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The necessary convergence between Social Economy and Social Enterprises

Several documents of important international organisations have considered Social Enterprise as an integral part of the Social Economy. These include the European Commission’s Action Plan for the Social Economy (SEAP) (SWD/2021/373 final); the Resolution on Decent Work and the Social and Solidarity Economy of the International Labour Organisation (ILO); the Recommendation of the Organisation for Economic Co-operation and Development (OECD) on the Social and Solidarity Economy; and the Recommendation of the International Labour Organisation (ILO) on the Social Economy and the Social Economy; the Organisation for Economic Co-operation and Development (OECD) Recommendation on Social and Solidarity Economy and Social Innovation (OECD/LEGAL/0472), both from 2022, and the United Nations Resolution on Social and Solidarity Economy for Sustainable Development (A/RES/77/281) from 2023.

The SEAP stresses that “Social enterprises are now generally considered to be part of the social economy”. The ILO Resolution states that “depending on national circumstances, the Social and Solidarity Economy includes cooperatives, associations, mutual societies, foundations, social enterprises, self-help groups, and other entities operating in accordance with their values and principles” (II.5).

The OECD Recommendation proposes to its members and adherents to design legal and regulatory frameworks suitable for the social and solidarity economy, highlighting the need to “recognize and promote, where appropriate, different legal forms for social economy organizations, especially new types such as social enterprises” (3.c).

Regarding the field of the social and solidarity economy, the United Nations Resolution recognizes international diversity but emphasizes that the sector undoubtedly includes cooperatives, associations, mutual societies, foundations, social enterprises, self-help groups, and other entities that operate according to their values and principles.

The concept of social enterprise emerged in the early 1990s, associated with non-conventional entrepreneurial dynamics, in response to the new challenges that emerged with the crisis of the welfare state, namely the progressive difficulty in obtaining sufficient resources to meet growing social needs, as well as the inability of traditional macroeconomic and employment policies to address new social needs, especially employment, participation, and social protection.

The implementation of these entrepreneurial dynamics has varied according to legal systems, ranging from the creation of specific legal forms through the adaptation of the cooperative, mutual, association, or foundation model, to the use of existing legal forms, including those used by conventional businesses, such as limited liability companies or public limited companies, or legislative solutions that provide a legal status that can be acquired by various legal forms, from non-profit to for-profit organizations.

The role of the European Union institutions in this movement deserves to be highlighted. Through various initiatives, they have conceived the concept of the social enterprise in dialogue with the already consolidated concept of the social economy.

One of these initiatives is the “Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee, and the Committee of the Regions — Building an economy that works for people: an action plan for the social economy (PAES).” In this document, on the one hand, there is a clear recognition of the holistic nature of the social economy, given the diversity of legal forms that make up this sector, and, on the other hand, a clear preference for an open delineation of the entities that make up the perimeter of the social economy. Indeed, the PAES includes in this perimeter, in addition to the legal forms corresponding to the traditional catalog of social economy families (cooperatives, mutual societies, associations, and foundations), social enterprises with the legal form of commercial companies.

The paths followed in the various countries that have already legislated on social enterprises are essentially of two kinds: the creation of special laws to regulate social enterprises (solution adopted in Finland, the United Kingdom, Slovenia, Denmark, Luxembourg, Italy, Latvia, Slovakia, Cyprus, and Lithuania); or the integration of social enterprises into social economy laws (solution adopted in France, Greece, and Romania). Whichever approach is taken, it is recognized that there is no single legal form for social enterprises, which may operate as social cooperatives, mutual societies, associations, foundations, or commercial companies.

In general terms, and considering this legislative mosaic, and the various international and European Union documents, social enterprises should be understood as entities of a private nature, autonomous and independent from the state (although they may involve the participation of public entities), that necessarily incorporate three dimensions: social, economic, and governance, and are governed by the guiding principles of the Social Economy, thus being intrinsically linked to this sector.

The social enterprise has a clear social mission which, in accordance with French legislation, must be reflected in its statutes, and translates into the pursuit of the general interest of enterprise and/or the professional integration of people with employability difficulties. Under Polish and Italian legislation, this social mission is realized through the development of specific activities with social impact, in the areas of social services and goods, culture, environment, education, territorial cohesion, and local development. Since they do not seek profit maximization as their main objective but rather efficiency in the use of available resources to pursue general interest objectives, a percentage of the profits must necessarily be reinvested in the social mission, as provided in the statutes (these percentages vary between 50% in Italian legislation and 80% in Cypriot legislation).

The form of organization and ownership must be based on democratic, participatory, transparent, and responsible principles. The organizational model adopted must guarantee the participation and representation of members, workers, customers, and other stakeholders in management and decision-making processes. Transparency in governance must be ensured through the public availability of accounts and social impact assessment processes.

A fair remuneration policy must be adopted, limiting, for example, the gap between the highest and lowest salaries. Suppliers must be selected based on social and environmental sustainability criteria, as required in French legislation.

These characteristics and requirements confirm the convergence between the social economy and social enterprises, which is why the path that seems most appropriate to me, in legislative terms, will be to recognize social enterprises as entities of the social economy.

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CIRIEC-International CIRIEC-España Social Economy Europe Ministerio de Trabajo y Economía Social Unión Europea