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Defining the indefinable 15 December 2012

Posted by cooperatoby in social economy, Social enterprise.

Social enterprise, social business, the social economy… People sometimes use these terms to mean what they want them to mean, and/or to make a political point. The constant and healthy evolution of organisational forms can exacerbate confusion. Here is my simplified guide through the maze of allied terms. They are a fugue on the theme of using business means – producing goods or services and selling them in the market – to achieve social objectives.

Social entrepreneurship: this is the process of undertaking a business venture in order to achieve social goals. It uses the same methods as conventional entrepreneurship, and aims to trade profitably (otherwise it would go bankrupt), but its profits are applied not to enrich the principals or reward financial investors, but to solve societal problems. The term emphasises the role of inspired individuals in achieving social progress.

BFSE final conference, 26 Jun 12, Brussels

BFSE final conference, 26 Jun 12, Brussels

Social economy: this term is usually used to denote four families of organisations which have legal structures specifically designed to encapsulate business carried out for social ends: co-operatives, mutuals, associations and foundations. The first three emphasise democratic control by members, and all four of them place limits on profit distribution. The first pair trade for the benefit of their members, while the latter pair, if they trade, trade for the benefit of the community at large (the general interest). The advantage of these legal forms is that they entrench the principles of non-profit distribution, ensuring that profit is applied to the enterprise’s social objectives. Co-operatives do have the power to distribute a dividend to members, but this is not a return to capital; rather it is a rebate related to the trade members do with the co-operative. The Enterprise DG has a webpage defining the social economy.
A fascinating chart of what actually makes up the social economy is given in Monzón & Chavez’s presentation at the EESC conference on 3 Oct 12.
Solidarity economy: this term denotes more ‘grassroots’ economic activity that respects the principles of meeting social needs through participation and economic democracy, as a reaction against the institutionalised nature of the mainstream social economy.
Social enterprise: This term was coined to describe businesses which are created to meet social needs, but do not take one of the established social economy forms: for instance they may be sole proprietorships, partnerships or share companies. In this sense, their profits belong to their owners and can in theory be distributed to them. In the UK, the specific form of a community interest company (CIC) was invented in 2005 to avoid this by capping dividend distribution and imposing an asset lock. Latterly some commentators have sought to dilute the principle of non-profit distribution by for instance insisting that up to half of profits may be distributed. The Enterprise DG also has a webpage defining social enterprise, based on the EMES definition.
Social business: this term has arisen most recently, and is in practice the same as ‘social enterprise’. In its leaflet promoting the Social Business Initiative, the European Commission offers the following joint definition:
A social business/social enterprise is an undertaking:
• whose primary objective is to achieve a social impact rather than generating profit for owners and shareholders;
• which uses its surpluses mainly to achieve these social goals;
• which is managed by social entrepreneurs in an accountable, transparent and innovative way, in particular by involving workers, customers and stakeholders affected by its business activity
It thus emphasises the innovative and governance aspects rather than non-profit distribution.
Social business enterprise: this term is used by Mohammad Yunus of the Grameen Bank, who has founded a number of enterprises which follow the principle of ‘no loss, no dividends’ – i.e. they apply their profit to return capital invested, but do not go beyond that to pay a return on investment. There is thus no essential difference from ‘social enterprise’.
Corporate social responsibility (CSR): this means the voluntary contribution to social objectives that some companies make, without challenging their fundamental purpose of making profits to reward capital. These contributions may take various forms: not only cash donations but staff volunteering, matching staff’s individual donations, donating goods, loaning premises etc.
Social co-operative: a family of co-operatives that has grown up since the 1980s under Italian leadership. Social co-operatives have two special characteristics. Firstly they address the issues of health and social welfare and/or unemployment and exclusion, and secondly they have multiple stakeholders, for instance unemployed ex-offenders, professional hoteliers, carers and volunteers.
Social exclusion: processes in which individuals and entire communities of people are systematically blocked from rights, opportunities and resources (e.g. housing, employment, healthcare, civic engagement, democratic participation and due process) that are normally available to members of society and which are key to social integration. The outcome of multiple deprivations that prevent individuals or groups from participating fully in the economic, social, and political life of the society in which they live. (Wikipedia)


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