A New Typology of Social Enterprise in Finland: Capturing the Diversity

Harri Kostilainen, Eeva Houtbeckers and Pekka Pattiniemi

Introduction

Research on social enterprise (SE) is often introduced by referring to different schools of thought (Defourny and Nyssens 2010); other analyses refer to different models, either within a country (Kerlin 2006) or within and across countries (Defourny and Nyssens 2017). Such analyses enable comparisons between regions and discussions about developments in the SE field; however, they might not capture the diversity within regions. This paper aims to capture the diversity of contemporary social enterprises in Finland by analysing to what extent Finnish social enterprises correspond to SE models identified in previous research and to what extent they represent reactions to changes in the institutional environment and to new types of socio-ecological challenges.

In order to answer these research questions, we review the institutionalised and non-institutionalised forms of social enterprise in Finland. They are influenced by social-economy traditions, changes in SE-related legislation and recent developments in the understanding of the role of businesses and the economy in general. To illustrate our findings, we present four concrete examples—cases illustrating the new typology of social enterprise in Finland that we had put forward in a previous publication (Kostilainen et al. 2016) and on which we base our analysis here. The proposed typology includes four categories: (1) social enterprises providing public (welfare) services; (2) emerging alternative economic initiatives; (3) impact businesses and “smart-ups”; and (4) social-impact redistributors. We argue that this newly developed typology reflects the diversity in the contemporary field of Finnish social enterprises in more detail than earlier categorisations did.

This chapter proceeds as follows. First, we review the context in which social enterprises operate in Finland. We then provide an overview of the institutionalised and non-institutionalised forms of social enterprise in the country. In the third section, we present the new typology of social enterprise in Finland, as well as four emblematic examples illustrating the different types of social enterprise. In the fourth section, we discuss

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social-value creation in different aspects of social enterprises’ activity, before analysing our typology in relation to the findings generated by the ICSEM project.

The Finnish Context for Social Enterprises

Finland is one of the North European welfare states—the others being Denmark, Iceland, Norway and Sweden. The Nordic countries are known for their universalist welfare states, which guarantee equal opportunities for all citizens. According to Hjorth (2008), the characteristic elements of the Nordic welfare states include high women representation in the national parliaments, compared to other European countries; a wide offer of government services, enabling citizens’ individual independence; and higher birth rates than in Southern Europe, due to government support for parenthood.

As in other Nordic countries, in Finland, the government has had—and still has—a central role in providing services for its citizens. These services are funded through taxes, which are legitimised by the wide-ranging availability of public services. This welfare-society policy is one of the reasons that can account for the slow development of social enterprise in the country; the state—rather than social enterprises—has been taking care of services to its citizens. There has been a strong political will to promote education, health care and equal opportunities, with an emphasis on the state and municipalities as producers of these services.

Social-Economy Organisations in the Finnish Welfare State

In Finland, there exists a long tradition of social-economy organisations— that is, cooperatives, mutual societies, associations and foundations—carrying out economic activities; this tradition can be traced back to the late 19th century (Pâttiniemi 2006). The role of traditional social-economy organisations has been—and still is—strong and recognised, inter alia through legal frameworks2 and dedicated financial instruments, such as the Funding Centre for Social Welfare and Health Organisations (STEA), whose predecessor, Finland’s Slot Machine Association (Raha-automaattiyhdistys, or RAY), was established in 1938 to finance social and health-care associations (Kostilainen and Pâttiniemi 2013: 40).

The traditional forms of social-economy organisations fought inequality and fostered social and economic development. Social-economy organisations emerged where there was a lack of vital services and resources were scarce. The role of social-economy organisations changed when the welfare state emerged, developed and matured, in the period that extended from the 1940s to the 1980s. Some social innovations implemented by these

54 Kostilainen, Houtbeckers & Pattiniemi

traditional social-economy organisations were transferred to the municipalities, which took over the responsibility of organising and financing most of the universal welfare-service functions, while traditional socialeconomy organisations maintained their role as service providers to meet various specific needs of different vulnerable groups, such as people with hearing, speech or a visual impairment, disabled war veterans, people with respiratory problems and several other groups (Kostilainen and Pattiniemi 2016: 60).

Evolution of New Social Enterprises

There is no common definition of social enterprise in Finland. The different types of social enterprise, as well as their activities and tasks, have been evolving in the welfare state since the recession that hit the country in the beginning of the 1990s. Kostilainen and Pattiniemi (2016) identified four phases of social enterprise’s recent evolution in Finland: (1) social enterprises as a social movement; (2) social enterprises as a labour-market measure; (3) social enterprises as a vehicle for renewing welfare-state services; and (4) institutionalisation of SE concepts. The institutionalisation was achieved through the Act on Work-Integration Social Enterprises and the implementation of the so-called “Social Enterprise Mark” (see section 3.2). Social enterprises are now expected to combine the business skills of the private sector with a strong social mission, producing social innovations that might play an important role in delivering public (welfare) services and in labour-market integration.

After the turn of the millennium, a social enterprise started to raise more interest. Some consider social enterprises as potentially more appropriate service providers than private companies (see, e.g., Bland 2010). Especially in health and social services, where national and local governments are reducing their own production of services, the need for alternatives has become intense. The target being improved efficiency, the services are outsourced to non-governmental organisations and private companies. According to critics, this trend towards outsourcing to private companies is problematic, in that it makes it possible to redistribute the profits generated to the shareholders at the expense (at least to some extent) of citizens and taxpayers. In comparison to purely market-oriented providers, social entrepreneurship is thus seen as a better solution, since social enterprises may include clauses limiting profit distribution and consequently ensure that profits are used for developing the social mission of the organisation.

It could thus be considered that the provision of welfare services is now “returning” to the civil-society organisations that had previously developed and taken care of these services. However, the public sector has changed, and so have civil society and the private sector.

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Social entrepreneurship is also seen as a means to enhance sustainability in deprived urban and rural areas. These areas may suffer from depopulation and diminishing employment possibilities. The local activities aiming to fight these trends mobilise the local people and empower them to contribute to their own community (Pearce 2003). However, critics point out that rural areas, which are not densely populated, may not offer the necessary conditions for any commercially related activity to be sustainable without government support (Pihlaja 2010). At the moment, the 311 Finnish municipalities are responsible for organising health and social services; the government (2015-2018) had committed that, in connection with the health and social-service reform, this responsibility would be transferred to the counties. As part of this reform, clients’ freedom of choice would have been increased—“freedom of choice” refers to the fact that clients have the right to choose where to get health and social services, by using, for example, service vouchers and personal budget. The planned reform also provided that publicly funded health and social services would be provided by public, private and third-sector operators, such as associations and foundations; such marketisation of public social and health-care services would open up chances for different types of enterprises to become service providers. The reform also concerned business advice and employment services. Although the reform finally did not take place, the measures that it foresaw will most likely serve as a basis for further negotiations in the future. Experiments are currently being conducted to apply social-impact bonds and social clauses in public procurements. Social enterprises are also trying to find their niche in this marketisation of welfare and employment sendees.

In Finland, the growing body of small enterprises and entrepreneurs see business opportunities in solving contemporary complex socio-ecological problems (Houtbeckers 2014). For some, social entrepreneurship is a more meaningful career choice than the work in large, established organisations, whose activities may be seen as unethical or where work contracts can be unstable (Demos Helsinki 2010). Additionally, working as a social entrepreneur or having a job in a social enterprise constitutes ways through which the workers can contribute back to society (see, e.g., Elkington and Hartigan 2008).

 
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