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Half the truth – a technocratic view of social enterprise 24 September 2013

Posted by cooperatoby in EU, social economy, Social enterprise.
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Having commented on the draft, I just read the OECD’s Policy Brief on Social Entrepreneurship, written for the European Commission. My main criticism is that it is too technocratic. I would be the last person to say that government policies are unimportant, but that’s not the whole story.

Its headline recommendations are that policies to create an enabling ecosystem should focus on:
• promoting social entrepreneurship
• building enabling legal, regulatory and fiscal frameworks
• providing sustainable finance
• offering business development services and support structures
• supporting access to markets
• supporting further research into the sector
So far, so good. The perception that we need an ecosystem is vital. Social enterprises are a living movement, not the creation of regulators.
The vital role of federal bodies
It analyses the main barriers to social enterprise creation as relating to:
• legal and regulatory frameworks
• financial resources
• access to markets
• business support and development structures
• training
What I’d say is missing here is any recognition of the movement aspect – the way social enterprises support each other, and the importance of federal bodies in encouraging new initiatives and sharing knowledge and skills. Business is not a logical mechanism that but a social phenomenon after all. Social enterprises will not spring up automatically given the right incentives, they respond to nurturing.
Culture and business support services should not be thought of in separate boxes – they are components of the same ecosystem. Public polices can encourage this networking and nurturing – by giving support to federal bodies that support the values of social entrepreneurs and give them useful contacts, knowledge and skills.
Partnership in policy-making
The brief mentions consortia, business and employment co-operatives and co-operative development agencies (p. 11). It is also most welcome that the brief approves of the co-construction of policy by government and the social economy.
Promising types of finance
If the problem is finance, the brief picks out seven alternatives to public finance:
solidarity finance
Here’s an interesting initiative: “In France, a dedicated regulation was set up in order to boost solidarity finance. Since January 2010, it is man¬datory for each French company with more than 50 employees to provide a socially-oriented pension scheme to its employees. These pension schemes (FCPES – Fonds Commun de Placement d’Entreprise Solidaire) invest 5 to 10 % of their assets in social enterprises or social funds. As of end 2011, socially-ori¬ented pension schemes accounted for more than €1.7 billion, of which more than €110 million was invested in social funds or social enterprises. As pension fund managers fre¬quently do not have any experience in financing and investing in social enterprises, most of the €110 million goes to social funds such as Comptoir de l’Innovation (CDI) for investment.”

  • venture philanthropy – patient capital looking for a blended return
  • institutional investment e.g. pension funds – usually into dedicated funds, hence the invention of the EuSEF. France, the USA and Canada are moving on this
  • individual investment – both by rich people and the general public
  • quasi-equity and equity instruments – 5-10-year loans that bear some of the risk of equity, useful for investment in things like property
  • ethical or social capital markets – the quest to launch a social finance exchange continues
  • crowdfunding – there are now over 500 platforms raising €3 bn a year, 10% of which is for social projects

It mentions the value of public-sector guarantees to bring private investors out of the woodwork, and Poland’s Human Capital ESF OP, but oddly it doesn’t mention new ways of using the EU’s Structural Funds, for instance to capitalise social co-ops as it being done in Lombardy.
Some glitches
A lot of the examples are from France, where the OECD is based and where the social economy is very institutionalised. And I was surprised to find (p. 8) the statement that CICs have an advantageous tax treatment. They don’t (yet), although they may get relief from local rates at the discretion of their local authority.
The policy brief is downloadable at: http://ec.europa.eu/social/main.jsp?catId=738&langId=en&pubId=7552

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