Module Nr' DG 1

1
Projekt delno financira Evropska unija

• Module Nr. DG 1
• Understanding the concepts and forms of social
  entrepreneurship and CSR
• Giacinto Tommasini
• 25 August 2007

2
Part One

• Some basic definitions

3
Social Economy

• It is a thriving and growing collection of
  organisations that exist between the traditional
  private sector on the one hand, and the public
  sector on the other.

4
European Recognition

• The importance to the Social economy is now
  receiving greater recognition at Member State and
  European levels. 
• Not only are they significant economic actors,
  they also play a key role in involving their
  members and European citizens more fully in
  Society.
•  Social Economy enterprises are helping to meet
  the demands of a changing Europe.
• They are important sources of entrepreneurship
  and jobs in areas where traditional "investor
  driven" enterprise structures may not always be
  viable.

5
Social entrepreneurship

• Defined as a professional, innovative, and
  sustainable approach to systemic change that
  resolves social market failures and grasps
  opportunities. Social entrepreneurship engage
  with both non-and for profit organisations, and
  the success of their activities are measured
  first and foremost by their social impact.

6
Main characteristics of Social Enterprises -
Coops

• Cooperatives
• voluntary and open membership
• equal voting rights - resolutions carried by
  majority
• members contribute to the capital which is
  variable
• autonomy and independence
• particularly important is the sector of
  agriculture, manufacturing, banking, retailing
  and services

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Main characteristics of Social Enterprises -
Associations

• Associations/Voluntary Organisations
• voluntary and open membership
• equal voting rights - resolutions carried by
  majority
• members' fees - no capital contribution   
• autonomy and independence
• service providers, voluntary work, sports and
  advocacy/representative
• important providers in health care, care for
  elderly and children and social services

8
Main characteristics of Social Enterprises -
Foundations

• Foundations
• run by appointed trustees
• capital supplied through donations and gifts
• financing and undertaking of research, supporting
  international, national and local projects
  providing grants to relieve the needs of
  individuals, funding voluntary work, health and
  elderly care.

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Main characteristics of Social Enterprises -
Enterprises

• Social enterprises
• no universally accepted definition    
• have a social and societal purpose combined with
  an entrepreneurial spirit of the private sector
• reinvest their surpluses to achieving a wider
  social or community objective
• are registered as private companies, as
  co-operatives, associations, voluntary
  organisations, charities, or mutuals some are
  unincorporated.

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Fundamental importance of Social Enterprises

• contributes to efficient competition in the
  markets
• offers the potential for job creation and new
  forms of entrepreneurship and employment
• is largely founded on membership-based activities
  
• meets new needs
• favours citizen participation and voluntary work
• enhances solidarity and cohesion
• contributes to the integration of the economies
  of the candidate countries.

11
Beneficiaries

• Disadvantaged people the concept of
  disadvantage is quite wide and can be used to
  cover not only disabled or handicapped people,
  but also all other people who encounter
  systematic limitations/difficulties in achieving
  acceptable standards in working and social life

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Part Two

• EU programmes to support Social Economy in
  Members States and Enlarging territories

13
Introduction

• The recent agreement on the Financial Framework
  2007-2013 sets the global level of commitment
  appropriations at 864.3 billion.
• The revised and the new proposals reflect these
  financial adjustments and priorities agreed by
  the Commission, Parliament and the Council in the
  Interinstitutional Agreement.
• The current legislative package includes 26
  revised and 5 new proposals.

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Specific EU programme for social economy

• Community Programme for Employment and Social
  Solidarity PROGRESS ( 743.3 million)
• As from 2007, the Commission plans to regroup the
  four Community Action Programmes covering
  anti-discrimination, gender equality, employment
  incentive measures and the fight against social
  exclusion which provide financial support to the
  EU's Social Policy Agenda.
• This single programme PROGRESS will complement
  the European Social Fund as well as the financial
  support provided for social dialogue, free
  movement of workers and social studies.

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Part Three

• A social SWOT analysis

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Weak Strong Points

• Weak Points
• Too fast developing
• They are increasingly dependent on public
  authorities
• Many have no volunteers and increase the
  dependence on external funding organisations
• There is not yet a clear quality certification
  for social enterprises

• Strong Points
• Social co-ops are enterprises with limited
  liability which can appeal to the financial
  market
• Small sized, rooted in the local territory and
  close to people
• Grouping into local and national consortia
• They can count on volunteers and with altruistic
  behaviour
• Good level of independence of public authorities
  about strategies

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Outlook of development

• Tendency of local authorities to entrust more
  social co-ops with the production of social
  services and it is shifting towards new services
• New tax exemption policies concerning private
  demand for services and the granting of vouchers
• Recent law about tax exemptions for private
  donations to non profit organisations
• Political interest in social co-ops is very high
  and increasing

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Part Four

• The Italian Social Situation

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Social cooperatives

• Type A supply services to people
• Type B operate for job inserting disadvantaged
  people
• Type C consortia of cooperatives

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Main fields of action

• Type A services (Home Assistance, Day and
  Social-Educational Centres, Therapeutic
  Communities, Nursery School, Residential Homes)
  to
• Elderly people
• Physical or mentally disabled
• Young in disadvantage
• Drug Addicts
• People affected by AIDS

• Type B job insertion (through Agriculture,
  Environmental Care, Publishing and Printing,
  Informatics, Industrial Laundries, Cleaning,
  Building, Park Maintenance, Nursery, Tourism),
  employing
• Physical of mentally disabled
• Psychiatric patients
• Drug Addicts
• Long-term unemployed
• Immigrants

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Main fields of activities

• Health
• Social assistance
• Culture Sports
• Education Researches
• Environment
• Economic development social cohesion
• Human rights politics
• Filantropy Volunteering promotion
• International cooperation
• Religion
• Unions social representatives

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Interesting news

• Franchising is proving to be a low-risk way of
  integrating disadvantaged people into the labour
  market by creating new enterprises. It has
  potential in many market sectors, but perhaps
  offers the quickest returns in areas where a
  fast-growing industry such as tourism is an
  important part of the local economy.
• The project proposed to use social franchising
  methodology to create hotels run by social
  enterprises integrating disadvantaged people.
  Social franchising is a very innovative business
  networking methodology. It cannot work through a
  strong franchisor simply selling the know-how.
  Rather, it is necessary to set up a complex
  network organisation which can empower and
  qualify the nodes and act as a network.

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Advantages of franchising

• Social franchising facilitates the creation of
  new enterprises by giving them the opportunity to
  benefit from existing positive experiences and
  tools (training tools, handbooks, skills,
  know-how, marketing and a trademark).
• Social franchising increases sustainability and
  viability of the enterprises involved and creates
  economies of scale.
• Developing a franchising network has a high cost.
  Franchising is not an easy and cheap way to grow
  a business. Especially at the beginning, the
  franchisor may have difficulty in raising
  finance.

24
Workers in Social Economy

• In Veneto Region (4 millions inhabitants) workers
  employed in Social Economy in year 2006 were
  roughly 400.000.
• Data from Chamber of Commerce of Padova, 2007

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Part Five

• Legal basis and involved bodies

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Legal framework

• Specific articles within Italian Civil Code about
  Co-operatives and other companies with
  mutualistic aims
• Decision No. 396/1988 by the Italian
  Constitutional Court which gave legitimacy of
  private initiatives in the social services sector
• Law 266/91 on voluntary organizations which
  settles down the rules for an organized voluntary
  work, providing special registers, and granting a
  number of tax benefits
• Law 381/91 on social co-operatives to grant tax
  benefits to social co-operatives (reduction of
  valued added tax on sales of services to 4) and
  rule social co-operatives of two types

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Organisations involved

• Public Organisations
• Ministry of Social Affair
• Ministry of Labour
• Regional Provincial Councillorship for Social
  Health Policies
• Municipal Councillorship for Social Policies

• Private Organisations
• Social Co-operatives
• Social Health Assistance
• Associations
• Training
• Foundations
• ONG
• Committees

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Role of volunteers
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Part Six

• VAT system and other fiscal matters

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Favourable VAT system

• Cooperatives A B are completely VAT free
  whether in the field of
• health social services
• house assistance for disadvantaged and disable
  people, elderly people
• drug users
• people with AIDS
• dis-adapted young people

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Detaxation system - Investment

• Members
• On interests given to financing shareholder,
  co-operative enterprises operate a deduction on
  tax of 12,5.

• Company
• Social cooperatives are ruled by Law Tremonti
  bis. The 50 of the difference of the investment
  of years 2001 - 2002 and the average of total
  investment is not considered as income and
  therefore free of taxation charge.

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Detaxation system - Profits

• Company
• In force of the Italian Law DRP 601/1973 social
  co-operatives are not subject to taxation whether
  payment given to the share holders is less than
  50 of total amount of any other cost, excluding
  only the cost for rough materials.

• Members
• Economical advantages for share holder whether
  re-invested in bringing up stock capital are
  considered non taxable incomes. Other benefits
  shared among share holders are subject to a
  withholding tax of 10.

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Non-fiscal incentives - Public tenders

• There is a priority when participating to public
  tenders.
• According to the regional law 24/1994 social
  co-operatives can be party in contracts for
  public work directly without advertised bidding
  or public auction.
• The same law finances at the 80 any investment
  made by social enterprises

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Part Seven

• Polish social economy

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Currently in Poland

• Despite significant economic growth over the last
  few years, resulting largely from increased
  productivity, employment indicators in Poland
  have remained virtually unchanged. 
• The employment rate, which has not exceeded 50,
  is among the lowest in Europe.
• Moreover, access to jobs is not equal and social
  groups especially vulnerable to discrimination,
  including the disabled, ethnic minorities, women
  (especially single mothers), the homeless,
  ex-prisoners, people with chronic illnesses and
  especially those with mental illness, remain
  markedly disadvantaged.

36
Approach to disadvantage

• It is worth noticing that social policy decision
  makers have not treated work as a basic form of
  aid for high risk groups.
• Material aid as well as access to medical
  services, therapy and rehabilitation have taken
  precedence, while work has been seen as a lower
  priority. This approach, however, has been
  changing recently.

37
Legal basis

• In Poland, through the efforts of the
  non-governmental sector (and in our project we
  are especially interested in this kind of
  grassroots approach), the legal foundation for
  building the social economy  comprises three
  acts the Social Employment Act of 2003, the
  Promotion of Employment and Labour Market
  Institutions Act of 2004, and the Public Benefit
  and Voluntary Service Act of 2003.

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Number of Social Organisations

• Voivodeships in which the number of registered
  Social Organisations in relation to the number of
  inhabitants is the highest are Mazowieckie (19
  organizations per 10,000 inhabitants), Pomorskie
  (18), Lubuskie (17), Warminsko-Mazurskie (16) and
  Dolnoslaskie (16), while the lowest number of
  registered organizations (in relation to the
  number inhabitants) is found in the voivodeships
  of Swietokrzyskie (11), Opolskie (12), Slaskie
  (13), Kujawsko-Pomorskie (13) and Lubelskie (13).
  According to data from REGON, nearly 19 of all
  Social Orgs registered in Poland are located in
  rural areas (11,170), whereas 69 are based in
  cities and towns.

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Fields of activity

• Most Social Orgs in Poland work in the area of
  sports, tourism, recreation and hobby (39.2 of
  organizations indicate this as their most
  important field of activity).
• Other areas of activities most frequently
  indicated by the organizations as their main
  fields of activity are culture and arts (12.8
  of organizations), education (10.3 of
  organizations) as well as social services and
  social aid (9.9 of organizations) and health
  protection (8).

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Members in Poland

• According to two sources of data a study on
  Social Orgs and a survey on a representative
  sample of adult Poles the total number of
  members of organizations in Poland in 2004 may be
  estimated at about 7-7.5 million.

41
Budgets

• In 2005, the budget of 20 of the organizations
  did not exceed 10,000 zloty (2500,00 ).
• 70 had, instead, a budget larger than 100,000
  zloty at their disposal (25.000,00 ).
• 10 declared budget exceeding 1 million zloty
  (250.000,00 ).

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Part Eight

• Ethical Bank and other Public Funds to finance
  social economy

43
The idea underneath

• The idea behind Banca Etica consists in creating
  a place where savers, driven by the common desire
  of a more transparent and responsible management
  of financial resources, may meet socio-economic
  initiatives, inspired by the values of a
  sustainable social and human development.

44
The principles

• The principles which inspired Banca Etica's
  incorporation, and which today distinguish and
  characterise its everyday work, are stated in
  article 5 of its Articles of Association
• The Company adopts the following principles of
  Ethical Finance
• ethically oriented finance is aware of non
  economic consequences of economic actions
• access to finance, in all its forms, is a human
  right
• efficiency and soberness are components of
  ethical responsibility
• profit produced by the ownership and exchange of
  money must come from activities oriented towards
  common well-being and shall have to be equally
  distributed among all subjects which contribute
  to its realisation
• maximum transparency of all operations is one of
  the main conditions of all ethical finance
  activities
• the active involvement of shareholders and savers
  in the company's decision making process must be
  encouraged.

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Financing

• Banca Etica grants financing to organisations
  operating within the third sector which carry out
  civilly oriented economic projects, having the
  legal form of co-operative societies,
  associations or social institutions, operating in
  one of the following areas
• Social Co-operation social, sanitary and
  educational services fight against social
  exclusion and integration of disadvantaged people
  in the community.
• International Co-operation social and economic
  development of the poorest areas of our planet,
  supporting fair trade, training and educating,
  promoting micro-enterprises, assisting and
  supporting immigrants
• Environment promoting research, experiments and
  use of alternative and renewable energy sources
  non polluting production techniques waste
  disposal services ecological public-transport
  productive and distributive processes with a
  positive impact on man and his environment
  management of natural heritage development of
  biological and bio-dynamic agriculture promotion
  of ecological awareness and culture.

46
New challanges - The Global Grant

• Regulation (EC) No. 1260/1999 on Structural Funds
  has approved a multi-regional Global Grant to
  develop, set up and improve social
  entrepreneurship on 2003 - 2005 delayable until
  2007. This Fund can be used in every Member State
  with the decision of local Managing Authority.
• Veneto Region, in agreement with the Commission,
  entrusted an unique appropriate intermediary for
  Venetian territory to open calls for tender,
  receive and finance projects submitted by social
  enterprises with the aim of improving social
  system.
• The final disadvantage beneficiaries will be
  financed with a contribution in capital account
  between 10.000,00 and 50.000,00 Euros for
• Starting new enterprises
• Developing enterprises or, finally,
• Improving long-lasting job insertion.

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Part Nine

• Corporate social responsability

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What CSR is?

• A concept whereby companies integrate social and
  environmental concerns in their business
  operations and in their interaction with their
  stakeholders on a voluntary basis.  (Commission
  Green Paper 2001 Promoting a European Framework
  for Corporate Social Responsibility). Amongst
  other things, this definition helps to emphasise
  that
• CSR covers social and environmental issues, in
  spite of the English term corporate social
  responsibility
• CSR is not or should not be separate from
  business strategy and operations it is about
  integrating social and environmental concerns
  into business strategy and operations
• CSR is a voluntary conceptan important aspect
  of CSR is how enterprises interact with their
  internal and external stakeholders (employees,
  customers, neighbours, non-governmental
  organisations, public authorities, etc.)

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The meaning of CSR

• Being socially responsible means not only
  fulfilling legal expectations, but also going
  beyond compliance and investing more into human
  capital, the environment and the relations with
  stakeholders.
• Going beyond basic legal obligations in the
  social area, e.g. training, working conditions,
  management-employee relations, can also have a
  direct impact on productivity. It opens a way of
  managing change and of reconciling social
  development with improved competitiveness.
• Within the company, socially responsible
  practices primarily involve employees and relate
  to issues such as investing in human capital,
  health and safety, and managing change, while
  environmentally responsible practices relate
  mainly to the management of natural resources
  used in the production. They open a way of
  managing change and reconciling social
  development with improved competitiveness.

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CSR the internal dimension

• Human resources management
• Health and safety at work
• Adaptation to change
• Management of environmental impacts and natural
  resources

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CSR the external dimension

• Local communities
• Business partners, suppliers and consumers
• Human rights
• Global Environmental concerns