The European Commission will publish its Communication on Social Business next week, setting out its social enterprise policies.
Social enterprise has already been identified as an investment priority in the new structural funds and about €90m (£79m) have been earmarked for a new social investment instrument to support debt and equity investments. Support has also been included in the new EU programme for social change and innovation. Tucked away in the small print of the rules 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 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.
President Barroso is hosting a major event to discuss the 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. 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 past 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 hamper 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 paradigm. This doesn't mean social enterprise should be exempt from competition, afterall, the whole idea is that they are businesses that trade in markets.
However, social enterprises need support to get going. Public service markets and government investment policies should be regulated in a way that matches policy intentions on public benefit. Later this year DG Markt will publish its proposals for reform of the procurement directive. It should use this as an opportunity to back social business.
Jonathan Bland runs Social Business International which specialises in knowledge transfer and innovation in the field of social enterprise. Email Jonathan Bland
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