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Money is not enough – the Active Europe conference in Kraków 22 September 2011

Posted by cooperatoby in EU, social economy, Social enterprise.
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I spent the week before last in Kraków at the 2nd ‘Active Europe’ conference, organised by FEBEA, the European Federation of Ethical and Alternative Banks. I co-chaired, along with Hugues Sibille of Crédit Coopératif, a workshop on public procurement and social enterprises. The conference attracted large contingents not only from host country Poland but from France, including such luminaries as ex-regional policy commissioner Danuta Hubner, current commissioner Janus Lewandowski (by video), professor Jerzy Hausner and minister Michal Boni, adviser to the Polish Prime minister.

One of the hardest-working speakers was Raymond Maes, head of the unit in the employment DG that is responsible for microfinance and social enterprise. He made the point that the forthcoming EU financial framework is not all about austerity – in fact it increases the social and education budgets. The Social Business Initiative, which will be launched in October with the backing of three DGs, recognises the crucial role that social enterprise and the social economy have to play in ensuring that growth is inclusive. The SBI will address three barriers to social enterprise growth: finance, visibility and legal recognition:

  • On the first point, the Commission intends to give concrete support to social enterprises not only through a dedicated investment fund, but also through gearing up the ESF and ERDF;
  • The second issue covers not only labelling but measuring social impact;
  • On the last point, the proposed definition turns on the social nature of the enterprise’s mission, rather than its legal form.

The challenge, he said, is to keep up the political momentum.

The conference drew stern conclusions regarding banking regulation post-crisis. On the one hand the Basel III directive could prove fatal to ethical banks, as it would practically double the capital they are required to hold. On the other hand a sort of European CRA (Community Reinvestment Act) could be helpful, by strengthening the involvement of local associations in banking. Regarding procurement, the social economy is clear that the simple criterion of the cheapest price is inadequate to the task of ensuring that public spending creates social value. Member states are already free to use tools such as social clauses and reserved markets, and these need to be taken up more widely. The main problem is that the people who take the decisions are risk-averse. Training is needed, as well as a more assertive approach by social enterprises to public markets.

Two new tools help more rational buying decisions

The event gave the Polish regional development ministry a hook upon which to hang a seminar of the BFSE (Better Future for the Social Economy) network. This seminar looked at two tools that have been developed to enable a more holistic approach to procurement. The first is the BFSE tool for measuring the social added value of social enterprises, developed in Lombardy. It is based on accounting principles (e.g. verifiability, credibility, comparability) and assesses 11 dimensions (e.g. economy, innovation, equal opportunities) according to indicators, numeric or logical. Each dimension is scored and the average is calculated.

The second is more controversial: a methodology for carrying out a cost-benefit analysis of socially responsible public procurement. This model has been developed by the Bundeswehr University in Munich – yes, that’s right, the German army’s own staff college! It takes the seven aspects of social responsibility set out by the European Commission – employment, decent work, SMEs, inclusion, fair trade, accessibility and CSR – and breaks each of them down into 15 decisions. It does not attempt to monetise these factors. The lawyers say that decisions based on the model might not stand up if challenged in court – but I don’t see how they can be less solid than the many case-by-case decisions that are already taken to justify purchasing decisions based on the MEAT (most economically advantageous tender) criterion.

Regions are innovating in the way they procure

A second workshop in the main conference looked at the way regions can take action to get better value for money by involving social enterprises in delivering public services. The Marche region of Italy has stolen a march on the rest of Europe by abolishing the “cheapest offer” and takes social added value into account when assessing bids. The commune of Forest/Vorst in Brussels is also developing legislation to implement social clauses.

Proposals for a new social investment facility

Following the conference, a further side meeting brought together social and ethical banks to discuss a proposal brokered by the Euclid network to establish ESIF – a European Social Investment Facility. In outline, the facility would act as a ‘double multiplier’ for an initial sum allocated by the European Investment Bank: the European public sector money would attract matching both from the national and regional level and from the private (and social economy) sector. The EIF has already set aside €50m, and intends to follow the model of the European Progress Microfinance Facility (EPMF) launched last year, in that it will invest in funds that in turn invest in social enterprises. However it intends only to do so by means of equity, whereas some of its potential customers see a need for other sorts of money such as guarantees. A further debatable issue is whether the facility should fund risky ventures by means of grant as well as loan. There is a lot of enthusiasm for joint action, and the result of the discussions was that a collective response has been made to the Commission’s consultation on social investment funds. Fuller report

ESF learning networks

At the conference’s final plenary, my private conclusions were that if our aim is to promote inclusion as well as prosperity, then investment capital must be seen as just one part of a broader strategy for inclusive and social entrepreneurship. And we need to focus less on individual entrepreneurs and more on social entrepreneurs. We have a job to do to build inclusive and social entrepreneurship strategies in the EU’s member states. There are as it happens two networks already doing this within the European Social Fund: COPIE in inclusive entrepreneurship and BFSE in the social economy:

  • COPIE is working to improve the reach and quality of entrepreneurship education, business support and microfinance;
  • BFSE is addressing five issues that are key to the growth of social enterprises: state aid and SSGIs, public procurement, measuring social added value, social franchising and finance. [It was succeeded in 2013 by the Social Entrepreneurship Network – SEN.]

Both networks will finish their work in 2012. Hopefully they will not only go out with a bang but will give rise to a broader network in the 2014-2020 programming period.

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