EU should go all the way in supporting social enterprise

EU should go all the way in supporting social enterprise

Social Enterprise


As the European Commission prepares to outline its policies supporting social business, Jonathan Bland warns that nice words of support – as important and welcome as they are – must be backed up by action to change the rules on procurement and give social enterprises a real chance to succeed


The European Commission’s Communication on Social Business, which will set out the broad policies it is developing towards social enterprise, will be published next week.


In advance of this, social enterprise has already been identified as an investment priority in the new structural funds and around 90 million Euros have been earmarked for a new social investment instrument to support debt and equity investments. Support for social entrepreneurship has also been included in the new EU programme for Social Change and Innovation.


Tucked away in the small print of the rules governing this programme is the first ever EU definition of social enterprise; one which is likely to be used for the next seven years.


The Commission’s definition is good and very compatible with the approach developed in the UK:


‘Social enterprise’ means an enterprise whose primary objective is to achieve social impact rather than generate profit for owners and stakeholders. It operates in the market through the production of goods and services in an entrepreneurial and innovative way, and uses surpluses mainly to achieve social goals. It is managed in an accountable and transparent way, in particular by involving workers, customers and stakeholders affected by its business activity.


European Commission President Jose Manuel Barroso is hosting a major event to discuss the EU’s Social Business Initiative in Brussels on 18 November with EU Commissioners, Prime Ministers from several member states, MPs and MEPs. There will be high level endorsement for social enterprise and, I am sure, a lot of warm words.


The question is, how far can the Initiative really support the growth of social businesses on the ground?


The measures already announced are positive. However, the bigger and more sustainable step would be to recognise the unique role social enterprise plays in the economy and society. The people who create social enterprises do so for public benefit, not to maximise their private profit.


The benefits of economic growth through free market competition across international borders don’t reach EU citizens who have lost their jobs or are socially excluded. Indeed, EU competition policy is often at odds with EU social policy.


Competition rules that were designed in the last century for the motor industry are now being assiduously applied to areas, like health and care, where different approaches should be used.


The application of the rules on state aid and procurement kill social innovation and are holding back the reform of public services. They are also a block on tackling social exclusion and supporting the creation of employment.


European regulations should clearly recognise the public benefit provided by social enterprises and make exemptions from competition rules in the early stages of their development (for example for public sector spin-outs) and in certain areas such as investment in local community economic development. This would lead to better solutions to some of the challenges facing us, which require a shift to a new 21st Century paradigm. This doesn’t mean social enterprise should be exempt from competition per se – after all, the whole idea is that they are businesses that trade in markets.


However, does the left hand know what the right one does?


Social enterprises need support to get going. Public service markets and government investment policies should be regulated in a way that matches policy intentions regarding public benefit.


Later this year DG Markt (The Internal Market and Services Directorate General at the European Commission) will publish its proposals for reform of the procurement directive. It should use this as an opportunity to back social business.


Jonathan Bland is the founder of Social Business International, was the founding CEO of Social Enterprise UK and is involved as an advisor on social business to a number of leading policy makers across the EU.


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