Social market economy and social enterprises in the European governance

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From its inception, the European Union has been striving to pursue the social-market economy’s concept in the member states’ development and national growth patterns. Therefore, the so-called social enterprises are presently playing increasing role in the EU-wide and states’ economy by prioritizing social, environmental and climate mitigation goals alongside creating substantial profits.   

     The social enterprise’s approach assists in driving sustainable and inclusive concept in national economic development, particularly in regional and local communities by creating social-type innovative start-ups and hubs; the so-called “social enterprises, SEs” are already creating an important development sector with significant economic potential.
In some EU member states with long-standing traditions in this area, like for example in Scandinavian countries, the “social economy” already represents about 10 percent of paid employment and over 10 percent of national GDP.
At present, more than half of the EU states have already specific governance’s systems, policies and legislation to support the social-type economy; however, the SEs activity has been unevenly represented across the EU-27. However, ever more European states have already a number of “tools” to strengthen the social economy’s development, including for example favorable taxation, public procurement and labour market policies.
Source: https://ec.europa.eu/commission/presscorner/detail/da/speech_23_3259

     There are presently about three million social economy entities in the EU-27: their economic activities are oriented towards such main purpose as providing increased number of goods and services to the communities at large helping to create more inclusive and sustainable societies and economies. These activities include a vide number of local and national economy sectors providing innovative solutions to improve quality of life, e.g. in recycling, which helps to save resources, materials and energy, the social enterprises are at the forefront. Besides, the SEs are creating and retaining quality jobs; they are contributing to social and labour market inclusion, boosting social innovation and providing opportunities for under-represented groups in society.
Young people increasingly prioritise pursuing careers with a positive social and climate impact. Social entities can help them to fulfill their ambition.
Recently, the Commission approved some additional proposals (in the form of recommendations to the member states, build on the Commission’s 2021 action plan) with guidelines to promote the social economy by:
a) creating favourable conditions to help the SEs to flourish;
b) facilitating the start-up and scaling of social enterprises to encourage social innovation, for example, by creating hubs or clusters; and
c) raising the social economy’s visibility and awareness of its potential.

     From the EU governance structures, the Employment and Social Innovation (EaSI) program represent a EU-wide financing instrument to promote a high level of quality and sustainable employment, guaranteeing adequate and decent social protection, combating social exclusion and poverty and improving working conditions.
More: https://ec.europa.eu/social/main.jsp?catId=1081&langId=en

Boosting social economy
The EU-2030 social development headline targets include such priorities as raising employment while reducing poverty and social exclusion. In the new recommendations, the Commission invites the member states to design and carry out comprehensive strategies to create an appropriate environment for the social economy to thrive.
The following directions, such as improving access to public and private financing, as well as facilitating markets and public procurement shall acquire some priority:
= Taxation policy can play a significant part in promoting the social economy and making sure that social economy entities can afford to operate alongside mainstream businesses.
= On funding: while public funding will continue to play a main role in financing social economy projects, there is much more that the private sector can do to support projects and businesses with a social impact.
= Financial markets: the EU aim is to make sure that financial and capital markets embrace social objectives and develop specific financial instruments to assist SEs.
To boost social enterprise, 16 EU countries have adopted new legislation during the past decade and 11 countries have created explicit policies to support its development, according to a new synthesis report ‘Social enterprises and their ecosystems in Europe’.
Social enterprises, being part of the social economy, are a dynamic element of the European economic landscape. They help to: create jobs, innovate in welfare provision, provide opportunities to participate in economic life, and help demographic, green and digital transitions.
The number of social enterprises in Europe is growing and their business models and fields of activities are getting more diverse. This is a result of both bottom-up developments as well as of policy measures and programs initiated by governments.
https://ec.europa.eu/social/main.jsp?catId=89&furtherNews=yes&newsId=9534&langId=en
The characteristics of social enterprises differ a lot from country to country concerning their number, size, legal forms and fields of activities. To create a clearer picture, the Commission has carried out a series of studies, mapping the reality of social enterprises in the 35 European countries using a common definition and approach. This EU level synthesis report collates and interprets the key findings from country reports and draws a European picture of social enterprises and the environments in which they operate, the “ecosystems”. The report brings together a comprehensive picture of different country traditions, salient trends and key EU-wide challenges; the “synthesis report” places social enterprises in their societal and economic context by explaining their relation to different welfare state traditions in Europe.

    An important report’s finding is that only specific legal frameworks are effective in supporting social enterprise development, whenever they recognise and support their full spectrum and potential; on the other hand, too narrow legal frameworks can limit the SEs development and economic attractiveness.

More in “Social enterprises and their ecosystems in Europe: comparative synthesis report” (2020) in: https://ec.europa.eu/social/main.jsp?catId=738&langId=en&pubId=8274

Social-type investment’s example
French eco-investment company LITA.co was created in 2015 to assist “revolutionary start-ups, scale-ups and SMEs” with financial resources to “service common good”. It is one of the first European investment platform (co-funded by the EU) dedicated to social enterprises and sustainable development with over €120 ml already collected. Through investments it creates new marketplace for participants in sustainable economy growth with responsible entrepreneurs (so-called eco-minded) addressing social and environmental challenges.
More in: https://fr.lita.co/en

    Large part of investments – over half of the total – is dedicated to early-stage enterprises (below € 500 thousand) to overcome the market failures in the financial market for social enterprises. LITA.co believes in the ecosystem strategy (i.e. sustainable entrepreneurship) and offers a complete solution for all types of social entrepreneurs.
Since its creation 7 years ago, it has developed a strong expertise in innovative economic models and project guidance through business plans and impact strategy; it was able to fund 43 social-entrepreneurs, “sensitized” more than 8 000 participants through 70 events. Through its branches in Italy, Belgium it has developed the online platform assisted by the European crowd-funding regulation (2023).

    Additional on LITA.co project in: https://ec.europa.eu/info/funding-tenders/opportunities/portal/screen/opportunities/projects-details/43254019/101101801/ESF

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