Twenty European countries have specific legislation on social enterprises, according to a report by the European confederation of industrial and service co-operatives (Cecop.)
Conducted by Professor Antonio Fici, the publication focuses on the impact of the European Commission’s Communication on Social Entrepreneurship of 2011, which is known as the Social Business Initiative (SBI).
What is a social enterprise?
The report points out that while the term “social enterprise” has been increasingly used to designate a particular type of private organisation, a universally recognised and commonly shared precise definition of SE does not yet exist.
The SBI mentioned the three key dimensions to describe a social enterprise:
- the main objective is having a social impact rather than making a profit for their owners or shareholders
- profits are primarily used to achieve social objectives
- the enterprise is managed in an open and responsible manner and, in particular, involves employees, consumers and stakeholders affected by its commercial activities
Specific laws on SEs began to be approved in Europe in the 1990s. However, following the publication of the SBI communication, there has been a significant growth in the number of national laws institutionalising SEs. In terms of ad hoc legislation, at least 20 EU countries (still including the UK in this list) have specific laws on SEs, says the report.
Two types of SE laws
Existing legislation on SE can be split in two categories: laws according to which the SE is a particular type or sub-type of legal entity and laws according to which the SE is a particular legal “status”, “certification” or “label” that only entities meeting certain requirements may acquire, regardless of their legal form of incorporation.
Laws belonging to the first group provide a specific legal form of incorporation for SEs, which is distinct from all the other legal forms and usually constitutes a special sub-type or modified type of either a shareholder company or a co-operative. These include social co-operatives and similar legal denominations, such as collective interest co-operatives, social solidarity co-operatives or community interest companies, and can be found in Croatia, Czech Republic, France, Greece, Hungary, Italy, Poland, Portugal, Spain, Belgium, and the UK.
Under laws belonging to the second category, entities may be incorporated under various legal forms (of a shareholder company, a co-operative, an association or a foundation, depending on the jurisdiction), provided they meet the relevant legal requirements for qualification. This sort of legislation may be found in many member states, such as Denmark, Finland, Italy and Romania.
The report also looks at the establishment of SEs in the co-operative form under a legal denomination of “social co-operatives”. The paper considers social co-operative to be co-operatives with a non-mutual purpose. It gives the example of Belgian law, where co-operatives may be accredited as social enterprises if their “main objective is not to provide their shareholders with an economic or social advantage, in order to satisfy their professional or private needs”, but “to generate a positive societal impact for human beings, the environment or society”.
“Whilst a social co-operative’s main purpose is similar to that of an SE, its organisational structure remains that of a cooperative,” explains the report.
One of the report’s main finding is that the SBI Communication of 2011 has strongly influenced member states’ legislation, inducing at least 12 MSs either to adopt ad hoc laws on SE or to adapt the existing legislation to the concept of SE embraced by the EC, in at least four other members states there are pending proposals of law which go in the same direction.
As a consequence, after a first generation of SE laws based exclusively on the co-operative legal form (the season of “social co-operatives”), a new wave of laws on SE began to appear in the EU.
This legal framework has determined the legal recognition as SEs of organisations other than social co-operatives, including shareholder companies meeting the necessary legal requirements.
The research argues that the co-operative should continue to be considered the most adequate legal form for SEs, and the SE incorporated as a co-operative should be seen as “the most virtuous form of social enterprise”.
The publication argues that the SE in the co-operative form deserves specific attention and treatment by legislators, as the co-operative SE adds the values of the co-operative organisational model to those of all the other social enterprises. “To convince legislators of this fact represents a new challenge for the co-operative movement,” concludes the paper.
The full report is available on Cecop’s website.