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Support for WISEs is a profit in disguise 25 March 2018

Posted by cooperatoby in social economy, Social enterprise.
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The Flemish government is wise to invest in WISEs (work integration social enterprises). Each disadvantaged person employed creates a benefit of €12,228 per person per year. This means the government makes a 52.6% return on its investment.

Social jobs (sociale werkplaatsen) is a Flemish policy that employs nearly 10,000 people in activities including catering, gardening, logistics, bicycle repair, cleaning, ironing, energy efficiency – and recycling.

The ESF Social Economy Thematic Network went to in Vilvoorde, just north of Brussels, last Thursday, to visit one of these recycling businesses, Televil, and discovered how cost-effective work integration social enterprises (WISEs) are.

Altogether, Flanders is covered by 141 Kringwinkel second-hand shops, which collectively turn over €51m per year. They collect 73,000 tons of refuse a year, and manage to reuse 32,000 tons of it. This work employs 5,423 people, of whom 85% are disadvantaged. 57% of their turnover comes from sales, with the remaining 43% coming in the form of subsidy. But this subsidy is really a profit in disguise.

A very illuminating cost-benefit analysis shows how society gains from employing disadvantaged people in recycling. Each worker employed brings a benefit of €12,228 a year. The benefits break down as follows:

    • €3,793 to the government, because unemployment benefits saved and taxes paid exceed the support costs (a return on investment of 52.6%%)
    • €5,350 to society, through the added value of the work done
    • €3,085 to the individual, because wages less the cost of going to work are greater than unemployment benefit foregone

The following table gives a fuller analysis:

Further information:
Download Samen Sociaal Tewerkstelling’s Portfolio 2018

Community wealth building through anchor institutions 3 October 2017

Posted by cooperatoby in cooperative, social economy, Social enterprise.
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A report to the British Labour Party analyses the characteristics of different forms of ownership of businesses – co-operative, employee-owned, local, municipal and national. It proposes the creation of ‘Anchor Institutions’ to promote local economic development.

Download Alternative Models of Ownership at: http://www.labour.org.uk/page/-/PDFs/9472_Alternative%20Models%20of%20Ownership%20all_v4.pdf

Further information:
A description of the work on community wealth building developed in Preston in north-West England, as part of the URBACT ‘Procure’ partnership:

Community Wealth Building through Anchor Institutions, Centre for Local Economic Strategies (CLES) can be downloaded at: https://cles.org.uk/our-work/publications/community-wealth-building-through-anchor-institutions/

Money not laws 23 June 2016

Posted by cooperatoby in EU, social economy.
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160623 EP SE report coverThe European Parliament has published a report on the social economy. I’m glad to see it features a lot of good practices we identified in SEN, like the UK’s Social Value Act and the Le Mat social franchise, although the authors seem never to have visited the SEN website.

The study packs a lot into its 120 pages. It has 6 big-country studies (DE, ES, FR, IT, PL, UK), boxes on EQUAL, DIESIS and Mondragón, and makes some interesting proposals on taking the social economy forward:
– a digital transformation – on the grounds that “The digital single market can help protect Europe’s economic and social model and increase citizens’ well-being, by being a key component of the renewal of public services”;
– indicators of added value other than GDP
– a clear definition.

So it comes up with another new definition:
“Distinctive features of the social economy can be identified – par ricochet – on the basis of what sets them apart from other enterprises. These elements include:
(i) the primacy of people: the social economy is based on the primacy of the individual and of social objectives over capital,
(ii) sustainable growth: the overall aim of the social economy activities does not emphasise the pursuit of profit and its distribution to the owners as an ultimate goal,
(iii) social and economic balance: in conducting their activities, social economy actors are engaged in a social aim and
(iv) democratic governance: social economy entities function in accordance with democratic, transparent and participatory decision-making processes.”

I think the social economy could improve service delivery by using digital tools more, and that the EU agenda should give an explicit place to them. Measures of social value are definitely needed, and the SBI as well as SEN worked on this. The main issue is for stakeholders such as public authority customers to start using them.

It’s difficult to disagree with the four ‘distinguishing features’ above, but I’m not sure they are any clearer than all the definitions we’ve navigated between so far. I fear that the again repeated call for a supposedly clear EU-wide definition misses the point. Will it enable very much to actually happen? It’s much more to the point to improve access to public funding programmes such as the ESIFs and to private investment in projects on the ground, and to help the sector’s federal support bodies to do their job. As in: “Existing social innovation and social investment programmes tend to reflect a focus on investor-led models and could be opened up to innovation based on member capital and on participatory innovation.”

See: http://www.europarl.europa.eu/RegData/etudes/STUD/2016/578969/IPOL_STU(2016)578969_EN.pdf

‘New’ social economy means non-social economy 15 May 2015

Posted by cooperatoby in social economy, Social enterprise.

Oh dear another attempt to redefine democracy out of existence.
In the footsteps of the terms social enterprise, social entrepreneurship, social business, social innovation and social investment, all of which, brandished in the wrong hands, seek to take the mantle of the social economy and depoliticise it, we now have a takeover bid for the very term social economy itself. It comes from about as far away from Europe as you can get in this world, California.
In her blog Lucy Bernholz notes that Rob Reich, also at Stanford has “coined” the phrase ‘new social economy’ to mean, wait for it:

    Organizations and financial structures that deploy private resources for shared social benefits – i.e. the sector formerly known as philanthropic, independent or nonprofit.

A presentation setting this out is here and an audio lecture about how the established model of the social economy needs to change is here.

It is simply extraordinary and leaves me speechless that the project is to redefine the social economy entirely in terms of impact investing, with nary a mention of the “social” dimension of any ownership, decision-making, production processes or impacts.

Parliament discusses intergroup agenda 15 November 2014

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The European Parliament has not yet chosen which intergroups will exist in the 2014-19 mandate, but a sort of proto-Social Economy Intergroup met on 13th November. It was well attended and discussed an agenda for the next five years.

IMG_3938 EP hemicycleIt was encouraging to see the relatively large number of MEPs present, although at mid-point a bell summoned them to a plenary vote, leaving Jan Olsson in charge. Jens Nilsson (S&D, SE) chaired the hearing, and six other MEPs intervened: Patrizia Toia (S&D, IT), Marie-Christine Vergiat (GUE/NGL, FR), Heinz Becker (EPP, AT), Sofia Ribeiro (EPP, PT), Beatriz Becerra (ALDE, ES) and Georgi Pirinski (S&D, BG).

Will there be an intergroup?

The continuation of the Social Economy Intergroup is not a foregone conclusion. Each political group has a limited number of votes to cast – 22 in the case of S&D and EPP, and 8 in the case of GUE/NGL. And they are up against some attractive competitors, as Heinz Becker reported, such as the proposed intergroups on wine, beer and hunting. It is also true that the vote may be split with other potential intergroups such as the one on public services. The vote on which intergroups will be established is set for 11th December, so let’s hope that three groups – where are the Greens? – will sign up.
Germania Viglietta, Social Attaché of the Italian EU Presidency, announced the four themes of the Rome conference next week: visibility, the legal framework, access to funding and stronger relationships with the public sector. Some 200 people are expected to attend, from 25 countries. Jan Olsson hoped for two key results: a statement supporting the continuation of the intergroup, and a roadmap for the development of the social economy.

An agenda for the next five years

There was unanimous agreement on the crying need for the social economy, above all to address Europe’s employment problem. The hearing collected priorities for future work:
For Jens Nilsson the priorities are public procurement, job creation and participative democracy. Following the adoption last year of Patrizia Toia’s report on worker take-overs, she thinks that this should be a permanent EU budget line. Georgi Pirinski suggested that the mid-term review of the Europe 2020 strategy would be a good opportunity to move the social economy up the list of policy priorities.
The perennial issue of definitions cropped up: for instance it’s an issue in Spain, where the social economy in many people’s mind equates to employment for disabled people, whereas in fact it provides 2.5 million direct jobs and is the only sector of the economy that is creating jobs. While the MEPs are happy with the concept of social economy and social entrepreneurship, they are dubious about ‘social business’.
The potential intergroup’s agenda seems to be shaping up to include:

• follow-up on Europe 2020: meaningful jobs for young people, the white and green economies
• renewal of the SBI, including the EU-wide internet platform
• public procurement: ensuring the Member States don’t close the windows that the EU has opened when they transpose the directive
• cohesion policy: a voice for the social economy in the committees that control the Structural Funds
• co-operative banks and capital adequacy
• statutes: given the lack of progress on a European Association Statute. maybe we should look at a European statute for sociétés de personnes (+/- partnerships)

Stakeholder support

The hearing gave space to two stakeholder groups which support the intergroup’s continuation. Harald Hauven of Social Services Europe pointed to the immense potential for job creation in health and social services. Michel Mercadié of the Social Platform had three priorities: clarifying the status of profit-making in social enterprises, measuring social added value, and the role of finance. He pointed out that there is a difference between hybrid financing from multiple sources, and handing over the social economy to investors. He also said that the issue on job creation is not just about quantity but also quality: jobs for whom (the disadvantaged), for what (to meet needs), where (neighbourhood renewal), how (with participation) and with whom (volunteers). The ecosystem requires the structuring of the public sector, an inter-DG structure within the Commission, an observatory and a representative forum.
The intergroup is an important forum. Watch this space.

What progressives should propose is social enterprise 15 November 2013

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Roberto UngerGood to watch Roberto Unger being grilled by Steven Sackur on the BBC’s HARDtalk last night. It was an interesting contrast of style between a deeply-thought-out political philosophy and a journalistic desire to get snappy answers to practical problems. Unger, who is a Harvard law professor and was Brazil’s minister of strategic affairs under Lula, tried his obstinate best not to be dumbed down. His analysis led me to watch his discourse on What progressives should propose.
And hey presto I am delighted to find that little I have come to some of the same conclusions as the great man. He proposes that:

    – our economies need to be based on a combination of self-employment and co-operation (18:00 in the video). He calls it “the reconstitution of free labour”
    – civil society involvement in experimental ways of providing social services (23:00 in the video) – exactly what social so-operatives and social enterprises are doing
    – politics needs to be enriched with participative democracy

It seems that we in Europe are edging towards many of his prescriptions – to find a new synthesis of the North American faith in unfettered markets and the north-east Asian command economy, by for example:

    – spreading the experimental innovative collaborative ways of production which are currently limited to the vanguard of the high-tech industries
    – encouraging localities to conduct social experiments

Michel Barnier’s grounding of the Social Business Initiative in the need to “put finance at the service of society” bears a resemblance too. Maybe social enterprise is capable of “doing the work of crisis, without crisis”.

CIRIEC in Antwerp – more theory than policy 6 November 2013

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CIMG1196-7 BoerentorenSocial Economy on the Move, the CIRIEC conference in Antwerp two weeks ago, was the first academic conference on the social economy that I’ve ever been to. Given that it was so close I couldn’t really say no – especially with €10 ‘Web Deal’ train fares on offer.
But I confess I was a little disappointed. The organisers had given space to as many promising young researchers as they could – the 48 workshop sessions each dealt with between 3 and five papers – and this meant that they each had very little time to play with. Anxious to prove their academic credentials, they tended to use most of their 15 minutes of fame to set out the theoretical model they were applying, and had no time to talk about the real world to which it referred. So not only was there no way to verify the truth of their assumptions and deductions, but I learnt very little about the state of the social economy in the wide world.
Of course the corridors and Oxford-style quadrangle of the Hof van Liere – you should not ignore the mediaeval heart of Antwerp if you have the chance to visit – did provide a place to bump into old friends and colleagues.
Thus, the main value I got from the event was the plenary sessions, held in the Boerentoren or ‘Farmer’s Tower’ – a miniature Empire State Building which was Europe’s first skyscraper, and has now passed from CERA to KBC, my bank.

Positive social value, but market regulation

On the bright side, the Belgian state certainly sees the value of the social economy. Yasmine Kherbache from the cabinet of Prime Minister Elio di Rupo reassured us that it was a misconception that policy to support the social economy has more costs than revenue – it’s just that the benefits are hard to measure in strict economic terms. She also stressed that the social economy’s role is growing: the present economic model cannot last till the next generation as it cannot cope with the issues of demographic change and the environment. “We can only progress if everyone can follow”, she said. She sees the sector’s growing relevance, noting how second-hand shops (kringloopwinkels) have been transformed from being the preserve of the poor into a resource for sustainability for everyone.
Getting down to brass tacks, she went on to justify the controversial Flemish maatwerkregeling (‘made-to-measure regulation’) which reallocates work integration subsidies according to each individual’s distance from the labour market. This reform has caused concern among WISEs in Flanders, as it makes their budget unpredictable and their financial planning very difficult. Not only that, but it puts social and conventional enterprises on the same footing. The subsidy is portable, and the worker carries it in a ‘rucksack’ if he or she changes jobs (although apparently the social economy and economic affairs ‘rucksacks’ will be different beasts, which might limit mobility).

Trust in globalised markets

Avner ben Ner from the University of Minnesota looked at how the globalisation of the supply chain is affecting the social economy.
Globalisation leads to long anonymous supply chains with asymmetric information and social distance. Businesses have greater opportunities to take advantage of this information asymmetry, so the self-regulation which the social economy practices is a valuable asset. It was asymmetric information (in the form of adulterated flour) that led the Rochdale Pioneers to set up shop in 1844. Long supply chains make quality inspection prohibitively expensive, and government regulation is out of fashion. So by quasi-regulating themselves, social economy organisations reduce the damage that globalisation causes.
His conclusions are that the social economy should focus its efforts where success is most likely: on food, on collaborative marketing, on new ways of raising capital (e.g. crowdfunding) and on new technologies.

Co-ops poised to benefit from global trends

According to Ruben Monbaillieu from MacKinsey, co-operatives’ credibility with their members means that are in a good position to benefit from four trends:

  • the rebalancing of the world economy from developed to developing countries
  • the rapidly raising old-age dependency ratio
  • ‘pricing the planet’ – factoring environmental costs into prices
  • the ‘market state’ – governments becoming active in the market

Aspects of management they need to improve are measuring their impacts and the speed with which they react to change.

The social economy as a component of social justice

Philippe van Parijs of UCL in Louvain-la-Neuve situated the social economy in a philosophical perspective. He believes that social justice has there dimensions: equality of opportunity, freedom and efficiency:

  • Equal opportunity means equal concern for the interests of all members of society – but personal responsibility means that it is up to each individual to make the most of the opportunities he or she has;
  • Freedom implies a liberal, pluralist perspective, that respects everybody’s right to seek their own conception of the good life;
  • However efficiency must also be considered: if equality leads to worst outcomes for all members of society, then we should allow injustice.

We need the market to ensure efficiency. The state’s role is to regulate the market, redistribute income and provide services such as education, health, cash transfers, justice and tax. So do we need a third sector?
Luckily the answer is “yes”, because of two characteristics:

  • its ‘marriage of trust and flexibility’
  • its facility for ‘legitimate self-exploitation’ which benefits the public

Non-profit private sector organisations are particularly needed where there is asymmetric information in markets.

The sacred hunger of social investors 5 November 2013

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The unsuspected and silent protagonist of Barry Unsworth’s (1992) novel of the slave trade is money itself – the ‘sacred’ need of capital to find a return.

Topic drift

social economy-investmentI’ve become increasingly worried by the insidious topic drift that is turning talk of social economy, via social enterprise and social business, into talk of social investment. Money has its own logic. I’ve noticed this during meetings both of foundations and of microfinancers, who are surely the most socially conscious of money managers. You start off taking about what to do with money and you inevitably end up talking about how you do it. Someone mentions risks and returns and suddenly the discussion is reframed in terms of the needs of the money itself. Who owns the money, how they got it in the first place, the rights they have over it and how you use it are suddenly irrelevant – the money itself “needs” this or that return, such and such will be impossible because investors see it as too risky… how often have you heard that?
I think this is a smokescreen. There are certainly ethical investors who want to do good with their money, and are searching for ways to do it without losing their life savings. But they are in the hands of the financial professionals when it comes to actually doing it. We’ve seen the disastrous effects that resigning control over money to bankers has had. They have dreamt up ever more abstruse formulae for minimising risk and maximising returns, built castles in the air… and when they collapsed, we have had to pick up the pieces. Result – astonishing and continually mounting inequalities in wealth, both within countries like the USA and UK, and globally.
As social finance becomes more sophisticated, it also becomes less transparent (though initiatives like Ethex help). It develops its own language and can only be discussed by specialists. This leads to the lack of accountability and the self-justifying in-crowd behaviour which has brought us the world financial crisis.

Reframing through terminology

This sleight of hand is now being applied to the social economy and social services. First, there was Commissioner Michael Barnier’s invention of the “Social Business Initiative”. Welcome though this is, I think the choice of the word “business” instead of “enterprise” was significant. “Enterprise” at least implies some sort of noble aims – to create something – while “business” implies not much more than doing a deal, from which one or ideally both parties gain. The choice of the term “social business” suggests an intention to change the underlying assumptions – it means that someone makes money out of the operation, rather than that it produces worthwhile benefits.
Money needs to find a return. In a depressed market, where do you go to find returns? You seek out those basic services that everybody needs to consume, whether they have disposable cash or not – those services that are inelastic with regard to price. They are not cyclical – i.e. they will continue to be consumed whether we are rich or poor, because our lives depend on them. Things like food, utilities, housing and social services. They will produce a steady return to investors when the market is failing to offer spectacular returns elsewhere in sectors like technology. They also have the benefit that governments are always there to subsidise them when things go pear-shaped. You then lobby to get governments to give you a slice of the action. Aditya Chakrabortti has a wonderful piece in yesterday’s Guardian showing that in 2012 the private rail operators to whom Britain’s railway system was sold off 20 years ago made a return of no less than 147% – a multiple of 2½ in a single year – on the small amount of money they have put in. The public was assured that what passengers needed was private firms who could invest in better services – but what we have is fat controllers creaming off massive profits. The public sector can run much better railways, as Directly Operated Railways has done with the East Coast Main Line – and it is to be reprivatised lest this good example should undermine the myth that private enterprise is best.
Once the SBI got under way, the practitioners – the people who are actually doing it on the ground – needed to be got on board. It became apparent that it would be no easy matter to impose an alien notion of “social business” on the relatively stable and well-rooted traditions of European social enterprise, and so the two ideas have been elided – the Commission treats them as synonymous. And the European definition includes three dimensions: not only a primary social objective and limits to profit distribution and asset disposal, but also participative management. This is a significant victory.

Why the emphasis on investment?

I’m suspecting that although DG MARKT puts the SBI forward as putting financial institutions at the service of society, there’s a double agenda: it also opens up opportunities for them to make reliable counter-cyclical profits.
At its worst, transforming public and social enterprises into vehicles for “social investment” is a mechanism to ensure a steady and relatively low-risk flow of money from disadvantaged service uses to capital owners – which is socially regressive.
Talk of business rapidly elides with talk of investment, but business is about much more than returning a stream of rewards to the people who put in the money. It’s about balance: a good business creates returns for all its stakeholders by providing worthwhile goods and services and satisfying, decent jobs.
Politicians placate us by saying that “we cannot go back to business as usual”. I fear that an over-emphasis on social investment is doing exactly that. Social enterprise is more a matter of solidarity, networking and mutual support and peer learning than it is about being able to borrow money.

Levanto – Antwerp’s red monkey breeder 24 October 2013

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CIMG1156 Levanto is a 'red monkey' (after Jef Staes)Levanto is a social enterprise in Antwerp that helps over 2,000 people each year to find their place in the labour market. It is re-engineering its management processes to tackle increasingly difficult economic conditions.
I’ve just paid a visit to the social enterprise Levanto in Deurne, a suburb of Antwerp, organised on the fringes of the CIRIEC conference. Its HQ is a bit like a Tardis – a 4-storey warehouse on a quiet residential street. Facing you as you enter is a big red gorilla, which symbolises the organisation’s innovative management style. This ‘red monkey’ (rode aap) is a symbol drawn from Jef Staes, a Belgian management thinker who talks among other things of the way the information revolution means we have to switch from ‘2D’ to ‘3D’ management. Learning organisations need to breed red monkeys, not hunt them, according to Staes.
Levanto is big business, as well as being a non-profit. It operates in a score of places in Antwerp and Mechelen, and trains over 2,000 people a year, targeting excluded groups such as migrants, young people and over-50s. It has a staff of 170, and provides permanent jobs for 370 others. It earns about 38% of its revenue of €18.6 million from the private sector, with the rest coming from the Flemish government, through a number of different schemes including the ESF. The two main programmes are:

  • permanent jobs: it operates the logistics for Antwerp’s 1,800 shared ‘yellow bikes’ and ‘red bikes’ which are seen all over the city, runs an energy efficiency service (Energiesnoeiers) and also has contracts cleaning public buildings – including specialist cleaning of the glass in the ornate Centraal Station – and with an increasing number of private firms, including builders Willemen, who built the iconic Museum aan de Stroom (MAS) which opened in 2011. On the way, Levanto has invented a new profession: recycling officer on building sites.
  • Year-long training schemes in trades including construction, logistics, carpentry and tile- and mosaic-making. Training is organised into four three-month blocks, embracing work attitudes, training (skills such as fork-lift driving but also Dutch language, arithmetic and getting a driving licence), practical issues (assignments teaching for example how to follow instructions and take initiatives), and finally external placements. In this last phase help is also given to find a job. Around 45% of trainees do find a job, and probably half of these keep it for longer than a year, while others lapse back into a periodic periods of inactivity.

A map of Levanto’s activities
A map of Levanto's activities
Enterprise architect
Levanto is the first company I’ve been to that employs its own ‘enterprise architect’, and his name is Phil Daenen.
The company’s innovative approach is based on accentuating the positive through ‘appreciative inquiry’. Its watchwords are “everybody is capable of something”, “together we accomplish more” and “innovation is key”. It therefore stresses solutions rather than problems, and works though partnerships.
To make Levanto more responsive, Phil is re-engineering the company to speed up its strategy cycle from its current yearly rhythm. He wants to make jobs at Levanto ‘active jobs’ – that is jobs which are both meaningful and challenging, which are neither stressful nor pointless, and which generate motivation and learning potential. Because at Levanto, every job has two elements: learning as well as production. This relies on all employees being able to give each other feedback, and this is a skill that has to be learnt (and shop floor workers are better at giving feedback, even if they sometimes do it harshly, than management staff!)
Closer to the market
CIMG1160 Levanto HQ, Clara Snellingstraat 27, 2100 DeurneLife is not easy working with a mixture of public and private funding. Contracts with the Flemish government come in four-year tranches, and the priorities for work integration change for each tender. So towards the end of each period, staff have to be put on notice in case their speciality falls out of favour. A further peril has just become apparent. As of January 2014, companies that are more than 50% reliant on public financing must apply public procurement rules to their purchasing, and this is going to massively increase administrative costs. These rules concern not only publishing calls for tender but also sticking to other policies such as environmental standards.
These factors are leading Levanto towards a more market orientation, even while it is getting harder to find private partners in today’s harsh economic climate. Through partnerships with other social enterprises in Ghent and Limburg it already offers a region-wide service.

SEN now on Storify 16 October 2013

Posted by cooperatoby in social economy, Social enterprise.
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I’ve just created a Storify for SEN. It may be a bit recursive at the moment, but this will change over time as news items proliferate. A tale of European enterprise and high-tech clustering: Storify was invented by a Belgian, but moved to San Francisco to be taken over by someone with loads of money!

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