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Social business

As part of the European Union priority to encourage growth and efficiency, the EU is exploring new and innovative ways to structure and provide key services across the continent. Social enterprises (also known as social businesses) working for a social, inclusive economy have a fundamental role to play.

There has been a growth of social enterprises and social investment market in the UK. The recent developments of Big Society Capital, Big Lottery Fund, Social Enterprise UK, increased outsourcing of public services and government’s social incubator funds have all changed the UK’s social investment sector.

Read more about

  • What is a Social Enterprise?
  • Social Business Initiative
  • UK Roundtable on the Social Business Initiative
  • Measuring impact
  • Social Innovation
  • Social Investment

What is a Social Enterprise?

There is no uniform definition for social enterprises, however the Organisation for Economic Co-operation and Development (OECD) defines social enterprises as

“any private activity conducted in the public interest, organised with an entrepreneurial strategy, but whose main purpose is not the maximisation of profit but the attainment of certain economic and social goals, and which has the capacity for bringing innovative solutions to the problems of social exclusion and unemployment” (OECD, 1999).

Whilst the European Commission defines a social enterprise as being

“an operator in the social economy whose main objective is to have a social impact rather than make a profit for their owners or shareholders. It operates by providing goods and services for the market in an entrepreneurial and innovative fashion and uses its profits primarily to achieve social objectives. It is managed in an open and responsi­ble manner and, in particular, involves employees, consum­ers and stakeholders affected by its commercial activities” (Communication from the Commission, 2011/682 final).

In Europe, the social economy includes entities such as co-operatives, associations, mutuals and foundations.

Read more in the European Commission’s brief on Social Entrepreneurship.

Social Business Initiative

The Social Business Initiative is a European policy initiative which aims to “create a favourable climate for social enterprises, key stakeholders in the social economy and innovation”.

Launched in November 2011, this initiative indicates the EU’s commitment to placing the civil society and social innovation at the heart of its concerns, as part of the wider Single Market agenda and the EU 2020 strategy, to meet EU economic, social and environmental policy targets by aligning finance and commerce activities with ‘ethical’ and ‘social’ principles.

The SBI action plan includes 11 key actions to support social entrepreneurship in Europe, in order to:

•improve access to funding, including social investment
•increase the visibility of social entrepreneurship
•improve the legal environment for social investment and new forms of businesses

Visit the European Commission’s website for more detailed information about the SBI agenda.

UK roundtable on the Social Business Initiative


NCVO has coordinated a group of stakeholders, including experts, practitioners and policymakers in the UK civil society sector to inform Brussels policymakers and the UK government of the opportunities and challenges presented in this initiative.

NCVO has submitted joint consultation responses with partners in the roundtable, on various regulations the European Commission is reviewing, in particular around State Aid:

Measuring Impact

A new standard to allow social enterprises to better measure and demonstrate their social impact and so help them in their discussions with partners, investors, and public sector funders has been published by the European Commission.

Download the report on the Proposed Approaches to Social impact Measurement in European Commission legislation and in practice relating to: EUSEF and EaSI (June 2014)

Social Innovation

According to the European Commission “Social Innovation can be defined as the development and implementation of new ideas (products, services and models) to meet social needs and create new social relationships or collaborations”, and includes the following four main elements:

  1. Identification of new/unmet/inadequately met social needs;
  2. Development of new solutions in response to these social needs;
  3. Evaluation of the effectiveness of new solutions in meeting social needs;
  4. Scaling up of effective social innovations”

There will be an opportunity in the 2014-2020 EU structural funds programme to fund social innovation by the ESF and ERDF.

By engaging civil society along with SME’s, we believe that this will increase social impact and help to develop effective innovative solutions for local employment and open public service delivery (e.g. green jobs).

You can read more about the kind of social innovation funded by the EU Structural funds (e.g social inclusion, the social economy and health and ageing) in the European Commission Guide to Social Innovation.

The European Commission scoreboard shows that the UK is in the top 10 of the Innovation leaders in the EU and the current financial and economic crisis makes social innovation more important than ever.

Related Documents
BiS Annual Innovation Report 2012
Nesta: The Open Book of Social Innovation

Social Investment

Social investment means enhancing people's capacities (e.g. jobseekers and potential job seekers, older people, disabled people, women) and supporting their participation in society and the labour market. Examples are prevention of early school leaving, lifelong learning, training and job-search assistance, housing support, and accessible health services.

By investing in people’s skills and capacities, this will in turn benefit individuals' prosperity whilst boosting the economy, and benefit employers with a healthier and more skilled workforce. This will offer social returns with higher productivity, higher employment, better health and social inclusion.

ESF and Social Investment

EU funds are vital instruments to support social investment in the Member States. For the next round of funding from 2014 onwards, the Commission has proposed that at least 25% of cohesion policy funding should be allocated to the European Social Fund and that at least 20% of total ESF resources in each Member State shall be used for 'promoting social inclusion and combating poverty'.

Some examples of how the European Social Fund promotes social enterprises are through:

  • Providing jobs
  • Developing training
  • Developing technical skills

The ESF Regulation for the period 2014-2020 contains new provisions to strengthen support for social innovation (Article 9). Social innovation and the social economy will both play an important role in helping to achieve the policy objectives of the Social Investment Package (SIP)

Social Investment Package

A Social Investment Package (SIP) was announced by the European Commission in February 2013. The Package calls upon Member States to prioritise social investment and to modernise their welfare states

The SIP recognises the crucial role that social partners - civil society organisations - play in helping lift target groups out of poverty and social exclusion and urges Member States to improve the involvement of social partners in the modernisation of social policy as part of the Europe 2020 Strategy.

The SIP calls for

  • More effective and efficient spending to ensure adequate and sustainable social protection.
  • Investment in people's skills and capacities to improve people's opportunities to integrate in society and the labour market.
  • Ensuring that social protection systems respond to people's needs at critical moments during their lives.

The SIP builds on the European Platform against Poverty and Social Exclusion and other Commission initiatives such as the Employment Package, Youth Employment Package and the White Paper on Pensions and includes:

The working document on how the ESF will contribute to implementing the SIP contains a list of the Thematic Objectives and Investment Priorities from the draft ESF that have been recommended by the Commission for using the fund to support implementation of each of the Country-Specific Recommendations that address social investment

Other funds such as the ERDF, Progress, the new Programme for Social Change and Innovation (PSCI) and the new Fund for European Aid to the Most Deprived (FEAD) will also provide support to implement the SIP.

The Commission will develop by mid-2013 operational guidance on how Member States can best use the EU structural and investment funds to achieve the agreed thematic objectives.

This will include clear orientations on how the funds can best support the implementation of the policy orientations set out in the SIP.

Social Entrepreneurs: Have your Say! Event, January 16-17 2014

At the beginning of 2014, the Commission organised a huge event for representatives of the social enterprise movement in Strasbourg to help influence the future policy of the social economy in the EU.

To give an idea of the scale of the social economy in Europe: 1 in every 4 new businesses in Europe is a social business, and approximately 145 million people in Europe employed in social enterprises.

The event came at a time when many changes are taking place at European level for social enterprises. The new Directives on Public Procurement establish measures aimed at supporting social entrepreneurship, the EU structural funds for 2014-2020, and the European Social Fund in particular will be an important source of funding for social businesses.

After debates, workshops, and plenary sessions, the 2000 delegates agreed on and presented a 10-point call to action to European leaders, the Commission and the Parliament to foster and promote social entrepreneurship in Europe.

The declaration is a call to action for realising the potential of the sector, by supporting its growth, through better recognition and visibility of the sector, improving engagement between the social enterprise community and member states and local authorities, and offering financial support for the sector.

Further reading

Strasbourg Declaration: A Potential Roadmap to the Future of Social Business in the EU.

What will Social Enterprise look by 2020?’ – British Council Report.

Go to the European Commission web page on Social Business

Join the debate on twitter #SocEntEu