(1)

The European Pillar of Social Rights (the ‘Pillar’) proclaimed jointly by the European Parliament, the Council and the Commission on 17 November 2017 (2) sets out a number of principles to support fair and well-functioning labour markets and welfare systems. The Pillar includes the first principle on the right to quality and inclusive education, training and lifelong learning, the second principle on gender equality, the third principle on equal opportunities, the fourth principle on active support to employment, the fifth principle on secure and adaptable employment, and principles 11 and 16 to 20 on social protection and inclusion of children, persons with disabilities and the homeless, and access to essential services, health care and long-term care.

(2)

In June 2021, the European Council, in line with the Porto Declaration, welcomed the EU headline targets for 2030 enshrined in the European Pillar of Social Rights Action Plan (3). Those targets aim to achieve an employment rate of at least 78 %, adult participation in training annually of at least 60 %, and a reduction of people being at risk of poverty or social exclusion of at least 15 million (of which at least 5 million children). The Member States have then set national targets in all three areas to help achieve those shared aims.

(3)

Despite the progress made over the past decade to reduce poverty and social exclusion, 95.4 million people remained at risk in 2021. The poverty risk has increased for people living in (quasi-)jobless households, and the depth and duration of poverty has worsened in many Member States. Quality and sustainable employment is key to alleviating this problem. Thanks to the way the social economy works, its actions and the aims it pursues, the social economy has a key role to play in improving social inclusion and equal access to the labour market. It therefore contributes to the successful implementation of the Pillar.

(4)

Social economy entities can create and retain quality jobs; they contribute to the social and labour-market inclusion of disadvantaged groups and to equal opportunities for all. This is in line with the framework of an inclusive recovery, as highlighted in the Guidelines for the employment policies of the Member States laid down by Council Decision (EU) 2022/2296 (4). Social economy entities can stimulate sustainable economic and industrial development and promote the active participation of citizens in society. They also make a significant contribution to Union’s welfare systems by complementing public services, revitalising Union’s rural and depopulated areas and playing an important role in international development policy.

(5)

On 9 December 2021, the Commission adopted an action plan for the social economy (5). That action plan contributes to the Commission’s priority of building ‘an economy that works for people’ and is aligned with the 2015 Council Conclusions on the promotion of the social economy as a key driver of economic and social development in Europe (6). In that action plan, the Commission put forward concrete measures to be implemented both at Union and national level. The measures aim to boost social innovation, support the development of the social economy and unlock its social and economic transformative power. The measures focus on creating the right conditions for the social economy to thrive, creating opportunities for social economy entities, which include enterprises and other forms of organisations, to start up and scale up, and ensuring that the social economy and its potential are more visible. The European Parliament welcomed that action plan in its resolution dated 6 July 2022 (7).

(6)

On 18 April 2023, the United Nations adopted a resolution on promoting the social and solidarity economy for sustainable development, providing a global definition of the social and solidarity economy and a roadmap to support the development of the social and solidarity economy at global level. Other international organisations have also adopted strategies for the development of the social economy, such as the Resolution concerning decent work and the social and solidarity economy adopted at the 110th International Labour Conference of the International Labour Organisation on 10 June 2022; and the Organisation of Economic Co-operation and Development Recommendation (OECD) on the social and solidarity economy and social innovation, also adopted on 10 June 2022.

(7)

The social economy, also referred to in some Member States as the solidarity economy or social and solidarity economy, encompasses a diverse range of entities with different business and organisational models that prioritise societal purpose, including social and environmental goals, over profit. Social economy entities and their definition can vary slightly between the Member States, and can take various legal forms and statuses, such as cooperatives, mutual societies, associations, foundations and social enterprises. They share the common principles of reinvesting all or most of their profits to pursue their social or environmental purposes and practicing democratic or participatory governance. The specific form of governance and management adopted by social economy entities varies according to their nature, scale, and context of operation. The principle of democratic or participatory governance thus takes different forms, ranging from the direct engagement of members in the governance processes to the representative involvement of members or partners in separate governance and management functions. For example, in cooperatives, mutual societies, and associations, this principle often takes the form of ‘one person, one vote’. The decision-making processes in social economy entities are characterised by a set of control systems and relationships between the different agents participating in the entity, including managers, partners, employees and beneficiaries. By bringing together those different agents, social economy entities promote a multi-stakeholder effort centred around a culture of participation, accountability, and transparency and aimed at achieving a common goal.

(8)

Social economy entities often strive to create economic opportunities that promote social inclusion and the integration of disadvantaged groups, including persons with disabilities and persons with mental health issues, into the labour market. Work integration social enterprises are a type of social enterprise that focuses on helping those groups of people integrate in society and in work by providing jobs at various skills levels with inclusive and flexible working conditions. For example, providing linguistic support to migrant workers and adapted tasks and working environments for persons with disabilities can offer them a route out of poverty and social exclusion. Those job opportunities can serve as stepping stones to other sectors of the labour market, helping to overcome barriers to employment for the long-term unemployed and other people experiencing difficulties in accessing the job market.

(9)

New enterprises in the social economy can be a powerful vehicle for job creation and positive social change. Social economy can provide opportunities for some underrepresented groups, such as women and young people, to enter the labour market or set up social businesses. According to the Global Entrepreneurship Monitor, an estimated 55 % of the world’s social entrepreneurs are men and 45 % are women, while in general self-employed women are outnumbered by two-to-one by men. According to a recent Eurobarometer on young people’s attitudes to social entrepreneurship, young people value the importance of social and environmental goals and participatory leadership. Member States could consider ways to minimise disincentives for potential entrepreneurs, such as ensuring they maintain access to proper social safety protection. Some Member States have reduced social security contributions as an incentive for social economy entities to hire staff. Ensuring there is an enabling framework for business transfers to employees to form worker cooperatives, or other relevant worker-owned social economy models, can also be a way to ensure continuation of small and family businesses and to avoid job losses, for instance in the case of restructuring. Member States could also implement facilitating measures for mainstream businesses to transition to social economy entities.

(10)

Social economy entities also promote the inclusion of young people, particularly young people not in education, employment or training (NEETs). They provide training and skills development programmes and apprenticeships as referred to in the Council Recommendation of 15 March 2018 on a European Framework for Quality and Effective Apprenticeships (8), and employment opportunities. They therefore contribute to the goals set by the Youth Guarantee referred to in Council Recommendation of 30 October 2020 on A Bridge to Jobs – Reinforcing the Youth Guarantee (9) and the Council Recommendation of 16 June 2022 on a European approach to micro-credentials for lifelong learning and employability (10). Union funding such as the European Social Fund Plus programme established by Regulation (EU) 2021/1057 of the European Parliament and of the Council (11) can support social economy entities in this role. To this end, successful collaborative initiatives between public employment services and social economy entities have taken place in Member States (12). Under those initiatives, social economy entities play an important role in identifying people in need of assistance and in developing tailored plans to help them achieve social and occupational integration, including training and work opportunities.

(11)

Social economy entities can promote fair working conditions by involving employees in their governance and decision-making. Promoting social dialogue in the social economy can improve the working conditions of employees. Member States can foster and build on this aspect of the social economy and make use of its know-how by involving social economy entities in the design and implementation of active labour market policies (13). Member States can also explore possibilities to facilitate the participation of social economy employers in social dialogue.

(12)

The social economy contributes to the Union of Equality strategies adopted by the Commission by promoting the social inclusion of disadvantaged and underrepresented groups, for example through the provision of social and care services (including childcare, health care and long-term care), social housing and support for children and young people with special needs. The social economy entities help reduce inequalities, such as the gender employment gap, both by directly employing a large proportion of women and by providing care services that enable caregivers, the majority of whom are women, to join the labour market. As an important partner for the public sector, the social economy can make a valuable contribution to the design and delivery of residential, home and community-based care services. Through partnership initiatives, public authorities and social economy entities can provide high-quality, accessible and affordable care services.

(13)

Vocational education and training systems play a crucial role in equipping people with the skills needed for the workplace, for personal development and for citizenship. They also help ensure a skilled workforce that can contribute towards a fair twin green and digital transition. Social economy entities provide job opportunities, on-the-job training, and work-based learning programmes tailored to the needs of individuals and the local economy. They have the potential to help roll out individual learning accounts as a possible means to achieve the objectives set out in Council Recommendation of 16 June 2022 on Individual Learning Accounts (14). Social economy entities can also contribute to closing the current digital gender gap by providing targeted support that strengthens women’s digital skills. Therefore, they can contribute to achieving a skilled and adaptable workforce able to respond to changes in the labour market, potentially easing job-to-job transition and alleviating labour shortages, therefore contributing to overall economic growth. The Member States can tap this potential when building skills intelligence, facilitating training, and designing education curricula.

(14)

The challenges posed by the twin transition and demographic change need to be tackled at regional and local levels to achieve economic, social and territorial cohesion. Social economy entities generally operate in a bottom-up way, close to communities, citizens and the problems they face, often acting as social innovators and finding solutions that can be scaled up or replicated and that contribute to systemic change. The social economy can also contribute to the Union’s strategic autonomy by creating business in strategic sectors that serve the interests and needs of the local communities. For example, the social economy could offer upskilling opportunities to low-skilled workers from sectors that are undergoing major changes and provide affordable basic goods to low-income groups. In remote and rural areas with fewer employment and educational offers, social economy entities can provide much-needed opportunities, rendering those regions more attractive. Developing the Union’s social economy ecosystems therefore contributes to alleviating the consequences of population ageing, depopulation and other demographic trends, and to promoting local economic and industrial development, including in rural and remote areas and in the Union’s outermost regions, such as in agriculture, organic food production and in the blue economy.

(15)

Promoting community-led local development and favourable ecosystems for social innovation reinforces the social economy and drives change to a climate-neutral economy in line with the European Green Deal (15) and the Green Deal industrial plan (16). Given the important role of the social economy in the development of the circular economy, as well as in citizen-led production and distribution of renewable energy, through renewable energy cooperatives and other energy communities, designing cross-cutting and coherent industrial policy measures on reuse, repair and recycling could promote a functioning market for secondary raw materials, optimising the social economy’s contribution to the objectives set by the circular economy action plan (17), and boost the competitiveness of the Union’s net-zero industry. Social economy entities operating in the digital field have demonstrated the potential to empower citizens and businesses to participate in an inclusive and human-centred digital transition and play an active role in reaching the objectives and targets of the Digital Decade 2030 policy programme established by Decision (EU) 2022/2481 of the European Parliament and of the Council (18) and the European Declaration on Digital Rights and Principles for the Digital Decade (19). To boost the resilience of this twin transition to a green and digital society, the Commission updated its Union industrial strategy in May 2021. The strategy sets out the challenges faced by the 14 industrial ecosystems, including the ‘proximity and social economy’ ecosystem, for which a transition pathway has been co-constructed.

(16)

To enable the social economy to fulfil its potential in supporting labour market access, social inclusion, skills development, territorial cohesion, economic democracy, climate neutrality and sustainable economic development, it needs an enabling framework. Since the social economy may be present in all economic sectors and is influenced by horizontal and sectoral policies and provisions, an enabling framework needs to factor in the specific features of the social economy and the additional barriers that social economy entities face in their development that limit their scope to operate alongside mainstream businesses. Social economy entities do not first and foremost seek to maximise efficiency gains and profits but primarily seek to create positive societal outcomes. They need support measures and favourable financial, administrative and legal environments that take account of the specific features of their business models in terms of governance, profit allocation, working conditions and impact. Those measures enable them to, for example, employ workers that are less productive or provide social services at accessible prices. Comprehensive strategies are needed to set enabling frameworks. This may involve adopting regulatory measures or implementing or adjusting policies and initiatives to support the social economy’s contributions to social and environmental goals and enhance their economic and industrial value. Those strategies should track progress and measure the effectiveness of initiatives, make adjustments and improvements as needed, and ultimately result in more efficient and impactful outcomes from the sector. Strategies may need to be adopted at different levels of government (national, regional and local) depending on the institutional organisation and context in each Member State. Regions, cities and other subnational levels could adopt social economy strategies that are clearly linked to regional development objectives and priorities, maximising the mutual benefits.

(17)

It is essential to involve social economy stakeholders and to facilitate the participation of the most vulnerable persons for the successful development and implementation of social economy strategies. Several Member States have already set up high-level groups that foster dialogue between public authorities and social economy entities (for instance the French High Council of Social and Solidarity Economy, the Spanish Council for the Development of the Social Economy, the Portuguese National Council for Social Economy and the Italian National Council of the Third Sector). Social economy representative networks can also be a platform for collective action, they can facilitate collaboration and information sharing, and create opportunities for capacity building and peer learning.

(18)

Public financial support can play an important role in enabling the start-up and development of social economy entities. In general, social economy entities have greater difficulties in accessing financial resources than other enterprises. For instance, despite some improvements, an analysis of social enterprise finance markets has revealed a persistent mismatch between supply and demand for finance for social enterprises in in the Union, in terms of access to debt and equity. Since social economy entities aim to generate positive social or environmental impacts and can only distribute profits to their funders and owners to a limited extent, if at all, they are generally not well suited for investors that seek significant financial returns. The support measures available to tackle this issue tend to be patchy and differ considerably in their effectiveness. Measures vary from grants and subsidies to consultancy and capacity-building services, and are often provided by incubators. There is therefore still ample room for improvement in providing tailored funding for different stages of the life cycle of a social economy entity, and further support to mobilise private funding and other complementary measures to improve access to funding for social economy entities could be helpful. One such approach involves providing the choice for individual savers or employees who participate in employer-funded retirement or savings plans with the option to select a savings plan that invests a portion of their savings into a social enterprise (20).

(19)

The Union provides many funding opportunities to support the social economy. The European Social Fund Plus, the European Regional Development Fund established by Regulation (EU) 2021/1058 of the European Parliament and of the Council (21), the Just Transition Fund established by Regulation (EU) 2021/1056 of the European Parliament and of the Council (22), the European Agricultural Fund for Rural Development established by Regulation (EU) No 1305/2013 of the European Parliament and of the Council (23), the single market programme established by Regulation (EU) 2021/690 of the European Parliament and of the Council (24), the InvestEU programme established by Regulation (EU) 2021/523 of the European Parliament and of the Council (25), and, where relevant, the Recovery and Resilience Facility established by Regulation (EU) 2021/241 of the European Parliament and of the Council (26), all provide funding.

The Union also provides advisory support through the fi-compass platform to design financial instruments under Cohesion Policy Funds. Member States, including regional and local authorities, could make better use of those opportunities by adopting specific measures for the social economy. Technical support (27) is another Union instrument available to improve the capacity of Member States to design and implement policies to strengthen the social economy.

(20)

Providing goods and services and working with both public authorities and mainstream businesses are critical for the development of the social economy, for generating revenue and to help social economy entities become financially self-sufficient. Thanks to the scope for flexibility under the Union and national public procurement rules and strategies, contracting authorities can use public procurement in a more strategic manner by setting innovative, green and social criteria, ultimately contributing to a more sustainable, inclusive and competitive economy. However, most tenders are still awarded solely on the basis of price. Since social economy entities aim to provide societal and collective benefits rather than to provide services at the lowest price, they struggle to compete in regular public procurement processes, despite the fact that they can provide broader added value to the procurement process. There is also room to increase the capacity of social economy entities to do business, including through a more systematic integration into mainstream business value chains and partnering with them to bid jointly for public procurement and create new market opportunities.

(21)

Public authorities often do not make the most of the current scope of the State aid rules to support the social economy, where the market alone is unable to achieve satisfactory access to the labour market and social inclusion, limiting themselves to measures under the general de minimis threshold and not using the option to establish measures under Commission Regulation (EU) No 651/2014 (28) (the General Block Exemption Regulation) such as regional aid, risk-finance aid, and aid to recruit disadvantaged workers. With regards to de minimis aid, it is currently limited to EUR 200 000 over three years, but the current rules will expire on 31 December 2023 and are in the process of being revised. Union rules governing services of general economic interest also offer scope to authorise State aid, but public authorities often do not make full use of those options, particularly for social services in the field of work integration of vulnerable persons. It is necessary for public authorities to examine first whether a measure qualifies as State aid within the meaning of Article 107(1) of the Treaty.

(22)

Taxation policy can also have a significant role in fostering the social economy and ensuring that social economy entities can afford to operate alongside mainstream businesses, creating a more equitable business environment while contributing to social inclusion and improved access to employment. Some Member States have established a taxation framework that encourages the development of the sector, including tax incentives tailored to the needs of the social economy, while recognising its diversity and preventing fragmentation. Administrative barriers remain in several Member States regarding public-benefit donations across Member States borders. Well-designed tax incentives for donations to public-benefit social economy entities can stimulate their financing, also across Union borders in line with the Treaty principle of non-discrimination. It is also recalled that certain goods and services, often supplied by social economy entities, can benefit from a reduced VAT rate in compliance with Article 98 of and Annex III to Council Directive 2006/112/EC (29).

(23)

Social impact measurement and management processes are particularly important for social economy entities as they enable them to understand and communicate their impact and access impact-driven funding. Social impact measurement involves using metrics and tools to gauge the social impact of a particular intervention or initiative. Social impact management involves building the systems, processes and capabilities that an organisation needs to proactively manage and increase its impact. But the wide range of frameworks and tools available can be a challenge, particularly for entities with fewer resources. Monitoring the social outcomes of public investments enables public scrutiny, can support the rationale for using taxpayer money to support social economy entities or activities, and can help to prevent ‘impact washing’ (overstating or falsely claiming impact). Social impact measurement and management approaches that are well-considered, proportionate and adapted to the needs of individual entities could be helpful in this regard. They should be based on standard methods and indicators, as well as on factors such as size, stage of development and diversity of entities. Linking social impact measurement and management methodologies to the United Nations Sustainable Development Goals can provide a helpful framework for demonstrating impact.

(24)

The visibility and recognition of the social economy at national and regional levels in the Union have improved over the last decade. However, the potential of the sector in many Member States remains untapped. A lack of coordination and exchange across Member States perpetuates the differences in the development of the social economy, therefore there is a clear opportunity for Member States to gain by learning and sharing best practices. There is also limited awareness among the general public about the social economy and the positive contributions it makes. This can hinder the development of support policies and market opportunities for the social economy. Regulating while ensuring new legislation meets the needs of social economy entities can raise awareness and give them greater legitimacy, facilitating access to finance and markets. National public authorities and stakeholders have launched several initiatives, such as specific legal forms, labels and statuses (30) for the social economy, and large-scale communication campaigns, to increase understanding and visibility of the social economy. Other successful reforms include the creation of specific ministerial units for the social economy and enhanced dialogue between stakeholders and public authorities. Boosting the visibility of the social economy is crucial to fully recognise its positive impact on society, as emphasised in the action plan for the social economy with the launch of a social economy gateway.

(25)

Having accurate data and statistics is key to improving the understanding of social economy business models and making evidence-based policy decisions. However, there is a shortage of reliable data on the social economy, including data on its economic added value and performance. Existing data is often incomplete and difficult to compare. For instance, only a few Member States have expanded their national accounting systems to collect supplementary data (such as in satellite accounts) on the social economy, despite financial support available under the Union budget. The social economy is usually not included in structural business statistics, for instance when the statistics are built on economic data generated by for-profit businesses and traditional social economy entities are only included in residual categories. By making available essential statistics on the size, workforce, development and challenges of the social economy, the strategies and measures put in place would be more efficient and adjusted to the different situations in the sector.

(26)

More broadly, promoting the social economy can be of critical importance for the attainment of the United Nations Sustainable Development Goals,