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Strasbourg event: taking stock of the Social Business Initiative – Frequently Asked Questions

European Commission - MEMO/14/11   15/01/2014

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European Commission

MEMO

Brussels, 15 January 2014

Strasbourg event: taking stock of the Social Business Initiative – Frequently Asked Questions

In October 2011, the European Commission presented a package of measures to support entrepreneurship and responsible business including a Social Business Initiative (see IP/11/1238 and MEMO/11/735).

As part of the follow-up, on 16 and 17 January 2014, the European Commission, the European Economic and Social Committee (EESC) and the City of Strasbourg will host a large European interactive event on social entrepreneurship and the social economy (see also IP/14/20) in order to:

  1. take stock of the Social Business Initiative achievements and implementation

  2. identify future priorities for action

  3. engage stakeholders in an innovative and participative environment to shape the European social business agenda for the next 3-5 years

  4. strengthen stakeholder networks to support the emergence and scaling-up of initiatives and best practices; and

  5. create more ownership and awareness among institutional actors.

How is the Strasbourg event different from other events that have taken place on the same topic?

  1. Stakeholders can engage in an open way and "Have their Say". The event will conclude with the Strasbourg Declaration from stakeholders addressed to EU institutions.

  2. Participants can propose new themes of interest: "Open Spaces" will be available where they can post and invite other participants to join their conversation.

  3. It will offer genuine opportunities to participants to shape the recommendations for the future policy agenda:

  1. the conclusions from each workshop/conversation will be collected and feed into the final Declaration

  2. participants will reflect collectively on what the future priorities should be at EU level in a World Café set-up: 400 small tables with five chairs with a mind-mapping by the master of ceremonies and the facilitators/harvesters

  1. An opportunity to exchange best practices and network:

  1. information stands for social enterprises to showcase their achievements

  2. a Network Hub where participants can find information and orientation about the event and where all outcomes will converge and crystallise. It will enable 'speed-networking' connections, interaction and collaboration in real time. For more info please visit: http://www.konnektid.com/socenteu

  3. field visits to local social enterprises

  4. coaching sessions, where participants collectively try to solve a challenge proposed by a social entrepreneur, and also learn by doing it.

  1. Social entrepreneurships themselves will shape the event:

  1. social enterprise catering services throughout the event

  2. local artists’ cooperative ArtenRéel1 will create a cooperative and participatory work of art, with input from participants, building a representation of a fair, coherent and creative social enterprise with contributions from the participants

  3. Local (and EU-wide) social enterprise Siel Bleu2 will warm up the crowd at the start of each day.

What is a social business?

The Commission uses the term 'social business' to cover an enterprise:

  • whose primary objective is to achieve social impact rather than generating profit for owners and shareholders;

  • which operates in the market through the production of goods and services in an entrepreneurial and innovative way;

  • which uses surpluses mainly to achieve these social goals; and

  • which is managed by social entrepreneurs in an accountable and transparent way, in particular by involving workers, customers and stakeholders affected by its business activity.

Due to the lack of comparable statistics for social enterprises that would give a detailed picture on the scale and dynamics of social entrepreneurship activities in the European Union, the Commission often uses data on the social economy, which includes many social businesses and which employs more than 11 million EU citizens, 4.5% of the total number of people employed in the EU.

Do you have any concrete examples of social businesses?

  1. In Italy, a medical centre provides high-level specialised assistance to people in need (immigrants for example), particularly in areas poorly served by public services.

  2. In Romania, a company with five members of staff and five volunteers has been working since 1996 to provide cultural services in the Romanian language to approximately 90 000 blind people by adapting media (especially audio books and films) to their needs.

  3. In 2004, in France, a business launched an innovative concept of water-free car washing services by using biodegradable products and employing unqualified or marginalised staff in order to reintegrate them in the labour market.

  4. In Hungary, a foundation set up a restaurant employing disabled staff (40 employees) and provided them with training and childcare to ensure the transition to stable employment.

  5. In The Netherlands, a company teaches reading using innovative digital tools and a method based on playing. This method is particularly suitable for hyperactive or autistic children but can also be used for illiterate people and immigrants.

  6. In Poland, a social cooperative comprising two associations employs long-term unemployed and disabled staff. It provides a variety of services: catering and food services, small construction and handicraft jobs and employability training for disadvantaged people.

    Many other examples can be found in the European Commission's "Social Europe Guide" on social economy and social entrepreneurship.

What was the Social Business Initiative about?

The growth potential of the social business model in the Single Market was not being exploited fully. Social businesses were finding it difficult to gain access to funding. There was a low degree of recognition for their work and the regulatory environment did not take into account their specific characteristics.

The mission of social businesses is to generate significant social, environmental and/ or community impacts, thus contributing to the realisation of the European Union’s objectives by:

- Generating sustainable jobs and facilitating social and work integration, improving the quality of social and healthcare (thus contributing to inclusive growth)

- Introducing efficient ways to reduce emissions and waste, and to use natural resources and energy more efficiently (thus contributing to sustainable growth)

- Focussing on innovation and the participatory use of the internet (thus contributing to smart growth).

The Commission's objective was to create an ecosystem conducive to developing social businesses and to facilitating their access to funding.

The Social Business Initiative identified three strands of action to make a real difference and improve the situation on the ground for social enterprises:

  • Improve the access to finance,

  • Give more visibility to social enterprises,

  • Optimise the legal environment.

Since then, a lot has been achieved. The EU institutions have delivered in all three areas. The event “Social Entrepreneurs – Have your Say!” is the platform where we take stock of what has been achieved so far and where useful actions for the future will be identified.

Here is an overview over what has been accomplished:

1. IMPROVED ACCESS TO FINANCE FOR SOCIAL ENTERPRISES:

  1. Public money has been mobilised to help social enterprises. The Employment and Social Innovation programme 2014-20 will support the development of the social investment market with €85m and to facilitate their access to finance . For the same period, promotion of social economy and social entrepreneurship has also been made an investment priority of the EU Structural Funds (European Social Fund and European Regional Development Fund), encouraging Member States to step up financial support for the start-up, development and growth of social enterprises.

  2. But the sector also needs private investments. This is why Europe has established the European Social Entrepreneurship Fund to help social enterprises get easier access finance and aid investors in identifying investments in social business. This EU passport has been available to investors from July 2013. To further improve access to private capital, the Regulation on Venture Capital Funds creates a new “European Venture Capital Fund” label to make it easier to market and grow this type of fund across the EU while using a single set of rules.

  3. Social Stock Exchanges are also being developed further to create a European platform that allows shares in social enterprises to be traded on a Financial Services Authority-regulated stock exchange. At the same time work is being carried out to tap into additional financing methods. In October 2013, a 'Code of Good Conduct for Micro-credit Provision' was published to enable the sector to face the challenges of accessing long-term finance. In addition, crowdfunding is growing in importance. Work is being carried out to collect more information on internet-based fundraising across Europe and to identify what added value EU action could bring.

More details on all initiatives to improve access to finance: http://ec.europa.eu/internal_market/social_business/index_en.htm

2. MORE VISIBILITY FOR SOCIAL ENTERPRISES:

  1. In order to give social enterprises more visibility, the online platform Social Innovation Europe was set up. It also helps social entrepreneurs communicate and share information on the latest events happening in the field. Another enabling tool is funding provided via Youth in Action, Erasmus and other education programmes, to educate and train social entrepreneurs in Europe. The SME Forum which was set up in 2010 achieves the same objective. The forum is a platform for dialogue and understanding between SMEs, social enterprises and financial institutions, to discuss problems each face and find ways in which they can work together for the future.

  2. At the same time, it is important to assist national authorities to understand the sector so that they can support the local and national ecosystems of social enterprise. Between 2014 and 2020, help will be provided to set up and improve schemes supporting social enterprise. The recently published 'Guide to Social innovation' will also contribute to this objective. On top of this, a mapping exercise is currently underway to give a clearer picture of the sector and gather sufficient and reliable data on social enterprises to identify potential EU actions to enhance social entrepreneurship. Subject to the results of this mapping exercise, a database comparing social enterprise labels and certifications could be created to create more transparency on the actual social impact of companies with social enterprise initiatives.

More details on all initiatives to enhance visibility: http://ec.europa.eu/internal_market/social_business/index_en.htm

3. OPTIMISED LEGAL ENVIRONMENT:

  1. To improve the legal environment, a first aspect is how authorities can take into account the specificities of social enterprises. The public procurement reform package to be adopted in early 2014 will encourage and enable public authorities to consider the full life-cycle of products in their purchasing decisions taking into account social criteria linked to the production process. In the same vein, the Services of General Economic Interest package introduced in 2011 gives more proportionality and flexibility to public authorities when providing state aid to social enterprises, by raising the threshold exempt from EU notification for public service compensations to 500,000 € per undertaking over a three-year period.

  2. Another important aspect is the offer of legal forms that can cater for the specific needs of social enterprises. This is why the Commission adopted a proposal for a European Foundation to facilitate cross-border activities of public benefit foundations. This project is currently being negotiated between Member States. Another legal form is European Cooperative Society which is already available. The Commission carried out a public consultation on how to simplify the existing statute and make it more user-friendly. A third legal form often used by social enterprises is the mutual. The Commission is currently looking at legislative and non-legislative options to see how the current situation of mutuals in Europe can be improved.

More details on all initiatives to improve the legal environment: http://ec.europa.eu/internal_market/social_business/index_en.htm

How will public authorities be able to use more social considerations in public procurement?

The new public procurement rules which are set to be formally adopted in February 2014 will introduce a life-cycle cost concept, which will encourage public authorities to consider the full life-cycle of products in their purchasing decisions.

Contracting authorities may take into account criteria linked to the production process of the goods or services to be purchased (important for work insertion companies or co-operatives).

They will have the possibility to require that works, supplies or services bear specific labels certifying social characteristics, as long as only the criteria and characteristics of the label which are linked to the subject-matter of the contract are required and that equivalent labels are accepted.

More specifically on social inclusion, the current contracts' reservation in favour of sheltered workshops (which are social enterprises) has been broadened:

  1. the exception is extended to economic operators whose main aim is the social and professional integration of disabled and disadvantaged workers (not only handicapped workers);

  2. the minimum required percentage of disabled or disadvantaged workers is reduced from 50% to 30%.

Many social enterprises provide social services. How is the regime proposed for social services being simplified in the new public procurement rules?

Social services already benefited from the simplified regime applicable to the so-called "B" or "non-priority" services". As they generally have a limited cross-border dimension, social, health and education services will now benefit from a specific and simpler regime.

They will be subject to a higher threshold (€750,000).Below this, EU rules do not apply. Even above the threshold, Member States will have the possibility to determine the procedural rules applicable, while respecting the basic principles of transparency and equal treatment. The only obligations shall consist in the publication of a contract notice and of a contract award notice.

State aid reform: why reduce thresholds from EUR 30 to 15 million? How is it going to help social enterprises?

The lowering of the threshold for notification is there to balance the extension of exemption for almost all social services. Since all state aids to social services are now exempted from notification (even those with a high threshold), it does not make sense to keep a high EUR 30 million threshold. Already with 15 million, there can be a cross-border effect as set out in the Decision on public service compensation: "Given the development of intra-Union trade in the provision of services of general economic interest, demonstrated for instance by the strong development of multi-national providers in a number of sectors which are of great importance for the development of the internal market, it is appropriate to set a lower limit for the amount of compensation which can be exempted from the notification requirement".

These reforms serve the objective of a more proportionate (lowering of the threshold) and more differentiated approach (extension of the scope for the exemption of notification).

In addition, Member States will have to make sure that contracting authorities may take into account inter alia all quality and continuity criteria they consider necessary for the services in question. Member States may also eliminate the price as the sole award criterion for such services.

What is the difference between the Social business initiative and other Commission initiatives in the field of corporate social responsibility (CSR)?

Corporate social responsibility is usually defined "as a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis."

The Commission's policy is to promote and encourage CSR, which ultimately remains a voluntary initiative of companies. Of course, all companies concerned by the Social Business Initiative will probably have very high standards of Corporate Social Responsibility.

SBI will try to provide those companies with the appropriate tools that will fully take into account their needs and specificities, and enable them to make better use of the Single Market opportunities.

Social enterprise, social economy, social innovation, social responsibility, companies, corporate governance – what is the link?

To avoid confusion, the terms social enterprise and social business are often used interchangeably, taking into consideration the variety of social business models and conceptions across Europe.

For consistency reasons, legislation on the new EU-level financial instrument supporting the development of social businesses (EU Employment and Social Innovation Programme (EaSI3) and the Regulation on European Social Entrepreneurship Funds (EuSEF4) only refer to “social enterprises”.

The key characteristic of social businesses is their primary social, environmental or community purpose, set up under a variety of legal forms, and the entrepreneurial and innovative way in which social entrepreneurs are striving to make a significant impact on society, economy and the environment.

Traditionally, the common thread for social enterprises had been ownership and use of the essential surpluses in the interest of their members or in the general interest, but not distributed to investors. These criteria are common characteristics of cooperatives, mutual societies, foundations, and associations, often termed as social economy enterprises.

Social innovation is an organised initiative of a variety of actors to tackle societal challenges when the market and public sector do not respond to these challenges in a suitable, sustainable and acceptable manner. It is about developing new forms of organisation and interactions between public, private and third sector actors and contributing to reshaping society in the direction of participation, empowerment and learning.

Social entrepreneurs have been pioneers in re-engineering supply chains and distribution networks, or developing, promoting and establishing business standards and norms for inclusive and sustainable development.

    Further background and examples are available in the European Commission's "Social Europe Guide" on social economy and social entrepreneurship.

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http://ec.europa.eu/social/main.jsp?langId=en&catId=89&newsId=1093


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