SE Models in Western Europe: Which Profiles and Relevance?

The key results of our statistical work are displayed in table 20.2 (at the end of section 20.3.3), where the five clusters are described through the various dimensions listed in the first column. The various clusters are analysed here with the following question in mind: to what extent do these clusters confirm or not the existence of our theorised SE models?

Two Clusters Converging Towards an Entrepreneurial Non-Profit SE Model

Clusters 1 and 2 gather almost half of the social enterprises in this Western sample and can be considered as corresponding to “entrepreneurial non-profit social enterprises”. Cluster 1 gathers organisations providing mainly education, health and social services, whereas social enterprises in cluster 2 are mainly driven by a mission of

Table 20.2 Main features of SE clusters for Western Europe

SE models

Cluster number and dominant type(s) in the cluster

Entrepreneurial non-profit (ENP) model

Social-cooperative (SC) model

Social-business (SB) model

Cluster 1 Socialservices ENP

Cluster 2 Nonprofit WISE

Cluster 3 Socialservices cooperative and cooperative WISE

Cluster 4 Citizen cooperative

Cluster 5 Small- and medium-sized SB

No. of observations

44 (27%)

32 (19%)

40 (24%)

23 (14%)

22 (13%)

Creation date (median)

1991

1997

2002

2009

2011

Legal form

NPOs (64%)

Foundations (16%)

NPOs (41%)

Ltd companies (44%)

Cooperatives (73%) Dedicated SE legal forms (23%)

Cooperatives (96%)

Ltd companies (59%)

Sole proprietorship (18%)

Goods and services provided

Education, health and social services (50%)

Various

Education, health and social work (57%)

Energy, trade, food, financial services...

Trade, manufacturing, education, etc.

Social mission

Community development, capacity building, equality and empowerment, employment generation

Work

integration (71%)

Employment generation (25%), health improvement (20%)

Ecological transition

(45%), social

finance (14%)

Various social missions

Mission-centric, mission-related or mission-unrelated economic activity

Mission

centric (78%)

Mission-related (88%)

Mission-centric (78%)

Mission-centric (52%) or mission-related (43%)

Mission-centric (64%) or mission-related (36%)

338 Defourny, Nyssens & Brolis

Economie model

Hybrid resources

Dominant market income

Share of the different sources in the income mix

Prices applied for the main economic activity and share of enterprises applying them

Market: 36%

Subsidies: 41%

Donations: 10%

Free of charge (55%) Market price (32%) Below-market

price (36%)

Market: 55%

Subsidies: 36%

Donations: 3%

Market price (84%)

Market: 73%

Market price (45%)

Below-market

price (58%)

Market: 87%

Market price (61%)

Market: 85%

Market price (77%)

Governance model

Democratic

Independent

Founder(s)

A group of citizens (45%), TSOs (18%) or one person (23%)

A group of citizens or TSOs (63%) or one person (28%)

TSOs (40%), workers

(23%), citizens (23%)

A group of citizens (65%) or one person (35%)

One person (41%) or a group of citizens (45%)

Share of organisations with a multistakeholder board

76%

84%

53%

69%

22%

Ultimate decisionmaking power

When applicable, composition of the board (percentage of boards where the category of stakeholders is present)

Board (71%)

GA (16%)

Volunteers (52%)

Experts (38%)

Managers (31 %)

Board (50%)

GA (47%)

Managers (83%)

Experts (71 %)

Citizens (38%)

GA (63%)

Board (35%)

Workers (65%)

Investors (40%)

Managers (35%)

GA (48%)

Board (48%)

Workers (57%)

Users (52%)

Investors (48%)

Providers (30%)

One person (45%)

Testing Major SE Models in Western Europe 339

(Continued)

Table 20.2 (Continued)

SE models

Cluster number and dominant type(s) in the cluster

Entrepreneurial non-profit (ENP) model

Social-cooperative (SC) model

Social-business (SB) model

Cluster 1 Socialservices ENP

Cluster 2 Nonprofit WISE

Cluster 3 Socialservices cooperative and cooperative WISE

Cluster 4 Citizen cooperative

Cluster S Small- and medium-sized SB

Rules limiting profit distribution

Yes (65%)

Yes (84%)

Yes (87%)

No (68%)

If the SE terminates its activity, net assets go to...

Another social enterprise or an NPO (40%)

Another social enterprise or an NPO (53%)

Members (41%)

Another social enterprise or an NPO (28%)

Members (35%)

Undetermined (32%)

Paid employees (median per social enterprise)

14

24

54

7

5

Volunteers (median per social enterprise)

10

0

2

4

0

340 Defourny, Nyssens & Brolis

Testing Major SE Models in Western Europe 341 employment generation and may therefore be considered as workintegration social enterprises (WISEs).

In cluster 1, the dominant legal forms are those of non-profit organisation and foundation. Most enterprises in this cluster have been launched by a group of citizens, sometimes in partnership with another third-sector organisation. In almost one quarter of the cases, a single person is the social enterprise’s initiator. These organisations pursue missions such as community development, capacity building, equality and empowerment or employment generation.

Either the board or the GA holds the ultimate decision-making power. In many cases, the board involves volunteers, experts and managers. In 40% of social enterprises in this cluster, if the activity is terminated, net assets go to another organisation with a similar social mission. Services provided by these social enterprises are mainly “mission-centric”, according to Alter’s (2007) classification. These organisations have almost as many volunteers as they have employees. Another major distinctive feature of organisations in this cluster is the fact that they are the oldest organisations in the entire sample.

The organisations belonging to this cluster display a wide diversity of resources, with 36% of income coming from the market and 41% from public subsidies. Only one-third of these organisations sell some of their services at market price. Indeed, providing at least some services free of charge or at a price not covering most production costs is a widespread practice in this group. In cases where such practice is implemented, the organisation may also receive substantial public subsidies, when its production is considered to contribute significantly to the public good and cannot be financed by private (market and non-market) resources.

Such resource mix could be seen as somehow surprising since a usual approach to social enterprise sees it as “a market solution to a social problem”; in this perspective, the proportion of earned income often constitutes the main indicator to identify social enterprises. For many scholars, however, among which those belonging to the EMES school of thought (Defourny and Nyssens 2010), the entrepreneurial dimension of social enterprise lies, at least partly, in the fact that the initiative bears a significant level of entrepreneurial risk—but not necessarily a market risk. In this broader perspective, the resource mix, which can best support the social mission, is likely to have a hybrid character, as it may combine trading activities with public subsidies and voluntary resources. In a similar way, Maier et al. (2016) identify several dynamics which can characterise “NPOs becoming business-like”, beyond the sole market character of financial resources: NPOs can adopt business-like goals (such as commercialisation or/and conversion from an NPO to an FPO legal form); they can also adopt business-like core and support processes (entrepreneurial orientation, professionalisation, business-like philanthropy, etc.) or develop business-like rhetoric. It is thus not surprising

342 Defourny, Nyssens & Brolis

that many NPOs have been identified as social enterprises by local researchers, even though they have less than 50% of earned income.

As briefly observed above, cluster 2 gathers mainly work-integration social enterprises (WISEs). The mission of WISEs is to integrate disadvantaged groups back into the labour market and society through a productive activity. In the last two decades, WISEs have been a major focus of policies promoting social enterprise (Nyssens 2006; Cooney et al. 2016). These initiatives sell a wide variety of goods or services, mainly at market price. They rely more heavily on earned income than organisations in cluster 1, although they are also embedded in a very hybrid economic model. These enterprises’ productive activities are mainly “mission-related”: indeed, the economic activity is a means to create jobs, whatever the types of products that are commercialised on various markets.

Enterprises in this cluster adopt either the legal form of an NPO or that of a limited company. Most of them have been launched by citizens or third-sector organisations. Like in the previous cluster, a single person is the social enterprise’s initiator in about 25% of cases, thereby reflecting the social entrepreneurial profile of pioneering leaders, who often bring about social innovation or pave the way for new waves of social enterprise. Such social entrepreneurs can be charismatic but they want to adopt democratic governance features. Indeed, either the board or the GA holds the ultimate decision-making power, and the board is composed mainly by managers, experts and citizens. The distribution of profit is limited. If the social enterprise terminates its activity, the net assets are transferred to another social enterprise or to an NPO.

These first two clusters clearly suggest the existence of two major subgroups of social enterprises (one strongly focusing on work integration and another displaying a diversity of other social missions) that share enough features to suggest the existence of a deeply rooted “entrepreneurial non-profit SE model”, covering a spectrum of non-profit social enterprises, as theorised earlier in this volume (see figure 0.1 in the introductory chapter).

Two Clusters Indicating the Existence of a Social-Cooperative SE Model

In two clusters among the five (clusters 3 and 4), a large proportion of organisations have adopted the legal form of a cooperative. This is a strong feature, which invites us to look carefully at these two clusters as potentially signalling the existence of a “cooperative-type” SE model. However, we still have to document more strongly the specific “social” nature of enterprises in these clusters, as conventional cooperatives are first and foremost oriented to their members’ interests, not the general interest of a larger community, as hypothesised in figure 0.1. The key

Testing Major SE Models in Western Europe 343 question is thus the following: how do the organisations belonging to these two clusters differ from conventional cooperatives, to such an extent that they have been regarded as social enterprises by ICSEM researchers, and do their specificity justify their positioning closer to the “social-cooperative” model than to the area of traditional cooperatives?

In cluster 3, about one-fourth of organisations are not legally registered as cooperatives, but this is not necessarily incongruent with our hypothesis of these two clusters signalling the existence of a “cooperativetype” model. Indeed, cooperative principles can also be implemented by social enterprises that are not formally registered as cooperatives. Twenty-three percent of organisations in cluster 3 have adopted dedicated SE legal forms, which vary according to national legislations; some are rather close to—although technically different from—the conventional cooperative status (like the so-called social cooperatives in Italy or the “general-interest cooperative society” in France). In other cases, a label may be combined with various conventional legal forms: until 2018, the “social-purpose company” in Belgium provided a good example of such an SE label that was particularly, although not exclusively, accessible to cooperatives. According to a new law of 2019, only cooperatives now have access to the Belgian SE label. Another case, in the UK, deserves some discussion: since 2008, the British Government has attempted to stimulate development of the “public-service mutual”—a private organisation, characterised by employee rights both to the residual profits and to control. These mutuals thus appear similar to worker cooperatives in that they are oriented to their members’ mutual interest; however, they may qualify as social enterprises because they are typically “spin off” from the public sector and provide a public service under contract to a government agency (Le Grand and Roberts 2018). They mostly adopt the legal form of community-interest companies.

The social mission and economic activities are clearly interwoven in the organisations making up cluster 3: almost 80% of these organisations perform economic activities that are “mission-centric”. Organisations in this first cooperative cluster deliver mainly education, health and social services (57%)—all activities that are meant to serve strong social objectives: they aim mainly at creating jobs for the unemployed or at improving the health of disadvantaged people. These social enterprises rely mainly on market resources (73% of income), although they often sell some of their products below market price, which reflects their general-interest orientation.

In this cluster, most organisations have been launched by third-sector organisations, workers or groups of citizens, and they display democratic governance structures, mainly under the control of their workers and managers (and, in some cases, investors). The distribution of profit is limited or even prohibited in some cases. If the social enterprise terminates its activity, the net assets are transferred to the members or to another social enterprise or NPO.

344 Defourny, Nyssens & Brolis

With a median workforce of 54 persons, these organisations are the largest social enterprises in the whole sample. On the basis of information not presented in table 20.2, we can add that cluster 3 includes a significant share of Italian social cooperatives, which are emblematic of a legal shift towards a model in which an explicit central place is given to the organisation’s general-interest missions. In the late 1980s indeed, in Italy, pioneering cooperative-like initiatives were launched by groups of citizens or workers in the absence of a specific legal form adapted to their characteristics. The conventional cooperative movement, which by then had become aware of new social challenges, decided to support this emerging movement and to lobby for a new type of cooperative, better adapted to these new challenges. Such lobbying led to the development of a supportive ecosystem: creation of a new legal form (namely that of “social cooperative”, including “A-type” social cooperatives, targeted at the provision of social services, and “B-type” social cooperatives, which can be considered as work-integration social enterprises), promotion of access to public contracts, etc. A similar movement has since been observed in other European countries, giving birth to social-cooperativetype social enterprises. Indeed, the Italian legal model has since been followed (either fully or partially, with adaptations to national contexts) by the Portuguese (1998), Spanish (1999), Greek (1999) and French (2001) legislators (Fici 2015).8

The second cooperative-type cluster (namely cluster 4) gathers almost only cooperatives, displaying the typical cooperative governance structure: a general assembly, and an ownership structure based on shares with a cap imposed on profit distribution. They mostly sell their goods and services at market prices.

Initiatives in this cluster are quite recent (about 10 years old) and much smaller than those in the previous cluster. Most of these social enterprises have been launched by citizens. Almost half of them are driven by an ecological transition mission. Moreover, all social enterprises in our sample that are driven by a social mission of “access to financial services” or “food security” are included in this cluster. This cluster also includes, inter alia, short-circuit agricultural cooperatives, gathering producers and consumers of organic food, and renewableenergy cooperatives, where members’ interest is combined with a large societal (environmental) aim. Many of these social cooperatives are multi-stakeholder organisations, involving workers, users, investors and providers in their governance bodies.

Overall, these “citizens’ cooperatives” involve committed citizens experimenting with social innovations that respond to the interests and values of local communities. As explained by Seyfang and Smith (2007), this type of cooperative strives to fulfil unmet social needs and develops practices based on alternative goals to economic growth per se, such as achieving a higher quality of life or local-community-oriented development. This is

Testing Major SE Models in Western Europe 345 certainly one of the most recent generation of cooperatives in Western Europe, and it is embedded in the so-called transition movement (Hopkins 2008, 2013).

The analysis of these two clusters leads us to conclude that our theorisation of social cooperative as a major SE model is supported by strong empirical evidence.

One Cluster Indicating the Existence of a Social-Business Model

The last and smallest cluster (cluster 5) gathers the most recent and smallest social enterprises in our sample. It may be identified as gathering organisations that combine a strong commercial orientation and a social mission (which, incidentally, may vary a lot from one enterprise to the other). These features, combined with the legal form of limited company or sole proprietorship, indicate the existence of a “social-business” model.

Data in table 20.2 show that organisations belonging to the socialbusiness cluster and those in the two cooperative-type clusters display very similar economic models: they mostly sell their goods and services at market prices and rely on market resources. As far as their activities and missions are concerned, the economic activity of both social cooperatives and social businesses is either “mission-centric” or “mission-related”, which means that they deliver goods or services to a wider population than to the group targeted by the social mission.

Beyond these common characteristics, several other features tend to draw the picture of two quite diverging SE profiles. As regards the ultimate decision-making power, in organisations belonging to this last cluster, it most often belongs to the owner. We can qualify this type of ownership and management as “independent”, as these social enterprises are in the hands of a single person. This of course contrasts with the “cooperativetype” clusters, whose organisations display democratic governance structures, with a board and a GA involving a wider diversity of stakeholders. Regarding rules and provisions related to profit distribution, it is striking to note that there is no rule limiting profit distribution in 68% of organisations in the “social-business” cluster (this feature sharply contrasts with what is found in the cooperative-type clusters). These businesses can adopt an accreditation requiring that social goals be predominant in their mission, but generally, such accreditations (e.g., the private accreditation of “benefit corporation” or “B Corp”) do not impose any limit on the distribution of profits. This is not to say, however, that all or most of the profits are usually distributed to owners: a quite common practice (shared by 64% of organisations in the “social-business” cluster) is to reinvest at least part of the profits in the social enterprise.9

In order to better capture the actual profile of social enterprises in the “social-business” cluster, more information is still needed, especially

346 Defourny, Nyssens & Brolis

about their actual size. At first sight, a good deal of the social-business literature emphasises, promotes and celebrates initiatives launched by or in partnership with multinational corporations, thereby suggesting rather large-size initiatives. The annual Global Social Business Summit and its charismatic leader, Muhammad Yunus, are emblematic of this “school of thought”, which stresses four key principles: shareholders in social businesses should not expect any financial return on investment (which is easy for big corporations in the framework of a CSR strategy); all profits should be reinvested for the social mission; goods and services should be sold at low prices to reach a high number of poor people; and the absence of public subsidies should guarantee full independence from the state.

It is precisely that kind of profile we had in mind when we started to conceptualise the social-business model, but our statistical results actually suggest another picture. This cluster is made of small- and mediumsized enterprises operating on the market while simultaneously pursuing a social mission. This feature is consistent with the already observed key role of an individual entrepreneur as the initiative’s founder, main owner and dominant decision-maker.

As this combination of economic and social goals is implemented here within less regulated frameworks than those defined by the governance rules and structures in “cooperative-type” social enterprises, the balance between these (potentially conflicting) goals and its evolution over time raise the question of the social mission’s sustainability. For instance, 32% of social enterprises in cluster 5 have no predetermined rule about the distribution of net assets in case the activity is terminated. In such context, it seems critical to observe enterprises’ actual practices more in depth: To what extent do social and/or environmental dimensions actually prevail over the profit motive? Are they not mere instruments to better serve the financial interests of the owner(s)? More generally, under which conditions can a social-value-generating economic activity be considered as an expression of social entrepreneurship?

In any case, we can, at this stage, state that this cluster provides support to the idea, already represented in our triangle, that the social businessmodel is also deeply rooted in SMEs’ willingness to generate blended value.

No Public or Quasi-Public SE Model?

Our theoretical typology also included a public or semi-public SE model, whose existence does not appear to be confirmed in Western Europe by the identification of a distinct cluster. However, some enterprises involve a governmental agency among their founding members. Moreover, a previous EMES research project (Nyssens 2006) revealed the importance of the public sector as the sole or as an associate founder of social enterprises in various countries. In Belgium, Germany, Portugal and

Testing Major SE Models in Western Europe 347

Sweden, for instance, WISEs may be launched by municipalities or other local public bodies getting together to create jobs in various fields, ranging from cleaning services to social housing. A possible interpretation is that, although they do actively support social enterprises, most public authorities prefer to act as partners—rather than as the main entrepreneur—in the creation and management of WISEs. Another explanation for the absence of a distinct cluster confirming the existence of a public-sector SE model may be linked to the personal perception of the SE phenomenon by local researchers: many of them probably considered a priori social enterprises as private entities by nature, and therefore disregarded public-sector initiatives as potential social enterprises.

 
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