonds[11], has led donors to develop instruments that enable them to accurately measure the social returns on their contributions. Although these tools can have extremely positive repercussions for companies, enabling them to assess the effectiveness of their actions at the social level and to readjust their operations based on these results, they also carry risks.
By adopting measures that are based more on the needs of private investors than on societal realities, there is a risk of favoring quantitative objectives at the expense of qualitative ones (e.g., the social ties created). However, the primary raison d’être of social enterprises is based on the qualitative dimension of their activities. Thus, the question of social impact measurement is crucially important in the debate on the design of social enterprises and their future direction.
This is a major challenge because, once officially defined, these measures would apply to all social enterprises supported not only by European public authorities but also by regional and national authorities.
3.2 Second challenge: the privatization of the public interest
Faced with the withdrawal of the state in European countries and successive waves of privatization of public companies, many services of general interest are being delegated to foundations and large for-profit companies with huge budgets. This new dynamic calls into question the effectiveness of public authorities in their ability to respond to societal problems.
The Anglo-Saxon concept of social enterprise therefore raises questions today about the risk of privatizing the public interest. For proponents of this approach, bringing together social enterprises, which are the actors at the heart of the field with concrete knowledge of social reality, and investors, who sometimes have greater financing capabilities than the state, will allow their complementary actions to better respond to social needs.
This logic raises the question of whether private donors are capable of understanding and solving societal problems, and of responding to them while maintaining the public interest above private interests. The second risk, which stems from the first, is that social priorities and challenges will be ranked according to market profitability rather than the public interest.
In the European model, while the legitimacy of social economy enterprises is based on the absence of profit on the one hand and democratic and participatory management on the other, in practice the principle that the beneficiaries of these activities must be included in the development of collective responses is not always respected. This leads us to take a critical look at how they operate and behave.
Conclusion
Today, the main difficulty explaining why the social and solidarity economy movement is struggling to gain momentum, both within the SSE sphere and among political authorities, can be explained by this fundamental debate on the vision of social enterprise.
The debate between the European approach and the Anglo-Saxon approach is at the heart of the problem. The former advocates the establishment of an alternative economic model to the current one, in which social economy enterprises are the main agents of change. The latter argues that, while applying the mechanisms that govern the capitalist market logic, it is necessary to pool the expertise of social enterprises on the one hand and private financiers on the other, in order to fill the welfare state deficit and better meet the social needs of citizens.
For Jean-François Drapery, Director of the Centre for Social Economy, Work and Society (CESTES) at CNAM and editor-in-chief of the International Review of Social Economy (Recma), the main weakness of the social economy is its lack of communication in a common political project. In practice, many social economy enterprises do not have the primary objective of changing the current economic and social model. This is due to the daily constraints they face in maintaining financial stability, creating jobs, and providing quality services, which lead them to change their priorities. In particular, they resort to other means of mixed financing (private/public) to meet their immediate needs.
Furthermore, within these structures themselves, employees or beneficiaries are not aware that they are producing or consuming in a « different » type of enterprise. Indeed, the heterogeneity of social enterprises means that many of them do not identify with the political and economic movement of the social economy and therefore do not display or communicate their differences.
For some, the social economy and social entrepreneurship are opposing concepts that should not be confused, lest the primary purpose of the social enterprise be betrayed. For others, by creating links, debates, and synergies, these two currents can complement and reinforce each other, thus allowing social entrepreneurship to serve as a gateway to the social economy.
Definitions
– Cooperatives: a form of enterprise based on the principle of cooperation, whose objective is to best serve the economic interests of its participants (members or shareholders).
– Mutual societies: non-profit organizations—legal entities under private law—whose purpose is to organize, for and with their members, responses to the social needs they express.
– Foundations: a non-profit legal entity created by one or more donors, who may themselves be individuals or legal entities, to carry out work in the public interest.
Bibliography:
– Dewandre, A. 2009. « Social entrepreneurship and the social economy. » SAW-BE Analysis 2009. This analysis can be downloaded at the following link: http://www.saw-b.be/EP/2009/A0916.pdf
– Huens, V. 2014. « Social economy, social enterprise, social entrepreneurship: challenges of an evolution, » SAW-BE Analysis 2014. This analysis can be downloaded at the following link: http://www.sawb.be/spip/IMG/pdf/a1405entrepreneuriat_social_web.pdf
– International Center for Research and Information on the Public, Social and Cooperative Economy (CIRIEC), 2012. « The social economy in the European Union: Information report prepared for the European Economic and Social Committee by the International Center for Research and Information on the Public, Social and Cooperative Economy (CIRIEC). » Brussels, CIRIEC. This report is available at the following link: http://www.eesc.europa.eu/resources/docs/qe-30-12-790-fr-c.pdf.
– Ministry of Economy and Finance, Ministry Delegate for the Social and Solidarity Economy and Consumer Affairs. 2013. « Mission report to Mr. Benoît Hamon, Minister Delegate for the Social and Solidarity Economy and Consumer Affairs: assessment of the contribution of the social and solidarity economy. »
For further information:
– Convergence portal : http://www.convergences.org/
– Economy and Finance Portal: http://www.economie.gouv.fr/cedef/economie-sociale-et-solidaire
– European Observatory on Social Entrepreneurship and the Social and Solidarity Economy portal: http://www.ess-europe.eu/
– SAW-BE portal: http://www.saw-b.be/
– Social Economy Charter available at: http://www.socialeconomy.eu.org/spip.php?article262
– Definition of Venture Philanthropy available at: http://www.centre-francais-fondations.org/fondations-fonds-de-dotation/pratiques-emergentes-ou-tendances/venture-philanthropy
– Definition of Social Impact Bonds available at : http://www.pro-bono.fr/2012/06/les-social-impact-bonds-sib/
– Social entrepreneurship barometer available on the Convergences website
– Ashoka organization: website: https://www.ashoka.org/
– Social Impact Bonds read:
– Huens, V. 2014. « Social Impact Bonds: win-win or fool’s bargain? » SAW-BE analysis 2014. This analysis can be downloaded at the following link: http://www.saw-b.be/spip/IMG/pdf/a1403_sib.pdf
Notes:
[1]Definition given by Convergences, Europe’s leading think tank dedicated to establishing new convergences between public, private, solidarity, academic, and media actors to promote the Millennium Development Goals (MDGs).
Website: http://www.convergences.org/
[2]Figures from the European Observatory of Social Entrepreneurship and the Social and Solidarity Economy.
Website: http://www.ess-europe.eu/?page_id=251
[3]European Observatory on Social Entrepreneurship and the Social and Solidarity Economy
[4]Definitions provided at the end of the article
[5]Reference website: Economy and Finance Portal: http://www.economie.gouv.fr/loi-sur-leconomie-sociale-et-solidaire-est-promulguee
[6]Definition by Social Economy Europe: « The social economy includes cooperatives, mutual societies, associations, and foundations, as well as new forms of enterprises that share the values defined in the Social Economy Charter of Principles. »
See the Social Economy Charter:http://www.socialeconomy.eu.org/spip.php?article262
[7]The term « social enterprise » comes directly from the social economy, but it was not until the 1990s that it came into being with the creation of the first « social cooperatives » in Italy. It gained momentum with the movement to support and recognize social enterprises in certain European countries.
[8]Source: The social economy in theEuropeanUnion—Information report prepared for the European Economic and Social Committee by the International Center for Research and Information on the Public, Social and Cooperative Economy (CIRIEC), 2012, pp. 43–44.
[9]Source: Dewandre Ariane (2009), Social Economy and Social Entrepreneurship, Analysis, SAW-B asbl. Online <http://www.saw-b.be/EP/2009/A0916.pdf>.
[10]Dewandre Ariane (2009), Social Economy and Social Entrepreneurship, Analysis, SAW-B asbl. Online <http://www.saw-b.be/EP/2009/A0916.pdf>.
-Social Impact Bonds allow private investors to finance projects run by non-profit organizations through bonds issued by public authorities.
For more information, read SAW-BE’s 2014 analysis: « Social Impact Bonds: win-win or fool’s bargain? »
Available at the following link: http://www.saw-b.be/spip/IMG/pdf/a1403_sib.pdf
-Venture Philanthropy: a new form of philanthropy that adapts the principles of private equity (the selection and development of companies with high growth potential, among other things) to the needs of the charitable sector.
Available on the website: http://www.centre-francais-fondations.org/fondations-fonds-de-dotation/pratiques-emergentes-ou-tendances/venture-philanthropy
