Executive summary

Inequality and persistent unemployment for vulnerable groups in particular have come to the fore as priority policy issues, not only with respect to social justice but also with respect to economic growth. Social enterprises are longstanding agents of inclusive growth and have proved remarkably resilient in the face of economic adversity. By design, social enterprises address socio-economic challenges in innovative ways and engage citizens to become part of the solution. A survey conducted in 2015 on more than 1000 social enterprises in 9 countries (the SEFORÏS project in which the OECD LEED participated as well) showed registered revenues of more than EUR 6.06 billion, provision of services and products to 871 million beneficiaries, job creation - particularly for people with disabilities or migrant backgrounds - upwards of about half a million people, and job placement for approximately 5.5 million people.

In 2001, the European Commission adopted the Social Business Initiative (SBI) that aims to support the development of social enterprises. Policy makers have a crucial role to play in this process by building enabling and tailored ecosystems, structured in a coherent, inter-connected, and transversal way. This means, for instance, designing a legal framework for social enterprises while simultaneously seeking to facilitate market access, support skill development and foster a varied financial landscape. Likewise, a social-enterprise ecosystem’s policy outcomes and actions are just as important as the process that leads to them: not only should each policy area within the ecosystem be part of an integrated systemic vision, it should also be co-constructed with the relevant stakeholders and co-ordinated among the different (national and territorial) policy levels.

This compendium of good practices provides an in-depth analysis of 20 initiatives across the European Union and illustrates the diversity of policy approaches that can be employed in order to establish an enabling ecosystem for social enterprise development. Policy makers can draw inspiration from the design of these initiatives and derive policy lessons from their implementation.

Key lessons

Raise awareness and visibility of social enterprises, and tackle misconceptions

Legal and institutional frameworks bring clarity by defining the nature, mission and activities of social enterprises. By granting to social enterprises recognition and visibility through the creation of framework laws or the implementation of national strategies, they help policy makers to more effectively target their support. Policy makers can also support efforts to raise funders’ awareness of the benefits of investing in social enterprises, supported by social finance intermediaries that help funders design tailored financing schemes. Support structures contribute to raising the visibility of social enterprises by organising regular local events and annual meetings bringing together social entrepreneurs, investors and public-sector representatives, designing creative communication campaigns about social enterprises, and having a strong media and social network presence.

Establish strategic and multi-stakeholder partnerships

Engaging and consulting with potential stakeholders is essential for public agencies to establish support frameworks for social enterprises. When an institutional development process is inclusive, the final output can more accurately reflect the needs of stakeholders, who will then take ownership of the process. The resulting institutional changes are more likely to be implemented effectively and to endure through time and government changes. Moreover, strategic partnerships constitute a win-win-win for social enterprises, public agencies and private-sector entities. When policy makers adopt a multi-stakeholder approach and establish strategic partnerships, they create the conditions for helping social enterprises enter public and private markets, build or participate in value chains, and gain access to complementary resources, skills and networks.

Foster viable and sustainable social enterprises

Social enterprises require business support throughout their developmental phase. Targeted public support for structures such as hubs, accelerators or incubators is essential to ensure their sustainable development across territories and activity sectors. Training, coaching or consultancy services play a critical role in building social entrepreneurial skills (e.g. measuring their impact, navigating administrative and public procurement procedures, developing business plans, accessing diverse funding sources and becoming financially self-sustainable). The asset of support structures is that they rely on professionals who understand both traditional businesses and social enterprises, and build entrepreneurial capacity without diluting the social mission. Financial intermediaries can help social enterprises to become investment ready and identify the right tool for reaching financial sustainability. However, social enterprises – especially small ones – often struggle to pay for intermediary services. To overcome this challenge, some financial intermediaries provide grants and vouchers to facilitate social enterprises’ access to tailored support by specialist providers. Public financial instruments can also provide useful support in this regard.

Support risk-sharing mechanisms for finance providers

While public support (predominantly through grants and subsidies) is a major financial source for many social enterprises, an increasing number now seek to access financing provided by mainstream or new funders (e.g. commercial banks or impact investors). Still, mainstream funders or impact investors perceive social enterprises – especially in the early stages – as high-risk clients, and are therefore reluctant to invest in them. Commercial banks share this view, considering that social enterprises may not have the capacity to sustain the loan costs or present the necessary financial guarantees. Policy makers need to encourage capacity-building, along with efforts to unlock and attract funds that are better suited to social enterprises. One effective response to this challenge is guarantee schemes, which are widely known for sharing or amortising risk with mainstream funders, impact investors and commercial banks.

Foster social-entrepreneurship skills in the education system

In the long run, education and skills that breed entrepreneurial behaviours need to be developed. Educational programmes on social entrepreneurship provide students with opportunities to develop new solutions to unresolved social challenges, and learn about business-creation processes and planning at the secondary and higher education levels. Partnerships between the social-enterprise community and research institutions are a promising approach to develop the evidence base, improve understanding and raise visibility of the field.

Ensure institutional continuity and political support for social enterprises

Political impetus can act as a catalyst for both nascent and/or well-established ecosystems, fostering and accelerating favourable conditions for the growth of social enterprises. However, challenges may emerge when political support fluctuates owing to government changes. Sustained policy support, which transcends government changes, is essential to establish an enabling ecosystem allowing social enterprises to thrive over time.