The Social Economy: A Comprehensive Guide to its Importance and Impact
1. What is the Social Economy?
Values, Relevant Figures, and Types of Organizations
Definition: The social economy comprises a diverse range of enterprises and organizations.
Values:
- Prioritizes people over profits
- Operates under democratic governance
- Reinvests most profits back into the organization
Relevant Figures: The social economy encompasses 2.8 million enterprises and organizations in Europe, employing 13.6 million people and contributing to 8% of the EU’s GDP.
Types of Organizations:
- Cooperatives
- Mutuals
- Associations
- Foundations
- Social enterprises
- Ethical banks
Note: The specific types of organizations within the social economy can vary by country.
2. What Defines an Organization as Part of the Social Economy?
Organizations within the social economy share common purposes and principles, including:
- Voluntary and open membership
- Democratic governance
- Reinvestment of most benefits
- Autonomous management and independence from public authorities
3. Why is the Social Economy Important?
The social economy plays a crucial role in various aspects of society:
Quality Jobs for All
Social economy enterprises and organizations are committed to providing quality jobs and promoting decent work conditions.
Deepening Democracies
These organizations reinforce democratic values through their governance practices, which emphasize participation and openness. They promote independent management, democratic decision-making processes, and prioritize people and labor over capital in income distribution.
Social Innovation
The social economy is a constant source of innovation for the common good. Many of its innovative ideas, such as ethical finance and the fair trade movement, have become mainstream. These enterprises and organizations contribute to smart growth and provide socially innovative services, collaborating closely with public authorities, stakeholders, and users to develop collective solutions to shared problems.
Championing Equality
Social economy enterprises and organizations strive to ensure equal opportunities, with a particular focus on marginalized communities and minorities. They champion their rights, advocate for better policies, provide services and training, and create job opportunities for migrants, homeless people, Roma, people with disabilities, and others. In the realm of gender equality, women represent over 60% of the workforce in many of these enterprises and organizations.
Fighting Climate Change
The social economy is a pioneer in the circular economy, engaging in recycling, reuse, and repair of goods, and employing individuals distant from the labor market. They achieve positive environmental and social objectives by leading the transition towards renewable energies and advancing sustainable agriculture and rural development.
Quality Services
Enterprises and organizations active in the health and care sector work to improve healthcare systems and local social services. This can include access to housing, assistance for the elderly or people with disabilities, childcare, and many more.
4. The Importance of the Social Economy for Promoting Equality
Social economy organizations actively promote equality by providing opportunities and advocating for marginalized communities, including women, migrants, and people with disabilities. For instance, many social economy organizations have a workforce where over 60% are women, demonstrating a commitment to gender equality.
5. Corporate Culture in Social Economy Organizations
Definition: Corporate culture in an organization refers to the shared values, beliefs, and practices that influence employee behavior and interaction.
Example: A social enterprise might have a mission to provide affordable housing, a vision to ensure everyone has access to safe living conditions, and values centered on community support and sustainability. The alignment of these elements creates a culture focused on social impact over profit.
6. Differences Between Sustainable Development and Sustainability
Sustainable Development: Refers to development that meets the needs of the present without compromising the ability of future generations to meet their own needs. It incorporates economic, environmental, and social dimensions to ensure all-around growth and sustainability.
Sustainability: More broadly refers to the ability to maintain or improve systems and processes indefinitely. This concept is often used to refer to environmental sustainability, which focuses on maintaining the quality of the natural environment over time.
7. Understanding Sustainability and its Different Types
Sustainability is a socio-ecological process characterized by fulfilling human needs while maintaining the quality of the natural environment indefinitely. It is based on the triple bottom line: people, planet, and profit.
Weak Sustainability
Weak sustainability is anthropocentric and posits that natural and human-made capital (such as machines, buildings, and infrastructure) are largely substitutable. This means that as long as the total capital stock (natural and human-made) does not decrease, sustainability can be maintained.
Strong Sustainability
Strong sustainability is environment-centered and argues that natural capital and human-made capital are not perfectly substitutable. It emphasizes that certain natural resources are irreplaceable and must be preserved for their own sake and for future generations.
Perspective: Strong sustainability is often a more prudent approach. This stance arises from the understanding that many natural systems are complex, and their full value and functions are not completely replaceable by human-made systems. Irreversible damage to biodiversity, ecosystems, and the broader environment can have profound impacts not only on nature itself but also on human societies that rely on these systems for essential services like clean water, air, and soil fertility.
8. Two Sustainable Development Goals (SDGs) and Business Ideas
The Sustainable Development Goals (SDGs) provide a blueprint for a better and more sustainable future for all. They address global challenges, including poverty and inequality. The 17 goals are interconnected, and achieving them all by 2030 is crucial to leaving no one behind.
SDG 2: Zero Hunger
This goal aims to end hunger, achieve food security, improve nutrition, and promote sustainable agriculture. It focuses on ensuring everyone has access to sufficient good-quality food for a healthy life. Agriculture must become more productive and sustainable, and food systems must be resilient.
Business Ideas:
- Agri-tech Startups: Develop technologies that increase crop yields and promote sustainable farming practices, such as precision agriculture tools that use IoT sensors to optimize water usage and nutrient application, minimizing waste and environmental impact.
- Community-Supported Agriculture (CSA) Programs: Establish subscription-based services where consumers buy shares of a farm’s harvest in advance. This model provides farmers with a stable income while ensuring local communities have access to fresh, nutritious produce.
SDG 6: Clean Water and Sanitation
This goal focuses on ensuring the availability and sustainable management of water and sanitation for all. It encompasses improving water quality, increasing water-use efficiency, implementing integrated water resources management, and providing access to safe drinking water and sanitation facilities.
Business Ideas:
- Water Purification Social Enterprises: Create low-cost, scalable water purification systems tailored for deployment in rural and underprivileged areas. Businesses can employ local workers for system maintenance, generating employment while providing clean water.
- Wastewater Recycling Innovations: Develop businesses that specialize in the recycling and safe reuse of industrial and municipal wastewater. This can help in agriculture, industry, and even for potable purposes, significantly reducing the strain on freshwater resources.
9. The Bottom of the Pyramid (BoP) and Social Business
The Bottom of the Pyramid (BoP) refers to the world’s poorest citizens, constituting an invisible and unserved market blocked by challenging barriers that prevent them from realizing their human potential for their own benefit, their families, and society at large.
Social businesses can meet the needs of the BoP by offering products and services that are affordable, durable, and directly address the challenges faced by these communities. The key is creating value propositions that align with the specific needs and financial capabilities of BoP consumers. By focusing on affordability and accessibility, businesses can tap into a vast, underserved market while contributing to social welfare.
Example: WaterHealth International
WaterHealth International provides a clear example of serving the BoP. This company installs community-based water purification systems in developing countries and sells the purified water at affordable prices. Their business model allows them to cover costs and maintain infrastructure while providing millions of people with access to clean water, improving health outcomes and quality of life.
This model demonstrates how social businesses can be profitable and socially beneficial by offering solutions that enhance the living standards of the BoP and foster sustainable growth in emerging markets.
10. Differences Between Social Business and Traditional Business
Social Business: A cause-driven business where investors/owners can gradually recoup their investment but cannot take any dividends beyond that point. The purpose of the investment is purely to achieve one or more social objectives through the company’s operation, with no personal gain desired by the investors.
Traditional Business: Focuses on generating profits for its shareholders. Its primary aim is financial gain, and it measures success by the degree to which it can maximize returns on investment. While a traditional business may engage in socially responsible activities or sustainability efforts, these actions are often driven by how they contribute to the bottom line or enhance the company’s image.
11. Social Impact Measurement
Social impact measurement is an essential practice for social and solidarity economy entities to purposefully implement their social mission. These organizations need impact information to effectively allocate resources to social value creation, improvise and innovate in their activities, inform scaling strategies, increase stakeholder engagement and funding, and support political and public advocacy. Evidence confirms that social entrepreneurs and charities increasingly and regularly track progress towards impact goals.
12. Social Impact and its Importance
In a narrow sense, social impact relates to individuals and communities and the interaction between them. In practice, when coupled with impact,”socia” often encompasses environmental, economic, or governance dimensions, as they ultimately have societal consequences.
Based on the primacy of the social mission, social and solidarity economy organizations need impact information to:
- Effectively allocate resources to social value creation
- Improvise, experiment, and innovate
- Increase stakeholder participation and collaboration
- Persuade and influence stakeholders
13. Ex-ante, Ex-post, and In itinere Evaluation
The measurement exercise can intervene at different stages of implementation, with distinct methodological implications:
Ex-ante Evaluation
Conducted before a project or policy is implemented. It is a forward-looking analysis used to forecast the effects and effectiveness of a proposed initiative.
Ex-post Evaluation
Retrospectively evaluating impact after a project or policy has been completed. The insights gained from ex-post evaluations are valuable for accountability purposes and can inform the design and implementation of future projects by highlighting lessons learned and best practices.
In itinere Evaluation
Concurrent to implementation as part of the continuous monitoring function. They support adaptive management by providing feedback while the project activities are still in progress.
Once the purpose, timing, and scope have been determined, social impact measurement practices are generally composed of similar elements. The social impact measurement practice of any organization is likely to include several of the following, in an order from specific to general: indicators, tools, methods, and frameworks.