Social enterprise sector hoping European Commission opens its wallet to boost the ecosystem

Social entrepreneurship is rising on the European political agenda, pushed by the pandemic. We look ahead to the European Commission upcoming action plan for the social economy.

The Body Shop is one of the early social enterprises in Europe. Harold Versteeg / ANP

In short

There are 2.8 million social economy enterprises in Europe, representing around 10 percent of all businesses in the EU.
In December 2021 the European Commission is to present an Action Plan for Social Economy, aiming to boost the contribution of social economy organisations to fair and sustainable growth.
European social entrepreneurs expect the action plan will give visibility to the sector and will hopefully provide incentives and funding needed to improve the impact of the social economy.

The European Commission will present its action plan for the social economy in December. The action plan also needs to be seen in the bigger context of initiatives coming from the European Commission focused on sustainability, such as the sustainable finance strategy, the non-financial reporting directive, actions and funding towards social and green procurement, and a potential social taxonomy.

For the first time in ten years, so expectations are high. The plan has no legislative power. It's up to the member states to come up with their own legislation. However, incentives and funding can still make a big difference. The aim is “to enhance social investment and social innovation and boost the potential of social enterprises to create jobs.”

The action plan will be important in providing incentives to member states to adopt national strategies on a social economy, according to Veerle Klijn, Head of Policy and EU Relations at Euclid Network, which brings together organisations that support social enterprises and impact-driven leaders in Europe.

It is also key for the visibility of social entrepreneurship, Klijn told Impact Investor. And then there is the issue of financing: What funding is made available to stimulate the sector is a tangible output that we are all waiting for, she said.

Differences between countries

Studies of previous EU actions to stimulate the sector show that EU funding has been a real game changer and has enabled many countries and regions to adopt social enterprise or social economy strategies, said Miia Rossi-Gray, policy officer at the employment department of the European Commission, at a webinar on the new action plan organised by European Venture Philanthropy Association in June. Rossi-Gray is part of the team in charge of preparing the action plan.

While more than 13.6 million people – about 6.3% of the employees in the EU – work for social economy enterprises, the numbers vary among the member states between 0.6% to 9.9%.

“This really indicates that in many member states there is a major untapped economic potential, including job creation,” Rossi-Gray said. This is according to her the reason why the EU Commission is putting forward an action plan on social economy.

Euclid Network hopes that the Commission will support the ecosystem across Europe. “We really hope that the action plan will conclude a funding mechanism to support national social enterprises networks or representative bodies,” Klijn said.

While some countries have ‘beautiful national networks’ that receive national grants, there are still around seven member states that do not even have any national network for social enterprises yet, she explained.

Public-private partnership essential

The European Venture Philanthropy Association (EVPA), comprising more than 300 social impact organisations, has actively pushed five recommendations to the Commission. For them, too, funding is essential.

“We must mobilise capital towards impact in order to maximise impact,” Bianca Polidoro, Senior Policy and EU Partnership Manager at EVPA, told Impact Investor. “This is the most important thing.”

The EVPA also calls for more data on social enterprises and their impact. Impact measurement and management is needed to avoid green and social washing.

Public and private actors also need to engage each other more, according to Polidoro. “It is fundamental that the private and public spheres communicate much more. My big hope, but what I see also as a challenge, is really trying to boost and make this collaboration between public and private efficient,” she said.

Common definition of social enterprises

The European Parliament is another actor that has been pushing the European Commission to take action on the socio-economic transition in the union. Monica Semedo, a politician from Luxemburg and part of the liberal political group in the Parliament, is one of the Chairs of the Intergroup on Social Economy.

“We have called for a definition of social economy enterprises. This will support member states in developing the social economy through legislation and policies,” Semedo said.

The regulatory differences between countries form a major obstacle for social enterprises to expand abroad. Having mutual recognition between member states of their respective social economy legal forms will make it easier for social enterprises to operate across borders in the single market, Semedo said.

Window of opportunity

For Veerle Klijn at Euclid Network the social economy action plan comes at a crucial time.
“We’re talking about inclusive recovery after Covid-19. After the financial crises there was also a lot of talk about business as usual failing us, but what we got in the end was a continuation of business. Covid is horrible but it is also a window of opportunity. I really hope this action plan can support and retain the momentum about doing business differently post Covid-19,” she said.