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Social innovation is more than start-up support 8 March 2016

Posted by cooperatoby in EU.
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The BENISI project aimed to identify 300 social innovations and help them to scale up. But faced with the enormity of this task it seems to have fallen back on promoting start-ups, without assessing whether they are either social or innovative.

I’ve just come back from the BENISI final conference and I have to say I am disappointed. I encountered at least two circular arguments, and ended up quite unsure whether the project was promoting social innovation, social enterprises or just start-ups.

A circular notion of growth

Firstly, the presentation of the project’s outcomes was couched in purely economic terms. It measured whether a business had scaled up by whether its revenue hadP1000111 BENISI grown – and then reported that one of the requirements for growth was financial investment. An unsurprising deduction. Even less surprising is that innovations that generate revenue are easier to scale. The only social outcome reported was employment growth, which is a by-product of revenue growth rather than a social outcome in itself. Social impact can grow even without revenue growth – for instance if a better method of delivering social services was replicated. If it was more efficient, revenue might even fall. In fact many ‘social innovations’ rely on using IT to cut the cost of service provision, and along with it cut the jobs they provide.

A circular notion of impact

Then there was the workshop on impact measurement, in which I was astounded to be told that the three factors making for impact are the values of its workers, the corporate culture and the management methods. That’s all very well, but these are not indicators of impact. They are drivers of impact, or as another participant contributed, indicators of a capacity to achieve impact. Impact is what happens in the outside world, and is about improved quality of life for the enterprise’s intended beneficiaries. Intention should not be confused with success.
Regrettably values, culture and management are not enough – witness how many social enterprises run by the best-intentioned value-led people you could possibly imagine nevertheless go bust and fail to achieve any impact.

Where’s the evidence?

Maybe BENISI could not have been expected to prove scaling in a 3-year timeframe. Maybe the project has served its purpose in making social innovation visible to a larger number of people – reportedly 14,000 have been reached.
But there is deep confusion over what the object of the exercise was. The discourse was about social enterprise, but no one is measuring these enterprises’ social impact – or at least the summary report did not attempt to make any sense of what social impacts the 300 projects did report. Surely one must at least one of them must have got some clients into jobs, or taken x tons of poisonous heavy metals out the waste stream, or housed some poor people, or cut its energy consumption, or even just got some letters of appreciation from its clients?
Unless an enterprise has a notion of what it is trying to change, and measures and reports on whether it is achieving that, then it is not a social enterprise. Having an explicit social goal is one of the principles of social enterprise the European Commission set out in the Social Business Initiative.
Social enterprises reportedly measure impact mostly as an internal management tool (“you can’t manage what you can’t measure”), but it’s also useful in building customer loyalty and essential in getting impact investors on board. Also see EVPA guide.
Public funders like the ESF are also keen to fund social innovation – but taxpayers’ money has to been seen to be benefitting somebody. Otherwise the fascination will fade.

Social what?

It seems to me that the Impact Hubs are hard at work promoting start-ups, and that many of these will be innovative in some way, but that doesn’t make it social innovation and it doesn’t make the start-ups social enterprises.
I also missed any explanation of what the different methods for scaling are – are they social franchising or organic growth or new products or new markets or acquisition or what? And then I’d like to have known which of them were tried, and which worked best in the sample of 300 enterprises. I was left wondering whether scaling is any different from good old growth. Maybe it is just that ‘growth’ is a taboo word which is too reminiscent of capitalist economics.
I left when a speaker pronounced that it was a problem that no social enterprise had yet done an IPO. That’s a key feature of a social enterprise – it can’t be floated on the stock market as a financial investment!
So that’s the trouble: social innovation is everything to everybody, and the name of social enterprise is being taken in vain.
To protect the guilty, this report is made under Chatham House rules.

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EU funding for sustainability and inclusion 22 February 2016

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The Green Group in the European Parliament has compiled a very useful compendium of sources of European funding for sustainability and inclusion. Your Guide to EU Funding covers the ESF (p14), CLLD (p19), FEAD (p25) and everything else from Horizon 2020 downwards.

Download: http://www.greens-efa.eu/fileadmin/dam/Documents/2014_2020_YourGuidetoEUFundingLowRES.pdf

By contrast, as part of building up the European Fund for Strategic Investments (EFSI), the Commission has issued guidance on how to combine public and private funds – for instance in a ‘layered fund’ where the Structural Funds can be used to limit the risk too private investors.

Webpage: http://ec.europa.eu/regional_policy/en/newsroom/news/2016/02/22-02-2016-investment-plan-for-europe-new-guidelines-on-combining-european-structural-and-investment-funds-with-the-efsi

How to use CLLD 21 February 2016

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LEADER in peopleCommunity-led local development means delegating development decisions to multistakeholder Local Action Groups. There’s a goldmine of info on how to implement CLLD from the FARNET transnational conference in Edinburgh on 8-10 Dec 15.

Well-proven through LEADER, CLLD is now taking off more broadly with €9.3 bn of ESIF funds allocated across 28 Member States and an expected 2,500 rural areas and 300 fisheries areas setting up LAGs and FLAGs. CLLD is also possible in urban areas in 11 MSs.
One key tip is how Poland uses 3 simplified cost options (SCOs), for:
– a lump sum for preparatory support (rather like the €15,000 preparatory grant in Flanders’s ESF transationality call in Jan 16 [link]
– a flat rate for running costs and animation
– a lump sum for business start-up

Another is how Sweden is using CLLD to integate migrants

Progress Microfinance not reaching social enterprises 13 May 2015

Posted by cooperatoby in Social enterprise.
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The European Progress Microfinance Facility (EPMF) was intended to open up finance to social enterprises as well as other microenterprises. By March last year the 28 EPMF intermediaries had made 13,250 loans worth €125m. However its interim evaluation reports that only 4% of the loans went to social enterprises.

Some reasons for this are that social enterprises don’t make enough profit to repay a loan, and that they require larger loans than other microcredit borrowers (the maximum loan size is €25,000), and hence the lenders demand more collateral, which they don’t have. It notes that in countries such as Bulgaria they lack experience of borrowing and prefer to stick to grants, so instruments combining loan with grant may be more accessible.

The evaluators comment that take-up by social enterprises might have been higher if they had been a higher priority for the microfinance institutions which have benefited from EPMF loans and guarantees.

The EPMF is shortly to be augmented by another fund specifically targeting social enterprises, funded under the EaSI programme.

Employee ownership stalling 15 January 2015

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EO in Europe 2007-14Employee share ownership is almost the other side of the coin from the investor-led type of ‘social business’, in that it addresses the third dimension of social enterprise – participation – rather than a company’s objective (social or not) or profit distribution policy.

It is based primarily on an individualist model and is conceived of as giving individual workers an incentive to work harder, by sharing the returns with them through the payment of dividends, thus increasing returns for investors too. But it can have a collective dimension, as in the case of ESOPs, where worker shareholdings are held and voted by an employee trust. It is also generally held to improve the efficiency of work organisation. There is some overlap with the social economy in the case of Spain’s 11,500 sociedades laborales, in which pubic authorities can invest for local economic development purposes.

Employee ownership has progressive intents in that it shares the fruits of labour more equitably, and also deters hostile takeovers (though it does not prevent corporate takeover as in the case of Britain’s bus companies). Many governments have therefore enacted measures to encourage it, and until 2011 it has been steadily growing. The European Federation of Employee Ownership (EFES) annual survey reports that in 2013 8.75 million employees 31 European countries held fractionally under 3% of company capital, worth in total €267 billion (an average holding of €30,000). However its latest annual survey finds that although in 2014 this total rose to €310 billion, the number of employee shareholders has now stopped:

For the third consecutive year in 2014, the number of employee shareholders decreased in Europe. This should be a warning signal for everyone. In fact, the number of employee shareholders in continental Europe decreased by 500.000 persons (-8%) from 2007 to 2014, while the number increased by 200.000 persons in the UK (+8%). These changes are clearly related to the regressive fiscal policies in many European countries, while in contrast, the UK chose to double the fiscal incentives for employee share ownership, considering it is a key element of recovery and an investment for the future.

Employee ownership is one the tools we need to transform the economy, so the reversal of this growth trend is worrying as well as surprising.

This nonsense about uncertainty 14 September 2014

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IMG_1714 In de War, Warmoesstraat crVoltaire: Le doute n’est pas un état bien agréable, mais l’assurance est un état ridicule. [letter to Friedrich Wilhelm I of Prussia, 1770]

I’ve been irritated recently by the chorus of business leaders (seemingly organised by the ‘No’ campaign) who have opined that a Scottish vote for independence on Thursday will be bad for the economy because it will create “uncertainty”. It seems to be taken as axiomatic that business dislikes uncertainty. This is at most a half-truth.

Business opportunities only come about through uncertainty. Someone with both information and imagination spots a need which they can satisfy and for which people are willing to pay. It’s a gap in the market. It’s otherwise known as risk. The entire justification for profit-making is that it involves risk. Financiers demand a “risk premium”. Risk-taking is seen as that grand thing, an entrepreneurial mindset, and tolerance of ambiguity is a political and diplomatic necessity.
Business can’t have it both ways. Either they are not taking risks – in which case the justification for taking profits disappears – or they are taking risks, in which case a bit more uncertainty is a good thing as it opens up entrepreneurial opportunities.
What these business leaders are saying is that they like the cards stacked in their own favour, just like they have always been. They don’t want the apple cart to be upset. They only want to deal with uncertainties that they have already analysed and assessed. They don’t want the bother of having to adjust their spreadsheets, set up new lobbying operations, do new market research or pay attention to new voices of citizen and consumer representation.
Uncertainty shouldn’t induce paralysis, but a search for new paths – the much praised activity of innovation. If people are poorer, that is a market opportunity, as discounters like Aldi have correctly deduced. The media industry thrives on uncertainty – without it there would be no demand for newspapers or television current affairs programmes. Uncertainty is the consultancy industry’s bread and butter. There is enormous growth in online information services that feed on uncertainty by advising us how to avoid bad weather or traffic jams. This market exists because we humans are quite risk-averse ourselves – we all want to know that is likely to happen next. And we all love a good thriller – the hero of Breaking Bad is even nicknamed Heisenberg, presumably after the inventor of the Uncertainty Principle.
So this outbreak of uncertainty-mongering must be code for something else, some other underlying fear. By voicing their fear of uncertainty, business leaders are unmasking their true nature as conservative rent-seekers, seeking to preserve their privileges – and this is hypocritical because their public stance is that they are agile and responsive to changing market demands. In principle, they should welcome change, as it opens up opportunities for innovators to make the system more efficient in meeting consumer needs.
The veiled threat is that business people will refuse to invest unless they can be sure of a predictable return. So what they are saying is that they are not entrepreneurs, just managers. They are not in business to take risks – only to preserve profits.
What’s fascinating and heartening about the Scottish referendum debate is that it has finally let out the pent-up anger at the way the City of London establishment has messed up. Their complaints about uncertainty are not only hypocritical, they are discredited. Anyway, an independent Scotland will be full of entrepreneurial opportunities.

The Strange Death of the Peterborough Social Impact Bond 24 June 2014

Posted by cooperatoby in Social enterprise.
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Leslie Huckfield has written a very penetrating analysis of what’s going on with social impact bonds, which notes that (as I pointed out) the UK government has been subsidising the returns to investors. He offers an explanation for what he calls the Strange Death of the Peterborough Social Impact Bond:

    It is difficult to avoid the conclusion that the Peterborough Social Impact Bond flagship, despite its proclaimed successes, looks very expensive and subsidised alongside the much cheaper and riskier Transforming Rehabilitation programme.

Social impact bonds: a wolf in sheep’s clothing? 26 April 2014

Posted by cooperatoby in Social enterprise.
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Very good critique of social impact bonds from a team at Glasgow Caledonian University.

Basically:

• It is difficult to agree outcome indicators – potential for disputes
• How to document mechanism – attribution difficulty – risk of simplistic cause-effect model ignoring other factors
• Unintended consequences – diverts 3rd sector activity from what is need to what is measurable, creaming of ‘easy’ clients
• Distorts definition of social enterprise – smokescreen for privatisation
• Most SEs too small to use social investment – concentration of provision in oligopoly of large corporations that have the capital to manage cashflow. Local needs will be left behind
• Public accountability obscured as intermediary chooses providers. Asymmetric information accumulates in hands of provider, preventing oversight & facilitating fraud
• Financial language buries the important distinctive basic principles of SE – drift towards profit-making so-called ‘social enterprises’
• Attacks independence of 3rd sector
• Moral dimension – is it right to profit from social need? Change in ethos
• Instability as derivative market develops

Now also in Italian (thanks Flaviano).

Social impact bonds – what’s the problem? 3 December 2013

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The European Platform against Poverty and Social Exclusion (EPAP) convened last week for the 3rd time in the Egg (which is a well-converted industrial building, located appropriately on the wrong side of the tracks in a down-at-heel corner of Anderlecht).

Financial stability is not solving poverty

The event was graced by speeches from Presidents Barroso and Van Rompuy, as well as Commissioners Andor and Barnier. These brought out the fact that given that their priority is re-establishing financial stability Meanwhile two of the Europe 2020 targets are going in the wrong direction. Unemployment is up to 26 million, and far from reducing the number of people living in poverty by 20 million by 2020, the number has increased by 7 million.
The Commission has instituted a ‘social scoreboard’ which will report on five indicators: unemployment, youth unemployment, household disposable income, the at-risk-of-poverty rate, and inequality. This elicited the call from Sergio Aires, President of EAPN, for the social impact of austerity measures to be assessed before they are introduced. He viewed the commitment to spend at last 20% of the Structural Funds on social inclusion, but feared this would be ineffective as it does not form part of an integrated anti-poverty strategy. Each country acts alone and there is no common monitoring or evaluation. The EU’s structure is asymmetrical: whilst economic policies are an EU competence, their social consequences are largely left to national governments.
George Soros was the joker in the pack. His primary purpose was to plead for greater effort to be put into Roma education (see his simultaneous Guardian article). But he didn’t waste the opportunity to say that the design flaws in the euro have to be remedied. They have turned the EU from an alliance of equals into a club where the creditor countries are pushing all the costs of readjustment onto the debtor countries. Rising unemployment is fuelling xenophobia. “I’m afraid the euro is going to destroy the European Union,” he said to applause.

Social impact bonds get a grilling

WS6 Ruth Owen SIBs threatsThe main attraction for me was the workshop on “Innovative financial instruments developed with the private sector.” This was chaired by Thomas Fischer of the Bertelsmann Foundation, and focused mainly on social impact bonds.
Simon Rowell of Big Society Capital outlined the financial scale of charities and social enterprises in the UK: the former have an annual income of £36 bn and employ 765,000, the latter a turnover of £24 bn and a workforce of 800,000. Their main financial need is for long-term loans, and it is being addressed through bonds like those issued by Scope and Hastings Pier.
In a very balanced presentation, Ruth Owen of FEANTSA set out the opportunities and threats that SIBs present, and described two cases where they are being used to address homelessness:
• In London, the Department of Communities and local Government and Greater London authority have agreed a £5m scheme linked to the work of two charities – St Mungo’s and Thames Reach – with a named group of 851 homeless people. The bond will pay out if they achieve results measured on dimensions including settled housing and health.
• In Dublin, Focus Ireland is developing an €850,000 bond to help 136 families in temporary accommodation.
The SIB mechanism has a good fit with the issue of homelessness, as there are gaps in provision (local authorities are fire-fighting and unable to invest in prevention), and there is scope to generate savings (for instance through reduced use of health services).
She cautioned against undermining public authorities lest SIBs should be seen as a vehicle for cost-cutting, and suggested that the Commission might like to support a pilot, but one that is carried out in partnership with the stakeholders.

Jane Newman of Social Finance, which invented SIBs, agreed that they should not be used as a substitute for public services, but only to fund additional services – i.e. social innovation. There are now 14 SIBs under way in Britain. The first was created in 2010 with the aim of reducing reoffending at Peterborough Prison, 63% of whose inmates reoffend within a year of release. It will work with 3,000 prisoners, and if the work cuts reoffending by at least 7.5%, the bondholders will be repaid, earning interest of between 6% and 13.5%. The results will start to become known in 2014. One of their attractive features is that they focus on outcomes, and are less concerned with the process of getting there, so they stimulate new approaches. They can also be flexible: as they are not constrained by top-down official policy, they can change tack midway.

But what are SIBs for?

My main doubt is that SIBs are being used as a way to cut the public sector. The main argument in their favour seems to be that they bring in additional money to tackle social problems. But it seems to me that this is a self-fulfilling effect of limits on public-sector spending and borrowing: the government prohibits public authorities from borrowing and thus forces them to outsource. Central government is encouraging local authorities to issue SIBs by supplementing the return to investors – so yes it is paying private funds to do things it has made it impossible for public authorities to do.
If the argument is that investing in prevention is better than ineffective current expenditure on fire-fighting, then surely the answer is to allow public authorities to treat social issues as investment propositions. I don’t see that should be conflated with privatising their delivery.
There may of course be a different argument for that – that involving the third sector brings in new ideas and a closer understanding of the problems and the clients – but rewarding investors seems to be a red herring.
It may be that the ‘problem’ that social impact bonds are tackling isn’t social at all, but neoliberal-macroeconomic – to do with the size of the public sector.

See the EPAP presentations online.

The EU – unimaginably good value for money 18 November 2013

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When they use it as an echo chamber to magnify the sound of their own voices, nationalist politicians only succeed in showing how important Europe is to us. It’s unimaginably good value for money. Here’s a graph showing the relationship between the economies of the EU countries, their government budgets, the EU’s collective budget, and the cost of administering the EU. How could we ask for less?EU budget in proportion

See EU budget – fact and myths

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