News

Statute proposed for social and solidarity-based enterprises – July 2018

The European Parliament vote to approve Fici Report proposals

European Parliament facade with all EU flags
By ESELA Posted 25/07/2018

In brief

The European Parliament has voted overwhelmingly to approve on an own-initiative report, which calls on the European Commission to create a new statute for “social and solidarity-based enterprises”.

The statute would aim to improve the regulatory framework by creating a ‘European social label’ scheme aimed at providing coherent legal rules in support of social enterprises. No consensus exists on a definition of ‘social enterprise’, which makes their regulation and funding problematic across various systems. The statute will seek to address the regulatory obstacles, access to funding and visibility challenges social enterprises face.

Comment

The proposal for a European statute for “social and solidarity-based enterprises” is a significant development.

The term “social and solidarity based enterprises” is not a widely recognised term and its relationship with the more familiar “social enterprise” term is not perfectly clear at this point, though there seems to be a very close relationship between these concepts.

Many social enterprises are difficult to distinguish legally from mainstream businesses and so do not feature in national statistics. Many, for example, will use the legal structures and forms of mainstream business but will, as a matter of custom and practice, trade for a social purpose and will reinvest profits to this end. These social enterprises, which use the same legal forms but which operate differently to mainstream business, are often called ‘de facto’ social enterprises.

As a great number of social enterprises are de facto social enterprises, there is a lack legal visibility. This means it can be difficult for policymakers to identify and support social enterprises.

The goal of making social enterprises more visible within the legal and policy system is a laudable one. However, the suggestion of a pan-European statute carries with it a range of serious risks:

  • is it possible to agree a truly pan-European definition which respects the diversity of different European legal systems and approaches?
  • is there sufficient consensus to form a workable and sustainable definition and is the social enterprise movement sufficiently mature at this point to attempt the task?
  • is it possible to agree a definition which is sufficiently flexible and open to allow new models of social enterprise to emerge and evolve?
  • is there a danger of a statutory definition being used to protect the status quo and to limit competition and innovation from new entrants in a growing movement?
  • is there a risk that years could be spent trying to agree a definition which in the end does not find a consensus and which is of limited practical utility and significance?

The seminal Social Enterprise in Europe report published by ESELA argued that it would be better for the European Commission and others to focus on encouraging and supporting member states to develop a range of effective local legal models of social enterprise. Ideally, we would see a proliferation of local not for profit, co-operative and share company legal models, which are adapted for social enterprise. This could be encouraged by the European Commission and others through the use of communications, guidance and practical support.

We look forward to seeing how the European Commission responds to the proposal for a pan-European statute and will share updates in future newsletters.

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