THE POSITIVE EFFECTS OF THE SOCIAL ECONOMY ON
SOCIETY
Author: Dimian Denisa Andreea
Class: Social Economy and Social Entrepreneurship
Coordinating Professor: Eleni Theodoropoulou
ABSTRACT:
This paper discusses some of the basic concepts of social economy and it aimed
to explore the positive effects of the social economy on society, particularly its
role in job creation and community development. It provided a concrete example
of social economy model, analyzing its effects in Sweden. The essay explored
the characteristics and services of social economy organizations, analyzes their
impact on job creation, and proposes strategies to ensure the sustainability of
social jobs.
After we examined the bibliography, we may conclude that social economy is an
essential component of the emerging economy, creating jobs, promoting social
cohesion, and fostering social protection in the long run. It plays a vital role in
addressing societal and environmental challenges and opportunities and is an
important source of employment for marginalized groups. The social economy
can contribute to the greater good of society, and its principles can be effectively
implemented to promote sustainability, social and economic security for all
citizens.
INTRODUCTION:
The social economy is an economic model based on social solidarity,
cooperation, and social responsibility rather than solely on profit maximization.
(Angresano, 1990)
In order to analyze its positive impact and provide some approaches for future
sustainability, it is important to define the concepts of social economy and social
entrepreneurship.
The social economy is often conceptualized as a distinct "social" sector
alongside the public and private sectors, commonly referred to as the "third
sector." The social economy is positioned at the center of a triangle of three
competing domains: state, market, and community or civil society. The state is
formal, nonprofit, and public, while the market is formal, for-profit, and private.
The social economy is seen as aligning with the "third sector" at the center of the
triangle, engaging in activity that is formally organized, nonprofit, and private.
(Thompson, 2020)
Firstly, social economy organizations, such as cooperatives, mutuals, and nonprofit organizations, aim to contribute to social welfare, community
development, and environmental sustainability while also creating economic
opportunities for their members and beneficiaries.
These groups are distinguished by how they treat and distribute profits or
surpluses, how they relate to workers, customers, members, and stakeholders,
the functions they perform in society, and their historical origins. However, they
share several key features which we will further explore in this essay.
Secondly, social entrepreneurship is a fast-growing field that uses
entrepreneurial principles and methods to create positive social and
environmental impact, therefore solving community-based problems. It is an
innovative approach that is becoming increasingly important in developing
economies, where it can play a vital role in driving economic growth and
promoting social inclusion. By creating jobs, providing innovative products and
services, promoting sustainability and hope for the future, social enterprises are
an essential contributor to a country's economy and social fabric. The sector is
expanding rapidly and in 2020 employed approximately 40 million people
globally, according to the European Commission, with over 200 million
volunteers engaged in social entrepreneurship activities around the world.
(Summerfield, 2020)
BIBLIOGRAPHY REVIEW:
The social economy is a critical aspect of modern society that seeks to ensure
that social needs are met by creating social businesses and other related ventures
that are often not driven primarily by profit. At the same time, it is an essential
component of the socioeconomic structure of the EU. Just in 2021, there were
2.8 million social economy businesses and organizations, which together created
13.6 million jobs, and they contributed to 8% of the EU's GDP. ( Interreg
Europe, 2021)
To be considered part of the social economy, an organization is usually
following a set of principles and characteristics that makes them distinguish, like
its focus on creating positive societal impact and its commitment to putting
people and the environment first, investing most of its profits back into the
organization or its chosen causes or beneficiaries. The social economy operates
with a long-term vision and governs democratically, with a focus on purpose
before profit while employing market means. The social and environmental
challenges and opportunities are placed at the center of economic activity, and
activities are carried out in the interests of members and beneficiaries or society
at large. (World Economic Forum, 2022)
Although they share the same characteristics, the social economy is composed of
a diverse range of organizations: associations, cooperatives, foundations, mutual
societies, non-profits, and social/impact enterprises. Associations have
voluntary membership and equal voting rights and often engage in voluntary or
advocacy work. Cooperatives are collectively owned and democratically
governed enterprises that are usually based on a common set of social,
economic, and/or cultural needs and values. Foundations are primarily run by
appointed board members or trustees and receive donations or gifts. They often
finance or undertake their own projects to support societal or environmental
needs, according to their principles and values. Mutual societies provide
insurance services, complementary social security schemes, and small-value
services of a social nature to satisfy common needs without making profits or
providing a return on capital. Non-profits serve the public interest and often rely
on external funding, but some have adopted hybrid activities in collaboration
with the government to enhance their income streams. Social/impact enterprises
prioritize social or environmental purposes and employ an entrepreneurial, forprofit, and innovative approach to provide goods and services. They are often
governed democratically and may disburse profits back to their stakeholders,
enterprise, or shareholders. (World Economic Forum, 2022)
To further illustrate what differences may occur in the social economy, let’s take
the example of two European countries: Greece and Romania. While in Greece
the social enterprise concept is still challenged by the social economy, in
Romania is politically and legally accepted, but it is weakly practiced. In Greece
in 2019 estimated number of social enterprises was 1.148, compared to Romania
with 6.317 and up to 17.117 employees in 2017. (European Commission, 2020)
The social economy has a wide range of positive effects, including addressing
inequalities through social innovation, creating Inclusion through jobs and local
empowerment, contribute to the change towards a sustainable, green economy
and easing the digital transition. (World Economic Forum, 2022)
Social economy actors pursue social, environmental, inclusion, and economic
objectives by exploring opportunities within markets and unlocking new sectors
for excluded groups. They often develop solutions through cooperation with
local actors. This strengthens social cohesion at the local level, fostering social
capital and creating social protection in the long run. Moreover, social economy
actors empower communities and vulnerable groups by enhancing their
employability and addressing local needs in underserved territories. By offering
employment opportunities and enhancing social protection, social economy
actors can also reshape informal economies. They often have a high proportion
of female workers, especially in welfare and education sectors. Additionally, the
social economy contributes to a sustainable, values-based transition towards a
green economy by promoting practices such as organic agriculture, renewable
energy, and low-carbon housing and mobility. The social economy also plays a
crucial role in leading an inclusive digital transition by using digital tools to
distribute ownership to more people and increase the skills of individuals to
grow their access to digital resources. (World Economic Forum, 2022)
Sweden is a good example of a country that has successfully implemented social
economy policies and has been widely recognized, yielded numerous benefits
for its citizens. One of the main advantages is the promotion of social equality
and economic prosperity through institutional change. The Swedish government
has implemented extensive redistributional measures, which have involved
reallocating resources from the state to households. This approach has helped to
minimize class conflict and reduce the exploitation of labor, while establishing
social and economic security for all socioeconomic groups. In addition, the
country has achieved a low rate of unemployment, with less than 4 percent being
reported for most of the past three decades. Moreover, income distribution has
become more equal, and poverty has been significantly reduced. Decentralized
mutual governance and collegial participation in the workplace are among the
practices of social economics, and Sweden has demonstrated how such
principles can be effectively implemented to promote the greater good of all
citizens. (Angresano, 1990)
However, one of the primary positive effects of the social economy on society is
job creation. The social economy is an important source of employment,
particularly for those who may face barriers to traditional forms of employment,
such as youth, women, and people with disabilities. According to the European
Commission, In the European Union, social economy enterprises make up 10%
of all businesses, with a total of 2.8 million such enterprises. These enterprises
provide employment to approximately 13.6 million individuals, which equates
to about 6.2% of the total employed population in the EU. In addition to paid
employees, social economy enterprises also engage a significant number of
volunteers, who are equivalent to 5.5 million full-time workers. (European
Commission, 2022)
Social economy has shown resilience during economic downturns, with social
economy organizations being less likely to lay off employees during times of
economic hardship. During a crisis, social economy organizations play a crucial
role in repairing and transforming society. Social economy organizations are
essential in addressing social needs that are not typically met by the market
economy. For instance, during the lockdown, La Cantine pour Tous in Quebec
changed its focus from providing healthy school meals to feeding vulnerable
groups. The nature of the social economy's activities and business models make
it a significant contributor to social and economic resilience. The social
economy's activities, particularly in the health sector, social services, and work
integration, help mitigate the direct impacts of a crisis, especially for the most
vulnerable groups. Additionally, the social economy's inclusive and
participatory governance structures, local community involvement, and mixed
resource mobilization enhance the organization's ability to overcome difficulties
during a crisis. These features of the social economy business models make
them well-equipped to resist shocks and help society to cope with the crisis.
(Kamal-Chaoui, 2020; OECD, 2020)
The social economy also has the potential to create jobs in areas that are
traditionally underserved by the private sector, such as rural areas and
economically disadvantaged communities. Social economy organizations can
provide important services and products to these communities while also
creating local employment opportunities. EnAble India (EI) is an example of a
social enterprise that enables people with disabilities (PwD) to become
economically independent and financially productive. EI has partnered with one
state government, over 700 companies, and 200 NGOs to implement programs.
The organization has built an ecosystem of employability, employment, and
entrepreneurship for PwD through technology innovations, breakthroughs in
skills training, new workplace solutions, and behaviour-change tools. EI's
success has been due to its focus on human-centred insights and developing the
ability to include and maximize value in spite of differences and disabilities.
(World Economic Forum, 2022)
Additionally, social economy enterprises have the capacity to transform
informal economies by providing employment prospects and improving the
welfare of individuals. Often functioning as intermediaries, social economy
organizations offer goods and services that provide advantages such as social
welfare, education, and healthcare, bridging the gap between informal and
formal economies. (World Economic Forum, 2022)
The social economy offers a variety of services that are critical to job creation.
One of the key services is access to finance. Social enterprises and other
organizations in the third sector often struggle to access traditional forms of
finance, such as bank loans. This is because these organizations may not have a
traditional business model that prioritizes profit maximization. As a result, they
may have difficulty meeting the requirements of traditional lenders. (Gérard
Andreck, et al, 2007)
To address this challenge, the social economy has developed a variety of
innovative financing models that adjust to the needs of social enterprises and
other organizations in the third sector. One such model is “membership funds”,
where members of a community come together to provide financing for social
enterprises and other organizations in their community. Another financing
source are grants, where institutions found SE’s activity. (Ojong, 2015)
“Establishment fund” for mutual societies and “associative fund” for nonprofit
organizations, enable them to put aside part of the year’s profits and gradually
build up equity. (Gérard Andreck, et al, 2007)
There is a wide range of sources of capital for social enterprises, different from
country to country. In Sweden, the UK, and Spain, sales and fees are the most
prominent sources of capital, followed by grants and investor capital.
Conversely, in Romania, grant finance is the most significant source of liquidity,
followed by sales and fees and private donations. (European Commission, 2013)
Research that studied over 600 social enterprises in Europe found out that in
2013 their main field of activity was centered upon social services (16.7%).
Social services play a critical role in social enterprises, as they are often created
to address social needs not met by the market economy. These services can take
many forms, such as healthcare, environment, education, housing, and job
training. Social enterprises work to provide these services in a way that is
sustainable and equitable, often using innovative business models and
governance structures. By providing these vital social services, social enterprises
can make a significant impact on the lives of people in their communities,
particularly those who are most vulnerable or marginalized. (European
Commission, 2013)
Another service offered by the social economy is employment and training.
Many social enterprises and other organizations in the third sector are started by
individuals who may not have a traditional business background. As a result,
they may lack the necessary skills and knowledge to operate a successful
business. The social economy offers a variety of training and support services
that help these individuals acquire the skills and knowledge they need to run
successful social enterprises.
The concept of sustainability in social entrepreneurship is a current concern that
involves creating viable and lasting solutions to address social or environmental
challenges that are often ignored by the market. (Kamaludin, 2023)
To ensure the sustainability of social jobs, it is essential to create an
environment that supports the growth and development of social enterprises and
other organizations in the third sector. One proposal for achieving this is to
establish supportive policy frameworks. Frequently, the support for creating and
developing social enterprises has enabled public policies to address employment
and other social and economic challenges more efficiently and effectively than
relying solely on the public or private sectors. As a result, this approach has
achieved greater value for taxpayers' money. (European Commission, 2013)
Therefore, governments can create policies that prioritize social enterprises and
other organizations in the third sector. Such policies can include tax incentives,
access to government contracts, and streamlined regulatory frameworks.
Another proposal is to establish partnerships between social enterprises and
traditional businesses. Traditional businesses can support social enterprises by
providing access to markets, expertise, and resources. This can help social
enterprises scale up their operations and increase their impact. At the same time,
traditional businesses can benefit from partnering with social enterprises by
accessing new markets and customers, as well as enhancing their corporate
social responsibility initiatives. (Sfetcu & Cojocaru, 2013)
In addition to partnerships, it is important to ensure that social enterprises have
access to the necessary resources to sustain their operations. This includes
access to finance, training and support, and networking opportunities.
Governments, foundations, and other stakeholders can play a role in providing
these resources to social enterprises.
Another proposal is to increase awareness and understanding of the social
economy through research. (European Commission, 2020) Many people are not
familiar with the concept of social enterprises and the role they play in society.
By increasing awareness and understanding of the social economy, we can help
create a supportive environment for social enterprises and other organizations in
the third sector.
CONCLUSION:
In conclusion, the social economy plays a critical role in addressing social
challenges in society and creating jobs. Social enterprises, cooperatives, and
other organizations in the third sector are driven by a mission to create social
value, and they have developed innovative business models that allow them to
operate sustainably while still fulfilling their social objectives. The social
economy offers a variety of services that are critical to job creation, including
access to finance, training, education, and healthcare. To ensure the
sustainability of social jobs, it is essential to create an environment that supports
the growth and development of social enterprises and other organizations in the
third sector. This can be achieved through supportive policy frameworks,
partnerships with traditional businesses, and access to necessary resources. By
increasing awareness and understanding of the social economy, we can create a
supportive environment for social enterprises and other organizations in the third
sector, and ensure that they continue to create positive social and economic
impact.
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