Social Enterprise and Innovation: lessons from the Italian Experience Giulia Galera EURICSE...
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Transcript of Social Enterprise and Innovation: lessons from the Italian Experience Giulia Galera EURICSE...
Social Enterprise and Innovation: lessons from the Italian Experience
Giulia Galera
EURICSE
Bertinoro – July 22, 2011
Main issues Part 1: conceptual aspects
Part 2: social enterprises and socio-economic development
Part 3: dynamics of development of social enterprises and legal evolution
Part 4: the Italian case study
Part 5: main lessons learned
PART 1: Conceptual aspects
1. Introducing conceptual aspects
Multiplication of definitions with “social” suffix next to typically economic concepts: Social Economy Social Entrepreneurship Corporate Social Responsibility Social Innovation Social Business Social Enterprise
1. Social Economy
French in origin, sometimes used as a synonym of Third Sector
Refers to organizations aimed to benefit members or the community
Developed to bring together: coops; mutual aid societies; associations; foundations
Broadcasted by the Revue des Etudes Cooperatives Mutualistes et Associatives (RECMA)
Comprehends also organizations that play non-economic roles, including advocacy and participation
Hence, the general character of Social Economy and its country-speficity
1. Social Entrepreneurship
Covers a broad range of activities falling along a continuum
Strong emphasis on “extraordinary individuals” Comprehends social initiatives of profit-seeking
businesses; practices that yield social benefits; entrepreneurial trends in non-profit organizations up to ventures developed within the public sector (Johnson, 2000; Roper and Cheney, 2005)
Hence, the very general character of Social Entrepreneurship, which crosses across all sectors
1. Corporate Social Responsibility
Concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis (EU Commission)
Concept that can in principle be applied to all forms of enterprises, but is mainly used to refer to for-profit enterprises
1. Social Innovation (SI)
Recent construct Meant to grasp lasting social change Dismatles the barriers between sectors and
refers to a wide set of novel solutions Can be a product; a production process, an
idea; a social movement or a combination of several elements (Phills, Deiglmeier, Miller, 2008)
Hence, the intrinsic vagueness of Social Innovation
1. Social Business
Comprehends companies that focus on providing a social
benefit rather than on maximizing profit; and profit-maximizing businesses that are owned
by the poor or disadvantaged (Yunus, 2008) Reference mainly made to the second typology Non-profit distribution: investors may not, after
having had their investments paid back, take profits out of the enterprise
Hence, the strong focus of Social Business on poverty, its limited reach, and the voluntary nature of the profit distribution constraint
1. Social Enterprise
Partially overlaps with other concepts (social economy/third sector; social business; social entrepreneurship)
Narrower focus (focus on the entrepreneurial component)
This notwithstanding it is supposed to have a more consistent beneficial impact on society
WHY?
1. Social Enterprise
Core product produced by social enterprises = activities that are of interest to the entire community
Refers to a “different way” of doing business and providing general-interest services
It is a specific type of institution that is supposed to perform in addition to public and for-profit enterprises
Encompasses:entrepreneurial component of the non-profit
sector innovative component of the cooperative
movement
1. How to overcome conceptual confusion?
Diversity in approaches, concepts, and cultures generates confusion and calls for a clarification
Tentative classification: various concepts pictured in a dynamic way
Classification built along two axes:
Institutional dimension= incorporation of the social goal by the organization
Entrepreneurial dimension=conduction of economic activities in a stable and continuous way
1. Positioning the different concepts
Institutionalized social aim Entrepreneurial nature
YES NO
YES 1. Not-for profit private organizations supplying general interest services
2. For profit enterprises (concerned with the social consequences of their actions)
NO 3. NPOs running advocacy and/or re-distributive activities
4. Spontaneus/not instit. initiatives of individ/enter. aimed to achieve a specific, transitory social goal
Social Economy
Social Economy
Social Enterprise CSR
SI
SI SI
SI
Social BusinessSocial entrepreneurshipSocial Business Social entrepreneurship
Social entrepreneurship
1. Defining social enterprise
Main features of social enterprises
i. Economic dimensionii. Social dimension iii. Ownership and governance structures
1. Economic dimension
Continuous and stable production of goods and services
High degree of autonomy, hence:significant level of economic riskuse of costly production factors (labour; capital;
infrastructures)
1. Social dimension
An explicit social aim of serving the community or a specific group of people (social aim defined at a statutory level)
General-interest character of the goods and/or services produced
1. Ownership and governance structure
Collective nature of the enterprise Involvement of interested stakeholders (membership
and governing bodies) A non-profit distribution constraint (total or partial),
which prevents members from dividing up profits in case of sale of the enterprise
1. Approach proposed
highlights the contribution of social enterprises – as specific types of enterprises – to:the delivery of general-interest serviceseconomic development
limits confusion with CSR and other forms of social responsibility
has a “revolutionary” character: it challenges the conventional concept of enterprise and entrepreneur
1. Strength of the definition proposed
The relevance of social enterprises for economic development stems from:
1. Type of activities performed needs of the entire community addressed considerable emphasis on general-interest,
often disregarded by other institutions
1. Strength of the approach proposed
3. Collective dimension of the enterprise reduces the probability of opportunistic
behaviours by single individuals ensures the survival of the enterprise
beyond the involvement of its founding leaders
furthers the participation of several stake-holders
1. Strength of the approach proposed
2. Sustainability supply of general-interest services
organized and managed in an entrepreneurial way
limitations concerning eligible sectors/activities (eg Italy; UK)
mobilization of a plurality of resources asset lock ensures that welfare and
development goals are observed
PART 2: Social enterprises and socio-economic development
2. Impact of social enterprises on economic development
complement the supply of general-interest services (eg social services, elecricity, gas, safe drinking water, etc. ) that public agencies and for-profit enterprises fail to deliverInteresting experiences from some developing
countries (coops guaranteeing access to infrastructure and utilities)
Experiences from CIS: basic services efficiently provided through the self-organization and self-reliance of the citizens concerned
2. Impact of social enterprises on economic development
generate new jobs in their fields of activity; create new employment in the sectors in which
they are engagedemploy unoccupied workers (women with children)
some social enterprises are specifically aimed to integrate into work disadvantaged workers
develop new forms of work organization
2. Impact of social enterprises on economic development
contribute to a more balanced use and allocation of resources available at local level to the advantage of the community“Internalization” of economic growth to the
advantage of the entire communitycommunity dimension allows to adjust to local
contexts and take stock of local resources
2. Impact of social enterprises on economic development
help foster social cohesion and enhance social capitalthey supply goods/services that are
characterized by a high social potentialadopt inclusive and participatory institutional
structures
2. Impact of social enterprises on economic development
support the institutionalization of informal activities belonging to the underground economyseveral social enterprise-like initiatives arise
informallyInstitutionalization allows irregular workers to
get out of the black market
PART 3: Dynamics of development of social enterprises and legal evolution
3. Social Enterprise in Europe
until 1970s two-poles institutional framework (State and Market) worked efficiently
crises welfare states and shortcomings of the privatization process renewed vitality of civil society through the development of voluntary initiatives
different trends in Europe
3. Socio-economic context
Associations/Foundations increasingly engagedin the production of services
Social
EnterpriseCo-operatives engaged in the production ofgeneral-interest services for non-members
3. Fields of activity
Social services
Work integration
New fields of interest for the community (e.g. local development; cultural services; social farming; general-interest services…..)
3. Dynamics of development of social enterprise
Drawing on the definition proposed, we can identify 3 stages of development of social enterprises
Pioneering stage
Institutionalization stage
Differentiation stage
3. Dynamics of development of social enterprise
Pioneering stageBottom-up emergence of new social enterprise-
initiativesNot legally recognizedOperate despite the lack of an enabling
institutional and legal environmentsNormally, no umbrella organizationsOrganizational freedomHigh degree of innovationStrong reliance on voluntary workPhase concerns countries with weak welfare
systems
3. Dynamics of development of social enterprise
Institutionalization stageDynamic concerns countries where social
enterprises have beeen recognized are connected to public policies
Enjoy a low degree of freedomRely also on paid, trained staffRun the maximum risk of isomorphism
3. Dynamics of development of social enterprise
Differentiation stageSocial enterprises are well consolidated and
organizedTend to expand in new fields of activity (if not
bound to operate in given sectors)Expansion concerns sectors other than social
services and work integration (e.g. environmental, cultural, services; social housing; social farming)
3. Legal evolution
Institutionalization of SEs in EU-15 pre-existing legal forms
association cooperative
legal frameworks designed for SEs adaptation of existing legislation (eg social coops)adoption of new laws providing for social
enterprise “qualifications”
3. Adaptation of existing legislation
Legal form Activities Governance
Italy Social coop Social services (a-type) Work integration(b-type)
Participatory nature/multi-stakeholder structure
Portugal Insertion coop Social services and work integation
Participatory governance not envisaged
France SCIC Production of goods and services of collective interest
Multi-stakeholder membership prescribed (users, workers and 1 additional category)
Poland Social cooperative
Work integration Participatory nature/single-stakeholder structure
3. Adoption of specific legislation
enlargment of the activities run and legal forms admitted trend first appeared in Belgium – Societé à finalité
sociale, 1995 Italy – Law 155/2006 and Decrees of year 2007
definition of Social Enterprise introduced in the Italian legal system
Great Britain – Community Interest Company Regulations of 2005
Slovenia – Law on Social Entrepreneurship, march 2011
PART 4: lessons from the Italian experience
4. Why presenting the Italian experience?
• the social enterprise concept was used in Italy earlier than elsewhere
• social enterprises account for a long history and significant development
• intense legislative activity: law on social coops (1991) and law on social enterprise (2005-2007)
• good availability of data and knowledge from both official statistics and private research
4. The emergence of social enterprises in Italy
• first social enterprises were set up in Italy at the end of the 1970s
• promoted by groups of citizens, given the limited supply of and growing demand for social services.
• most of these organisations were set up through the cooperative form
4. Basic data Since approval of Law 381/1991 on “Social Cooperative”
annual growth rate from 10 to 20%• in 1993: 1,479 social coops (National Cooperative
Department)• in 2003: 6,159 (ISTAT)• in 2005: 7,363 (ISTAT) – 59% A-type; 32.8% B-type;
8.2% mixed or consortia In 2009 (Unioncamere):
• 13,938 social cooperatives, with• 304,645 people employed• more than 30,000 disadvantaged workers integrated• more than 3,500,000 users• more than 6,381 million euros turnover
4. Key factors explaining the growth of SEs in Italy
Acknowledgment of social enterprises• legal recognition: in 1991 Law 381 recognized
social cooperatives ex-post• intense research activity, important:
to assess the importance/impact of the sector for lobbying purposes
• public contracting contributed to create new markets recognized the entrepreneurial charater of the
new initiatives
4. Key factors explaining the growth of SEs in Italy
Decentralization• in 1990 transfer to the regional and local
administrations of: responsibility of delivering social services possibility to delegate the provision of these
services to private providers
4. Key factors explaining the growth of SEs in Italy
Umbrella organizations Cooperative consortia or federations played a
crucial role in supporting new, developing and established social cooperatives enable cooperatives to gain skills which they
cannot afford internally they provide coops with economies of scale
4. Key factors explaining the growth of SEs in Italy
Voluntary contributions as work free of charge:
social enterprises developed as voluntary responses to social needs
also when supported by public resources, SEs continue to be voluntary promoted by groups of citizens
4. Key factors explaining the growth of SEs in Italy
Beneficial tax arrangements The added value of social enterprises is recognised
in Italy in both its laws and Constitution most fiscal incentives are embedded in the law on
social cooperatives A type social coops charge nil rate or 4% VAT disadvantaged members integrated by B type
social coops are exempted from payment of national insurance contribution
4. Key factors explaining the growth of SEs in Italy
Multi-stakeholder membership Mix of members not compulsory
69.7% of Italian SEs have a multistakeholder membership
33.8% of SEs have a multistakeholder governance
The main model consists in memberships involving volunteers and workers (37.9%)
• European Social Funds• Now; Integra; Horizon; Youthstart; Equal;
Progress…
4. Development trends in Italy
The growth experienced by social coops and other types of organisations has progressively made evident that: the social enterprise form was also suited to
provide community services other than social and educational ones
the cooperative form was no longer suitable to manage some of these new activities
4. Development trends in Italy
General Law on Social Enterprise approved in 2005-2007. It:
allows to establish SEs through a plurality of legal forms (association, foundation, cooperative, shareholder company)
enlarges the set of activities of SEs
At the moment 601 social enterprises registered (March 31, 2010)
4. Social Cooperatives and Innovation
As a completely new form of enterprise, Italian social cooperatives are a social innovation in and of themselves.
Moreover, Italian SCs have:
Introduced new services to satisfy new needs
Innovated the “production process”, replacing bureaucratic and hierarchical forms with participatory ones,
Challenged the conventional conception of enterprise: from profit maximization to collective problem solving
Changed the conception of social services from activities with mainly redistributive purposes to activities based on entrepreneurial principles
Entirely new form of enterprise, devoted to carrying out economic activities, with strict limits to the distribution of profit and a collective governance system
Different from traditional cooperatives because not strictly mutualistic
Different from traditional non-profits because they are primarily engaged in economic activities
4. Social Cooperatives ARE a Social Innovation
Product Innovation SCs respond to rationed demand for services and specific
needs of particular groups of people With the evolution and diversification of needs, SCs have
responded by continuously developing new services and experimenting with new solutions to better meet those needs
Provision of many social services was started directly by cooperatives, regardless of availability of public resources
4. Social Cooperatives Generate Social Innovation
Process Innovation Replaced hierarchical and bureaucratic mechanisms with flexible and
participatory ones Multi-stakeholder governance “Strawberry field” strategy and use of consortia to capture economies of
scale Unique resource mix (including donations, voluntary work, etc.) combined
with cost savings (lowe wages to motivated workers) enabling “distributive” allocation pattern
Innovative management of human resources, relying on mix of intrinsic and extrinsic motivations, leads to high job satisfaction despite low wages
4. Social Cooperatives Generate Social Innovation
4. Focus: Alternative Allocation Patterns
Social coops use allocation patterns that differ from conventional enterprises. As a consequence they also modify the distribution of income.
social coops also provide services to users who are: unable to pay the full price or to pay at all not covered by contracts stipulated with the
public authorities
This is explained by the resource mix that characterizes many social cooperatives.
4. Focus: Innovative HR Management
Given their limited resources, SCs have managed to develop a new model of relations with their workers:based on a pluralistic mix of incentivesable to select workers that share the missioncharacterized by a high level of effort even in the absence of strict control
This model has proved able to compensate for relatively low wages (especially in the start-up phase). Workers interviewed declared:
high satisfaction with their work (an average of 5.2 on a scale of 7)
high level of loyalty (74.2% declare that they want to stay with the coop as long as possible because they share the mission)
PART 5: main lessons
5. Lesson 1: Having a Social Aim Matters
The Italian case shows that, at least with respect to social innovation in the social services sector:
Organizations with an explicit social aim have a distinct competitive advantage in the development of social innovation
This advantage is closely connected to the collective dimension of these organizations
Involvement of a diverse set of stakeholders makes it easier both to tailor the supply of services to customers’ needs and to secure resources that would
not be available to a different type of organization
5. Lesson 2: Importance of a Supportive Framework
Process of social innovation is complex and can encounter serious obstacles
Obstacles can be overcome by presence of supportive legislative framework and clear demarcation of roles and responsibilities for the supply of relevant goods and services In Italian case, social cooperatives were bottom up
innovation that had strength to overcome initial difficulties
However, approval of law on social cooperatives and transfer of responsibility in social service provision from central government to local agencies were instrumental in growth of the sector
5. Lesson 3: Being Innovative is not Enough
Innovative capacity is not the only important factor in addressing social problems
If social needs are widespread, solutions must be deployed on a large scale in order to make an impact
Strength of social cooperatives was not only innovation, but ease of replication and scalability (easy to set up, quickly became consolidated model, role of 2nd and 3rd level consortia in supporting individual enterprises, etc.)