How can local authorities support social enterprises?

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The social economy is a crucial part of the EU socioeconomic landscape. It accounts for 8% of the EU GDP, and there are 2.8 million social economy enterprises and organisations that provide 13.6 million jobs altogether (source EC).

In December 2021, the European Commission (EC) published a Social Economy Action Plan in order to better address the many challenges and tap into the potential of social enterprises.

 

Social Economy Action Plan

Building an economy that works for people: an action plan for the social economy

This is very much what the Interreg Europe project BRESE - Border Regions in Europe for Social Entrepreneurship is about.

The BRESE partners strive for creating conditions which enable social enterprises to develop innovative and future-oriented solutions for societal challenges: climate and demographic change, development of lagging regions, social inclusion of marginalized groups or the COVID-pandemic.

Social entreprises' main challenges

The main challenges, as identified by the BRESE partners, are:

  • Suitable funding, support and investment schemes are often not available or easily accessible. Measuring their profits is often difficult, not only from a financial aspect but also from an impact aspect, and it is a challenge for them to compete with "traditional" enterprises when it comes to investments and loans.
  • Actions aimed at boosting the sector are fragmented. There is a lack of dedicated funding and support services, e.g., training and incubators.
  • Also, tailored legal forms for social enterprises are lacking, their political recognition is very fragmented among European countries.

In the following, we present examples of municipal social enterprises and preferential contracts for social enterprises in Slovakia.

The information was collected by the Interreg Europe Policy Learning Platform in the framework of an interview with Zuzana Polackova, a member of the BRESE project team on behalf of Slovak Business Agency.

Municipal social enterprises in Slovakia

Slovakia is typical for its high level of regional disparities, same as for its high number of local municipalities.

For a population of 5,5 million people, we have almost 3 000 local municipalities. A number of regions suffer from the so-called institutional emptiness characterized by the absence of private or public institutions driving local development.

In such a situation, local municipalities are the only institutions in the region and are also taking the roles which, in Slovakia, are not typical for them, such as creating local jobs and driving local economic development.

For this purpose, many of local municipalities established an entrepreneurial entity owned and controlled by local municipalities. Their main aim is to deliver a measurable social impact; therefore, these are embraced by the legislation on social enterprises and are recognized as ‘municipal social enterprises.

I may speak about the Slovak example, but I know that a similar model exists also in other countries.

Social enterprises - set up and controlled by local municipalities-  are now common practice in Slovakia.

By the end of 2021, out of a total of 479 social enterprises registered under Act 112/2018 Coll. on social economy and social enterprises, 108 were established and controlled by local authorities, i.e. the so-called municipal social enterprises.

By setting up and operating a municipal social enterprise, these municipalities provided a solution to a number of problems they were facing. Beyond being active in the field of job creation and providing a variety of services, they have also brought about a way of managing public resources responsibly, whereby several of the tasks directly deriving from their direct competencies have been carried out by the local municipal social enterprise.

Although municipal social enterprises have not taken the initiative to address the need for legislative anchoring of social entrepreneurship, the arguments in favour of the adoption of legal regulation of social entrepreneurship and the resulting support mechanisms have been largely conditioned by the experience and results of several municipal social enterprises.

Municipal social enterprises, which are now common practice, represent an innovative combination of public administration and entrepreneurial principles carried out for the purpose of meeting social objectives.

Local food supply networks in the Banská Bystrica Self-Governing Region - a social innovation in the testing phase

Institutions at this administrative level can go incomparably further and focus more on creating the support to make social enterprises work better in their area.

One good example is an initiative of Banská Bystrica Self-governing Region (BBSK) on the field of the local food supply network. School canteens and social service facilities established by higher territorial units are important food buyers.

This is no different in the BBSK. It is the founder of a total of 48 catering establishments (school canteens and social services establishments), which together buy more than  4.440 tonnes of food each year. Their purchase is subject to public procurement, which most often respects a single criterion, namely the lowest price. In the absence of other selection criteria, the kitchens often receive inferior quality food or food produced abroad, which represents an unnecessary increase in the carbon footprint and does not bring any economic benefit to the region.

The Banská Bystrica Self-governing Region, through its development agency, has created a model strengthening the purchase of local food, which undoubtedly has a positive impact on supporting the local economy.

The model uses the possibilities offered by the legislation on public procurement for the purchase of goods and services by registered social enterprises: the law offers the implementation of so-called reserved contracts.

In practice, this option means that only suppliers who have the status of a registered social enterprise or a sheltered workshop can submit a bid. “Sheltered workshops” are suppliers whose activities and emphasis on employing people far from the labour market also bring a positive social impact on society.

However, farming and food production is not yet widespread business activity among registered social enterprises in Slovakia. The BBSK, through its development agency, has implemented activities aimed at encouraging existing registered social enterprises to expand their business scope to include agriculture or food production.

The development agency staff also identified those agricultural and food enterprises that fulfilled the principles and ethos of social entrepreneurship and encouraged them to apply for obtaining the status of registered social enterprise with the Ministry of Labour, Social Affairs and Family.

Resources were also engaged in raising awareness of schools and social service establishments that purchase food. During the first eleven months of the initiative, a network of 11 potential suppliers and 47 potential buyers was established. 

The suppliers offer a spectrum of basic food categories. Fruits and vegetables, potatoes, beef, pork, eggs, milk and dairy products are all available for purchase locally by the canteens under the responsibility of the BBSK founder. 

A positive externality of the whole initiative is the 19 new jobs that have been created as a result of the initiative.

In addition to supporting the local economy and job creation in an innovative way, the initiative has also strengthened new relations between public institutions and private entrepreneurs, which can be considered one of the basic characteristics of social innovation.

Public authorities can make a difference for social enterprises by setting up dedicated support schemes, giving them special recognition within their local legislation, and by defining ad-hoc public procurement rules.

 

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Social enterprise
Economy