Beyond Nonprofits: Re-conceptualizing the Third Sector

Original Paper

DOI: 10.1007/s11266-016-9726-z

Cite this article as:
Salamon, L.M. & Sokolowski, S.W. Voluntas (2016) 27: 1515. doi:10.1007/s11266-016-9726-z

Abstract

The idea of a “third sector” beyond the arenas of the state and the market is probably one of the most perplexing concepts in modern political and social discourse, encompassing as it does a tremendous diversity of institutions and behaviors that only relatively recently have been perceived in public or scholarly discourse as a distinct sector, and even then with grave misgivings. Initial work on this concept focused on what is still widely regarded as its institutional core, the vast array of private, nonprofit institutions (NPIs), and the volunteer as well as paid workers they mobilize and engage. These institutions share a crucial characteristic that makes it feasible to differentiate from for-profit enterprises: the fact that they are prohibited from distributing any surplus they generate to their investors, directors, or stakeholders and therefore presumptively serve some broader public interest. Many European scholars have considered this conceptualization too narrow; however, arguing that cooperatives, mutual societies, and, in recent years, “social enterprises” as well as social norms should also be included. However, this broader concept has remained under-conceptualized in reliable operational terms. This article corrects this short-coming and presents a consensus operational re-conceptualization of the third sector fashioned by a group of scholars working under the umbrella of the European Union’s Third Sector Impact Project. This re-conceptualization goes well beyond the widely recognized definition of NPIs included in the UN Handbook on Nonprofit Institutions in the System of National Accounts by embracing as well some, but not all, of these additional institutions and forms of direct individual activity, and does so in a way that meets demanding criteria of comparability, operationalizability, and potential for integration into official statistical systems.

Keywords

Nonprofit organizations Social economy Civil society Volunteer work National accounts Conceptualization Definition 

Résumé

L’idée qu’un « tiers secteur » puisse exister au-delà de l’État et du marché est possiblement un des concepts les plus déconcertants des discours politique et social modernes, englobant, comme il le fait, une incroyable diversité d’organismes et de comportements qui, jusqu’à tout récemment, étaient perçus, dans les discussions publiques et savantes, comme appartenant à un secteur indépendant, même si sous réserve. L’examen de ce concept s’est initialement concentré sur ce qui est toujours largement perçu comme son fondement institutionnel, soit une vaste gamme d’organismes privés et sans but lucratif et les bénévoles et travailleurs rémunérés qu’ils mobilisent et engagent. Ces organismes ont en commun une caractéristique essentielle permettant de les différencier des entreprises à but lucratif : l’interdiction de répartir les surplus qu’ils génèrent à leurs investisseurs, directeurs ou intervenants, et ce, dans l’intérêt présumé d’un plus vaste public. Plusieurs savants européens ont toutefois jugé que cette conceptualisation était trop étroite, affirmant que les coopératives, les mutuelles d’assurances et, plus récemment, les « entreprises sociales » devraient en faire partie, en plus de normes sociales données. Cet article présente une conceptualisation repensée du tiers secteur modelée par un groupe de savants œuvrant dans le cadre du projet d’impact du Tiers secteur (Third Sector Impact) de l’Union européenne. Elle va bien au-delà de la définition largement reconnue des organismes sans but lucratif inclus dans le manuel des Nations Unies du système des comptes nationaux, en intégrant quelques-uns de ces organismes supplémentaires, pas tous, et des formes d’activités individuelles directes, et ce, de façon à satisfaire d’exigeants critères de comparabilité et d’opérationnalité et à être éventuellement intégrée aux systèmes statistiques officiels.

Zusammenfassung

Das Konzept eines „Dritten Sektors“ neben Staat und Mark ist wahrscheinlich eines der verblüffendsten Konzepte in modernen politischen und sozialen Diskussionen. Es ist äußerst umfassend, da eine große Vielfalt von Institutionen und Verhaltensweisen inbegriffen sind, die erst seit relativ kurzer Zeit in öffentlichen oder wissenschaftlichen Diskussionen als ein eigener Sektor betrachtet werden, und das auch nur unter großen Bedenken. Anfängliche Arbeiten zu diesem Konzept konzentrierten sich darauf, was noch immer weitgehend als sein institutioneller Kern betrachtet wird, nämlich die weite Reihe privater, gemeinnütziger Institutionen und die ehrenamtlichen und bezahlten Mitarbeiter, die sie mobilisieren und engagieren. Diese Institutionen teilen ein wichtiges Merkmal, aufgrund dessen eine Unterscheidung von gewinnorientierten Unternehmen praktikabel ist: die Tatsache, dass es ihnen nicht erlaubt ist, Gewinne an ihre Investoren, Direktoren oder Stakeholder auszuschütten, wodurch sie vermeintlich einem breiteren öffentlichen Interesse dienen. Viele europäische Wissenschaftler betrachten diese Konzeptualisierung jedoch als zu beschränkt und argumentieren, dass Genossenschaften, Gegenseitigkeitsgesellschaften und in den letzten Jahren „Sozialunternehmen“ sowie gesellschaftliche Normen ebenfalls eingeschlossen werden sollten. Dieser Beitrag präsentiert einen Konsens zur Rekonzeptualisierung des Dritten Sektors, die von einer Gruppe von Wissenschaftlern erstellt wurde, die im Rahmen des EU-Projekts zu den Auswirkungen des Dritten Sektors (Third Sector Impact Project) arbeiten. Diese Konzeptualisierung reicht weit über die weitgehend anerkannte Definition gemeinnütziger Institutionen laut dem UN Handbook on Nonprofit Instituions in the System of National Accounts hinaus, indem sie zudem einige, jedoch nicht alle, dieser zusätzlichen Institutionen und Formen direkter individueller Aktivität auf eine Weise umfasst, die die anspruchsvollen Kriterien der Vergleichbarkeit, der Operationalisierbarkeit und des Potenzials zur Integration in offiziellen statistischen Systemen erfüllt.

Resumen

La idea de un “sector terciario” más allá de los ámbitos del estado y del mercado es probablemente uno de los conceptos más desconcertantes en el discurso político y social moderno, englobando, como hace, una tremenda diversidad de instituciones y comportamientos que sólo relativamente hace poco han sido percibidos en el discurso público y erudito como un sector diferenciado, e incluso entonces con graves recelos. Los trabajos iniciales sobre este concepto se centraron en lo que se sigue considerando ampliamente como su núcleo institucional, la vasta variedad de instituciones privadas, sin ánimo de lucro y los voluntarios, así como también los trabajadores pagados que movilizan y contratan. Estas instituciones comparten una característica crucial que hace factible diferenciarlas de las empresas con ánimo de lucro: el hecho de que se les prohíbe distribuir cualquier excedente que generen a sus inversores, administradores o partes interesadas y por consiguiente sirven presuntamente a algún interés público más general. Sin embargo, muchos eruditos europeos han considerado esta conceptualización demasiado limitada, argumentando que las cooperativas, las sociedades mutuas y, en años recientes, las “empresas sociales”, así como también las normas sociales también deben ser incluidas. El presente documento presenta un consenso, una reconceptualización del Sector Terciario fabricada por un grupo de eruditos que trabajan bajo los auspicios del Proyecto sobre el Impacto del Sector Terciario de la Unión Europea que va mucho más allá de la definición ampliamente reconocida de las instituciones sin ánimo de lucro incluidas en el Manual de las NU sobre las Instituciones Sin Ánimo de Lucro en el Sistema de Cuentas Nacionales abarcando también algunas, pero no todas, de estas instituciones y formas adicionales de actividad individual directa, y lo hace de una forma que satisface los exigentes criterios de comparabilidad, operacionalizabilidad y potencial de integración en los sistemas estadísticos oficiales.

Chinese

超出国家与市场范围的“第三部门”想法可能是现代政治和社会话语最为复杂的概念之一,涵盖各种各样的制度和行为,这些制度和行为最近才在公共或学者话语中视为独特的领域,即使这样也存在极大的顾虑。这一概念的前期工作专注于仍被广泛视为制度核心的内容:大量的私人、非盈利机构以及所组织和雇用的受薪员工。这些机构都有一个共同的特点,从而实现与盈利企业的区分:它们被禁止将带来的任何盈余交给投资者、总监、利益相关方,因此假设可用于更加广泛的公共利益。许多欧洲学者都认为这一概念化过于狭义;然而,表示这还应包含合作、共同社会,以及近年的“社会企业”和社会规范。本文介绍了基于欧盟第三部门影响项目展开工作的一组学者的第三部门重新概念化,这一范围远远超出联合国国民账户体系非盈利机构手册广泛认可的非盈利机构定义,涵盖一些而不是全部额外的机构和直接个人活动形式,并在某种程度上满足严格的可比性、可操作性和融入官方统计系统的可能性标准。

Japanese

国家と市場を超えるという「第三セクター」の考え方は、おそらく現代政治的・社会的な論文においては最も複雑な概念の1つであり、途方もない多様性に富んだ制度と実践が含まれているが、異なるセクターと重大な危惧を持つ公共あるいは学術論文においてのみ認識されている。当初の研究では、この概念が中核機関、私的における広大な配列、非営利機関、動員されて従事する有償ボランティアとして幅広く認識されている点に焦点を当てた。これらの機関では、営利企業から区別するために重大な特徴を共有していて、育成された投資家、取締役または利害関係者に剰余金を配分しない事実があるため、推定的に広範な公共の利益を提供する。多くのヨーロッパの学者は、この概念は狭義であると考えており、協同組合、相互の社会、近年、「社会的企業」として社会規範も含めるべきだと主張する。非営利組織は国家会計システムの非営利機関国連ハンドブックにおいて、公式統計システムへの統合の可能性、機能性、比較評価に適合する方法で直接的な活動形態と追加組織が含まれるという定義として広く認識されており、本論文では、欧州連合の第三セクターへの影響プロジェクトの下で研究している研究者グループが、すべて第三セクターの再概念化を同意していることを提示する。

Arabic

فكرة “القطاع الثالث” ما وراء الساحات للدولة والسوق هي على الأرجح واحدة من أكثر المفاهيم المحيرة في الخطاب السياسي والإجتماعي الحديث، تشمل كما هو الحال تنوع هائل من المؤسسات والسلوكيات التي فقط مؤخرا” نسبيا كان ينظر إليها في الخطاب العام أو العلمي بإعتبارها قطاع مستقل، حتى ذلك الحين مع شكوك خطيرة. العمل الأولي في هذا المفهوم يركز على الذي لا يزال يعتبر على نطاق واسع جوهرها المؤسسي، مجموعة واسعة من مؤسسات خاصة غير ربحية والمتطوعين وكذلك العمال المدفوعين الأجريتم تعبئتهم ويشتركون. تشترك هذه المؤسسات في سمة حاسمة التي تجعل من الممكن تمييزها عن الشركات التي تسعى للربح: الحقيقة أنهم ممنوعون من توزيع أي فائض ينتجوه للمستثمرين، المديرين، أو أصحاب المصلحة، بالتالي يخدمون من المفترض بعض المصلحة العامة على نطاق أوسع. إعتبر العديد من العلماء الأوروبيين هذا المفهوم ضيق جدا”، مع ذلك، المجادلة أن التعاونيات، المجتمعات المتبادلة، و، في السنوات الأخيرة، “الشركات الاجتماعية”، كذلك المعايير الإجتماعية ينبغي تضمينهم أيضا”. يقدم هذا البحث آراء إعادة صياغة مفهوم القطاع الثالث التي صنعت من قبل مجموعة من العلماء الذين يعملون تحت مظلة مشروع تأثير القطاع الثالث للاتحاد الأوروبي الذي يذهب إلى أبعد من التعريف المعترف به على نطاق واسع من المؤسسات الغير الربحية المذكورة في دليل الأمم المتحدة على المؤسسات الغير ربحية في نظام الحسابات القومية من خلال تبني كذلك بعض، لكن ليس كل ، هذه المؤسسات الإضافية وأشكال النشاط الفردي المباشر ، و يفعل ذلك بطريقة تلبي معايير تطالب بالمقارنة، إنها تكون قابلة للتفعيل، والقدرة على الإندماج في النظم الإحصائية الرسمية .

Introduction

Recent years have witnessed a growing interest among policy-makers, researchers, and practitioners in the array of institutions and individual activities that occupy the largely uncharted social space beyond the market, the state, and the household. To be sure, there seems widespread agreement that both institutions and individual activities fall into this twilight zone. Similarly, there seems to be agreement that these institutions and activities share at least three common attributes that, together, set them apart from the other spheres of social life: first, because, unlike the state, they are private, second, because, unlike market entities, they primarily serve some common good, and third, because, unlike families, participation in them involves some meaningful element of free choice.

Beyond these abstract concepts, however, enormous differences exist about which institutions and individual activities should be included, indeed whether institutions belong at all, and what “private,” “common good,” and “free choice” really mean. An early first step toward clarifying the boundaries and content of this twilight zone within the framework of the Johns Hopkins Comparative Nonprofit Sector Project focused on what is widely considered to be at its core—the set of institutions and associated behaviors known variously as associations, foundations, giving, and volunteering; or collectively as nonprofit, voluntary, voluntary and community, or civil society organizations and the volunteer activity that they help to mobilize (Salamon et al. 2004; Salamon 2010). Even this was a Herculean conceptual task, however, given the bewildering diversity and incoherence of the underlying realities this concept embraced. But no sooner did a consensus form around how to define this core than a chorus of critics surfaced calling attention to an even wider network not only of institutions and individual behaviors, but also of sentiments and values, legitimately eligible to be considered also to be primarily serving the common good (Evers and Laville 2004b). And now, perhaps not surprisingly, in some quarters, the entire task of conceptualizing and mapping this twilight zone has come under fire as an exercise inherently doomed to serve chiefly the anti-democratic, anti-civil society objectives of states, and therefore of questionable benefit (Nickel and Eikenberry 2016, pp. 392–408).

Against this background, this article seeks to take the next step in clarifying the composition and boundaries of the twilight zone of institutions, activities, and behaviors that lies beyond the market, the state, and the family, and to do so in a way that can ultimately be utilized in empirical research and institutionalized in official statistical systems. While we certainly concede that conceptualizing and mapping what we here term the “third sector,” or ultimately the “third or social economy (TSE)” sector, faces formidable problems of “hybridization” and “blurred boundaries” (Henriksen et al. 2012) and can serve the control objectives of states; we believe equally strongly that it is intellectually possible and is at least as likely to empower, legitimize, popularize, and validate the behaviors and institutions that operate in this social space and potentially lead to supportive private actions and public policies instead of only harmful ones.

More than that, we believe that clear and understandable conceptual equipment remains one of the sorest needs in the social sciences, and certainly in the somewhat embryonic field of third sector studies. Indeed, as one of us has written in another context: “The use of conceptual models or typologies in thinking is not a matter of choice: it is the sine qua non of all understanding” (Salamon 1970, p. 85). Political scientist Karl Deutsch made this point powerfully in his Nerves of Government, when he wrote: “…we all use models in our thinking all the time, even though we may not stop to notice it. When we say that we ‘understand’ a situation, political or otherwise, we say, in effect, that we have in our mind an abstract model, vague or specific, that permits us to parallel or predict such changes in that situation of interest to us” (Deutsch 1962, p. 12). It is for this reason that Deutsch argues that meaningful conceptualization is “basic progress in the technology of thinking and in the development of human powers of insight and action” (Deutsch 1962, p. 10).

Anyone who has followed the development of understanding of the third sector in all of its manifestations must recognize the need for such “basic progress in the technology of thinking” in this field. Accordingly, this article describes an effort undertaken by a team of scholars to take the next step in conceptualizing this broad sphere of social activity. More specifically, it presents an elaborated definition of what for the sake of convenience we referred to as “the third sector,” and that later in this article, we will propose referring to as the TSE sector for reasons that will become clear there.1

This conceptualization builds upon the widespread bottom-up investigation carried out in more than 40 countries scattered widely across the world in the process that led to the conceptualization of the “nonprofit sector” in the Johns Hopkins Comparative Nonprofit Sector Project, but supplements this with a similar bottom-up investigation carried out more recently in a broad cross-section of European countries to tap understandings of the broader concept of “third sector” and its various regional cognates, such as the social economy, civil society, and social entrepreneurship. Building on these bottom-up processes, a consensus conceptualization of the “third sector” was hammered out through a vigorous set of discussions among representatives of 11 research institutes operating within the framework of the European Union-funded Third Sector Impact (TSI) Project and the advisory board and sector stakeholders this project mobilized.2 The goal was to provide as broad a consensus conceptualization of the “third sector” as possible while meeting a demanding set of criteria for rigor and clarity. While fashioned against the immediate backdrop of European realities, it is our hope that this conceptualization can help structure inquiries in other regions as well and even penetrate official international statistical systems.

To introduce this proposed conceptualization, the discussion here falls into five sections. “The Challenge” section, which follows, describes the basic challenge that stands in the way of coherent conceptualization of the third sector that can work across nations and regions, and explains why overcoming these challenges might be important. “Overcoming the Challenges: The Approach” section then outlines the strategy we employed to find our way around these challenges. In “Key Findings and Implications” section, we summarize the major conclusions that emerged from the fact-finding processes undertaken in pursuit of this strategy. In “Toward a Broadened Operational Conception of the Third Sector/Social Economy (TSE) Sector” section, we present the key elements of the clarified definition of the third sector that resulted, focusing first on this sector’s institutional components and then on its individual activity components. The final section outlines the next steps that will be needed to test the operational feasibility of the resulting conceptualization.

The Challenge

A Diverse and Contested Terrain

The starting point for our conceptualization work was naturally the existing diversity of views over whether something that could appropriately be called the “third sector” actually exists in different parts of the world, and, if so, what it contains. Even a cursory review of the literature makes clear, however, that the “third sector,” and its various cognates, is probably one of the most perplexing concepts in modern political and social discourse. It encompasses a tremendous diversity of institutions that only relatively recently have been perceived in public or scholarly discourse as a distinct sector, and even then only with grave misgivings given the apparent blurring of boundaries among its supposed components (see, for example, Salamon and Anheier 1997a, b; Defourny and Pestoff 2014; Taylor 2010; Corry 2010).

Some observers adopt a very broad definition that, in addition to organizations, includes the actions of individuals and societal value systems (Heinrich 2005 ; Anheier et al. 2001). Others prefer more narrow definitions, focusing, for example, on “nongovernmental” or “nonprofit” or “charitable” organizations. Other definitions fix the boundaries of this sector on the basis of such factors as the source of organizational income, the treatment of their operating surplus, who the organizations serve, how they are treated in tax laws, what values they embody, how they are governed, what their legal status is, how extensively they rely on volunteers, or what their objectives are (Salamon and Anheier 1997a, b; Salamon 2010; Evers and Laville 2004a, b; Alcock and Kendall 2011; Cohen and Arato 1994; Edwards 2011; Habermas 1989). These conceptualizations also identify this sector using different terms—including civil society sector, nonprofit sector, voluntary sector, charitable sector, third sector, and, more recently, social economy, social enterprise, and many more (Teasdale 2010).

More importantly, conceptualization of the third sector is a contested terrain, a battlefield where different and often opposing views vie for ownership of the concept and its ideological, cultural, and political connotations (Chandhoke 2001; Defourny et al. 1999; Fowler 2002). Diverse and often conflicting interest groups, from left-wing social movements to conservative think tanks, claim proprietorship of the third sector concept because of the emotively desirable connotations it evokes, such as public purpose, freedom, altruism, civic initiative, spontaneity, or solidarity. Regional pride also figures into the definitional tangle. When scholars in one major project focused on “nonprofit institutions” (NPIs), both formal and informal, and the voluntary activity they engaged as the core of the third sector (Salamon et al. 1999, 2004), colleagues in Europe accused it of an Anglo-Saxon bias notwithstanding the fact that it was fashioned by a broadly cross-national team, embraced entities not commonly included within American or British conceptualizations of this sector, while many of the cooperatives and mutual associations they proposed to embrace within a broadened concept were difficult to distinguish from regular profit-distributing corporations (Evers and Laville 2004a, b; Heinrich 2005; Defourny and Pestoff 2014).

Many popular perceptions of third sector activities appear to share an underlying ideological position that places a premium on individual entrepreneurship and autonomy, and opposes encroachment on that autonomy by state authorities, while others see this sector as a source of citizen empowerment (Howell and Pearce 2001; Seligman 1992). The third sector thus becomes the carrier of a wildly diverse set of ideological values—an expression of individual freedom, a buffer against state power, a vehicle for citizen promotion of progressive policies, and a convenient excuse for resisting such policies (Van Til 1988).

A Sector Hidden in Plain Sight

One reflection of this conceptual confusion is the treatment of third sector institutions in basic international statistical systems. The System Of National Accounts (SNAs), which guides the collection of economic statistics internationally, assembles considerable data on third sector institutions, as well as on cooperatives and mutuals. But, because they often engage in market sales or received government contracts, such institutions get assigned to the “corporations sectors” in national economic statistics, where they lose their identity as third sector entities (Salamon 2010).3

Similarly, while quite robust labor force surveys are regularly conducted in virtually all countries, until very recently the International Labour Organization (ILO), which oversees the development of guidelines for these surveys, has not recommended covering volunteer work in them, leaving such work empirically invisible in most of the world. While a handful of countries does ask about such work through labor force or other specialized surveys, they do so using significantly different definitions and questions, making comparisons across countries, and often even within countries over time, almost impossible.

Why Address This Challenge? The Case for Better Conceptualization and Data

To be sure, as some critics have noted, there are certainly risks in having governments, or any other entity, in possession of data on third sector institutions and volunteer effort (Nickel and Eikenberry 2016). But aside from the fact that in most countries much of such data is already in government hands as a by-product of registration, incorporation, or taxation requirements, disclosing such data can also bring important benefits to third sector organizations, volunteering, and philanthropy. For example, such data can
  • Boost the credibility of the third sector by demonstrating its considerable scale and activity;

  • Expand the political clout of third sector institutions by equipping them to represent themselves more effectively in policy debates;

  • Validate the work of third sector institutions and volunteers, thereby attracting more qualified and committed personnel, volunteers, and contributors;

  • Enhance the legitimacy of the third sector in the eyes of key stakeholders;

  • Deepen sector consciousness and cooperation; and

  • Facilitate the sector’s ability to forge partnerships in support of its central missions.

At the end of the day, the old aphorism that “what isn’t counted doesn’t count” seems to hold. At the very least, other industries and sectors act in ways that seem to confirm the truth of this aphorism. This was evident, for example, in the campaign launched by the tourism industry to convince statistical authorities to establish an official procedure for the preparation of regular “satellite accounts” to bring together in one place data on the disparate components of this industry that are now scattered broadly in different other industries—transportation, services, accommodation and food services, retail trade, and recreation (see: http://unstats.un.org/unsd/tradeserv/tourism/manual.html).

Overcoming the Challenges: The Approach

To overcome the challenges in the way of formulating a meaningful conceptualization of the third sector and thereby allow this sector to secure the benefits that this can produce, we utilized a four-part strategy.

Establishing the Criteria for an Acceptable Conceptualization

Because different types of definitions may be appropriate for different purposes, a first step in this process had to be specification of the type of definition at which the conceptualization work was aiming. In our case, the goal was to formulate a definition capable of supporting empirical measurement of the sector so defined. This meant that a basic philosophical conceptualization would not suffice. Rather, we resolved to push beyond philosophical concepts to find observable manifestations of whatever philosophical notions we concluded that this sector embodied. This led us to five key criteria that our target conceptualization had to embody.

• Sufficient breadth and sensitivity encompasses as much of the enormous diversity of this sector and of its regional manifestations as possible, initially in Europe, but ultimately globally.

• Sufficient clarity differentiates third sector entities and activities from four other societal components widely acknowledged to lie outside the third sector, i.e., government agencies, private for-profit businesses, families or tribes, and household work or leisure activities. A definition that embraced entities or activities with too close an overlap with these other components thus had to be avoided.

• Comparability highlights similarities and differences among countries and regions. This meant adopting a set of common standards that could be applied everywhere. The alternative would be equivalent to using different-sized measuring rods to measure tall and short people so that everyone would appear more or less equal in height.

• Operationalizability permits meaningful and objective empirical measurement and avoids counterproductive tautologies or concepts that involved subjective judgments rather than objectively observable characteristics. Philosophical or normative features could usefully guide the search, but operational proxies for them would have to be found.

• Institutionalizability facilitates incorporation of the capability to measure the third sector into official national statistical systems so that reliable data on it can be regularly and reliably generated.

The Concept of a “Common Core”

In order to adhere to the comparability criterion, the project had to formulate a conceptualization applicable to a broad range of countries, north and south. To achieve this, the work outlined here set as its goal not the articulation of an all-encompassing “definition,” but rather the identification of the broadest possible conceptualization of a “common core” of the third sector. Central to the concept of a “common core” is the notion that particular countries may have elements in their conceptions of the third sector that extend beyond the common core. Countries or regions could thus use the common core for cross-national comparative purposes and still report on a broader concept in country reports, though while taking care to label the different versions appropriately.

A Modular Approach

Recognizing that even a common core would likely contain a variety of types of entities and activities, a further key feature of our conceptualization was the need to preserve the identities of these types of entities and behaviors. Such a “modular” approach would make it possible to document the likely variations in the composition of the third sector from place to place and provide further richness to the picture.

A Bottom-Up Strategy

Finally, to build a common core, consensus conceptualization of the third sector broad enough to encompass all relevant types of institutions and behaviors in-scope of this sector, yet operational and clear enough to distinguish in-scope entities from ones that bear stronger resemblance to the other sectors, we devised a bottom-up strategy carried out as part of a larger research project aimed at defining and measuring the third sector in an international, comparative perspective. With the aid of the research partners in this larger project and an agreed-upon research protocol, we reviewed existing literature and conducted interviews to identify national and regional conceptualizations of the third sector and its component parts in five sets of European regions, assessed them against a potential consensus definition of the third sector flowing out of broader work and literature, and then analyzed the resulting observations to find whether common understandings could can be discerned in these conceptualizations and manifestations.4

This methodological approach was carried out in a collaborative and consultative manner allowing the project’s partners to present and discuss their unique regional perspectives and concerns at every stage of the investigation, and working to reconcile them with the overarching objective of developing a consensus conceptualization of the third sector that could be effectively applied both to the different regions of Europe, and more generally as well.

Key Findings and Implications

Two major conclusions flowed from this bottom-up review process.

Enormous Diversity

In the first place, this review confirmed the initial impressions of enormous diversity in the way the term “third sector” is used, and in the range of organizational and individual activity, it could be conceived to embrace even within Europe, let alone in the world at large.

At one end of the spectrum is the UK, which holds to the concept of “public charities” as recently articulated in the Charities Act of 2011, but with its real roots in the Elizabethan Poor Law of 1601. This concept is rather narrow and, though broadened a bit in recent legislation and policy debate, remains confined to an historically evolved concept of charity (Kendall and Thomas 1996a, b; Alcock and Kendall 2011; Garton 2009; Six and Leat 1997). To be seen as having charitable purposes in law, the objects specified in organizations’ governing instruments must relate to a list of 12 particular purposes specified in the Charities Act of 2011 and be demonstrably for the public benefit. Not all nonprofit organizations (NPOs) are considered charities in the UK, though broader concepts such as “third sector,” “civil society,” “voluntary and community sector,” “volunteering,” and “social economy” are sometimes used for policy purposes, but have no legal basis and no clear definitions (UK Office of the Third Sector 2006). The term “social economy” was not widely recognized in the UK until the 1990s (Amin et al. 2002) and is not widely used. In recent years, a robust “social enterprise” sub-sector has emerged, consisting of entities that use market-type activities to serve social purposes, but these take a variety of legal forms. In short, there is no commonly accepted concept of a third sector in the UK, and the plethora of terms and concepts in use raises questions about whether a coherent conceptualization of the third sector is possible, even in a single country, let alone across national borders. At the very least, different definitions may be appropriate for different purposes.

By contrast, in France and Belgium—as well as throughout Southern Europe (Portugal, Spain, Italy, and Greece) and in parts of Eastern Europe, the Francophone part of Canada, and throughout Latin America—the concept of “social economy” has gained widespread attention.5 In contrast to conceptions prevailing elsewhere in Europe—which underscore organizational features like charitable purpose, volunteer involvement, or a nonprofit-distribution constraint—the social economy conception focuses on social features, such as the expression of social solidarity and democratic internal governance (Evers and Laville 2004a, b; Pestoff 2004; Bode and Evers 2004; Defourny and Pestoff 2014). In its broad formulations, the concept of social economy embraces not only the voluntary, charitable, or nonprofit sectors, but also cooperatives and mutuals that produce for the market, and newly created “social cooperatives” that are even more clearly socially oriented.6 Since many cooperatives and mutuals have grown into enormous commercial institutions that distribute proceeds to investors as well as “members,” the social economy concept as widely used thus blurs the line between market-based, for-profit entities and the nonprofit, or nonprofit-distributing entities that are central to many northern European and Anglo-Saxon conceptions of what forms the heart of the third sector (Defourny et al. 1999; Evers and Laville 2004a, b; Barea and Monzón 2006).

Yet another conception of what constitutes the third sector can be found in Central and Eastern Europe where the broad overarching concept of “civil society” is widely used in public discourse. Civil society consists of formal organizations and informal community-based structures as well as individual actions taken for the benefit of other people, including improvement of the community or natural environment, participation in elections or demonstrations, informal or direct volunteering, and general political participation (Edwards 2009, 2011; Pollack 2004; Zimmer and Priller 2007; Chambers and Kymlicka 2002; Seligman 1992; Cohen and Arato 1994). More narrow terms—third sector or nonprofit sector—are used to denote the set of organizations with different legal forms, including associations, foundations, cooperatives, mutual companies, labor unions, business associations, professional associations, and religious organizations. The use of various terms changed during the political transformation following the dissolution of the Soviet bloc. The term “nonprofit sector” was very popular in the beginning of the transformation. However, accession to the EU introduced the concept of social economy in this region as well. Recently, the very broad and inclusive term “third sector” has been gaining popularity. It includes all kinds of civil society activities that have permanent or formal structure, including cooperatives and mutuals that allow profit distribution (Nałęcz et al. 2015).

Other countries fall on a spectrum among these various alternatives. Some countries hew close to the “British” end of the spectrum, focusing on structured organizations that adhere to a non-distribution of profit constraint. This is the case, for example, in Germany and Austria, where the term “nonprofit organization (NPO)” is common, though the concept of “civil society” has also gained some traction (Bode and Evers 2004). However, the values expressed by various actors in this latter sphere are frequently contested (Chambers and Kopstein 2001; Heins 2002; Teune 2008). And this term does not normally extend to the service-providing NPOs mentioned above. The boundaries between civil society and the NPO sector are often blurred, and “civil society,” “third sector,” and “NPO sector” are often used synonymously (Simsa 2013) while research under the title of civil society is frequently limited to references to NPOs. In recent years, the term “social entrepreneurs” has gained importance—meaning innovative approaches to mainly social problems, with high market orientation, not necessarily nonprofit, not necessarily involving voluntary elements, and where financial gains can be at least as important as social mission. Cooperatives and mutuals, because they can distribute profit, would not be included in the concept of a third sector in Austria or Germany, though these institutions do exist as parts of the commercial sector. In the Netherlands, as well there is also no single overarching concept of the third sector, but three mid-range conceptualizations—particulier initiatief (private initiatives), maatschappelijk middenveld (societal midfield), and maatschappelijk ondernemerschap (social entrepreneurship)—are used instead. These correspond roughly to nonprofit associations providing various services, advocacy groups, and social ventures, though sector identity appears to be waning (Dekker 2004; Brandsen and Pape 2015).

Likewise, there is no a single overarching concept of the third sector in the Nordic countries, Instead, different historically evolved types of institutions are commonly identified—voluntary associations, ideal organizations, idea-based organizations, self-owning institutions, foundations, social enterprises, cooperatives, mutual insurance companies and banks, and housing cooperatives (Pestoff 2004). Some of these have a legal basis while others do not. Cooperatives are not widespread in the Nordic countries and those that exist typically have some limitation on their distribution of profits. Norway did not establish a law on cooperatives until 2008, for example. Sweden has a category of “economic associations” (ekonomiska föreningar) and has recently developed the cooperative form in areas where the government until recently has been the main supplier. However, “social economy” is not widely used and most cooperatives are viewed as profit-distributing institutions. The Nordic countries stand out, however, with respect to the emphasis they place on volunteer work (Sivesand et al. 2004, pp. 261–275).

One other institutional element identified in several countries as potential components of the third sector are so-called “social enterprises.” As noted, these are enterprises that use market mechanisms to serve social purposes. Examples include catering firms that sell their products on the market but choose to employ mostly disadvantaged workers (e.g., persons with previous drug habits or arrest records), using the business to help rehabilitate these workers and prepare them for full-time employment (Defourny and Nyssens 2006; Nicholls 2006; Bornstein 2004). Special legal forms, such as “Community Interest Companies” in the UK and “Benefit Corporations,” or “B-Corps” in the US, have been created for such enterprises in some countries, but not all such enterprises have chosen to seek such legal status, preferring to organize under laws that apply to NPOs or to organize as regular for-profit businesses (Lane 2011; Nicholls 2006; and http://www.cicassociation.org.uk/about/what-is-a-cic).

Considerable Underlying Consensus

Despite the apparent impossibility of bridging the considerable disparities in conceptualizations of the social space connoted by the concept of a “third sector” even in this single region, it is well to remember that the third sector is not the only societal sector that has faced the challenge of dealing with diversity in finding a suitable conceptualization of itself. Certainly, the business sector has every bit as much diversity as the third sector, with multiple legal structures, tax provisions, lines of activity, variations in scale, and inter-relations with government. Yet, scholars, policy-makers, and statisticians have found reasonable ways to conceptualize this complex array of institutions and distinguish it from other societal components, and popular usage has bought into this formulation.

And, as it turns out, a somewhat surprising degree of consensus also surfaced in the responses to our field guide search for clarification of the elusive concept of the third sector in its European manifestations, and it seems possible to imagine this consensus applying more broadly as well. Four important components of this consensus stand out.

Wide Agreement on Three Underlying Conceptual Features

In the first place, while there was disagreement about the precise institutions or behaviors that the concept of the third sector might embrace, the review surfaced a considerable degree of consensus about some of the underlying philosophical notions that the concept of a third sector evoked in Europe (and very likely beyond it). These connect the third sector concept, by whatever term used for it, to three key ideas:
  1. (i)

    Privateness i.e., forms of individual or collective action that are outside the sphere and control of government;

     
  2. (ii)

    Public purpose i.e., serving the broader community and not primarily to generating profit or otherwise creating something of value primarily to the persons undertaking the activities or those persons’ family members; and

     
  3. (iii)

    Free choice i.e., pursued without compulsion.

     

NPIs are in

Second, there was general agreement that whatever else it embraces, the concept of the third sector certainly embraces the set of institutions defined in the United Nations Handbook on Nonprofit Institutions in the System of National Accounts as NPIs, or nonprofit institutions. As spelled out in that NPI Handbook, these are institutions or organizations, whether formally or legally constituted or not, that are private, self-governing, non-profit-distributing (viewed as a proxy for public purpose), and engaging people without compulsion. The defining elements of this component of the third sector have been tested already in more than 40 countries and incorporated into the latest (2008) edition of the methodological guidelines for the official SNAs that guides the work of statistical agencies across the world. Several partners reverted to this basic set of institutions in defining the core of the third sector concept.

More than NPIs: Cooperatives and Mutuals

While there was widespread agreement that NPIs are appropriately considered part of the “common core” of the third sector, there was also considerable agreement that they could not be considered to constitute the whole of it (Knutsen 2016). Rather, other types of institutions also needed to be considered. Most obvious were the cooperatives and mutuals that form the heart of the social economy conception so prominent in Southern Europe, but that are present in other parts of the continent and in other regions as well. The problem here, however, was that some types of cooperatives and mutuals have grown to the point where they are hard to distinguish operationally from for-profit businesses, particularly if some type of limitation on the distribution of profit is taken, following the experience with NPIs, as a proxy for the pursuit of public purpose. This applies particularly to such organizations operating in the insurance and financial industries, but applies to some production cooperatives as well. Because of this, there was little consensus about the appropriateness of bringing the entire “social economy” collection of institutions into the common core concept of the third sector in Europe. What is more, there is little sign that it would be possible to convince statistical authorities to treat the entire class of cooperatives and mutuals as something other than regular “market producers” appropriately assigned to the corporations sectors in national accounts.

More than NPIs: Social Enterprises

A similar situation surrounds the relatively recent concept of “social enterprises.” As noted, this type of enterprise that mixes social purpose with market methods has recently gained considerable prominence in a number of European countries, such as the UK, France, and the countries of Central and Eastern Europe, as well as in parts of Latin America, Asia, and Africa. More even than cooperatives and mutuals, however, these entities raise difficult definitional challenges since they seek market returns and are often organized under laws that apply equally to for-profit businesses. In some countries, such as the UK, to be sure, special legal categories have been established for such entities to acknowledge their mixture of social and commercial objectives and activities. In Italy, for example, a special class of “social cooperatives” has been established for enterprises that operate market production facilities but are required to employ a minimum of 30 % of their workers from among persons who exhibit one of a list of legally defined forms of disadvantage. In other countries as well, the cooperative form is also used for such enterprises while elsewhere they organize as NPOs (Borzaga and Loss 2006). But the boundary between valid “social enterprises” and plain vanilla for-profit firms has remained obscure (Defourny 2001).

More than Institutions: The Individual Component

Finally, given the prominence of the concept of “civil society,”—with its emphasis on citizen action, social movements, and the so-called “public sphere” as embodiments of the third sector, especially in Central and Eastern Europe—as well as the emphasis on voluntarism as an important component of the third sector concept in the Nordic countries, the UK, and Italy, it also became clear that confining the concept of the third sector to any particular set of institutions would not suffice. Rather, it was important to include individual activities of citizens within our conceptualization of the third sector. But clearly not all citizen actions could be included. Here, again, distinctions were needed to differentiate activities citizens engage in for their own enjoyment or as part of their family life from those carried out on behalf of others.

The task here was greatly simplified, however, by the existence of the ILO Manual on the Measurement of Volunteer Work, which offered an operational definition of volunteer work that included many of the activities that could easily be interpreted as manifestations of civil society, including participation in demonstrations, other forms of political action, as well as other activities undertaken without pay for the benefit of one’s community or other persons beyond one’s household or family (Salamon et al. 2011).

Conclusion: Portraying the Third Sector Conceptually

Four more-or-less distinct clusters of entities or activities thus emerged from our bottom-up review process as candidates for inclusion within our consensus conceptualization of the third sector in whole or in part: (i) NPOs, (ii) mutuals and cooperatives, (iii) social enterprises, and (iv) human actions such as volunteering and participation in demonstrations and social movements that are undertaken without pay.

However, not all of the entities in each of these clusters seem appropriate to include within a concept of the third sector. This is so because many of them significantly overlap with other institutional sectors, i.e., government, for-profit businesses, and household activities—from which the third sector must be distinguished in order to stay true to our basic philosophical conception of a set of institutions or activities that are private, primarily public serving in purpose, and engaging people without compulsion. This bottom-up review thus made it clear that formulating a broadened conceptualization of the third sector that met our criteria of clarity, comparability, operationalizability required finding a way to differentiate those sub-sets of these institutional, and individual components that are “in-scope” from those that are “out-of-scope” by virtue of being much closer to for-profit businesses, government agencies, or household activities. This required us to translate the concepts of “privateness,” “public purpose,” and “non-compulsory” into operational terms that could perform this differentiation function and thus yield a coherent operational definition of the third sector/social economy, or TSE sector, amalgam.

Figure 1 provides a visualization of the conceptualization task that the project thus faced. The circular line marks the hypothesized boundary of what we can term the third sector/social economy, or TSE, sector, and differentiates the institutional and individual action components that are in-scope of this sector from those that are out-of-scope. Several features of our conceptualization task stand out starkly in this figure.
Fig. 1

Conceptualizing the third sector: a first cut

First, the triangle in the middle represents the NPI set of entities that forms the core of the TSE sector. There are several reasons for this. First, except for a relative handful of NPIs created by governments and fundamentally controlled by them, almost the entire class of NPIs is within scope of this TSE sector. Second, the NPIs have been well-defined as a class for the purpose of statistical information assembly and reporting. This was due in part to the fact that it was relatively easy to identify operational features of NPIs that embody our philosophical notions of the essence of the third sector and that could consequently be used to differentiate NPIs relatively clearly from units that are part of the other social and economic sectors. The total prohibition on the distribution of profits to stakeholders was perhaps the most useful of these, providing a way to capture the notion of “public purpose” without having to enumerate a long laundry-list of such possible activities.

Also notable in Fig. 1, the dotted lines are separating NPIs from cooperatives, mutuals, social enterprises, and activity without pay. These are intended to reflect the fact that some cooperatives, mutuals, and social enterprises are also NPIs, and that some volunteer work takes place within NPIs.

Third, the conceptual map also makes clear that the TSE sector is quite broad, potentially embracing cooperatives, mutuals, social enterprises, and volunteer work in addition to the multitude of types of NPIs. It does so, however, in modular fashion, separately identifying the different types of entities rather them merging them into one undifferentiated mass, thereby making it possible for particular stakeholders to gain insight into their particular component of this TSE sector whole.

Finally, and perhaps most importantly, figure graphically illustrates the significant conceptual and definitional work that still remained, since not all cooperatives, mutuals, social enterprises, or individual activity can be considered in-scope of the TSE sector. This is so, as noted earlier, because some of them do not adequately embody the philosophical notions that underlie the common understanding of what truly constitutes the TSE sector. The task that remained, therefore, was to identify a set of operational features that could be used as proxies to translate these philosophical notions into observable, operational form. It is to this task that we therefore now turn.

Toward a Broadened Operational Conception of the Third Sector/Social Economy (TSE) Sector

Fundamentally, two sets of hypothesized operational features had to be devised to capture our broadened conception of a TSE sector in operational terms: one focused on the institutional components of this sector and the other on its individual activity components. Fortunately, in both cases, we were not completely at sea in formulating useful dividing lines. The discussion below takes up each of these components in turn and indicates how each came to operationalized using an iterative process in which partners were asked to provide their input on a set of proposed operational characteristics, on the basis of which the defining features were modified or tweaked and submitted for additional review until a consensus was achieved.

Defining In-scope Institutional Components of the TSE Sector

So far as the institutional components of the broadened TSE sector were concerned, we found it useful to start our search for in-scope operational features from the definition of the NPI sector formulated and tested in over 40 countries through the Johns Hopkins Comparative Nonprofit Sector Project and institutionalized in the official international guidance system for economic statistics through the issuance in 2003 by the United Nations Statistics Division, with the concurrence of the UN Statistical Commission, of the Handbook on Nonprofit Institutions in the System of National Accounts. According to this Handbook, which was more fully integrated into the core SNAs during a 2008 revision, such NPIs can be identified and differentiated from other societal institutions on the basis of five defining features. In particular, they are (a) institutional units, that are (b) barred from distributing any profits they might earn to their stakeholders or investors, (c) self-governing, (d) not controlled by government or institutionally part of the governmental apparatus, and (e) engage people on the basis of free choice.

These features usefully embody all three of the crucial philosophical notions central to the third sector concept—privateness, public purpose, and uncoerced participation. The first and third of these were reflected in the definitional requirement that in-scope NPIs be self-governing entities that individuals are free to join or not join voluntarily, and that are private, i.e., institutionally separate from government, and not controlled by government, even though they may receive substantial financial support from government. The second was reflected in the fact that nonprofits are, by definition, prohibited by law or custom from distributing any profits they may earn to their investors, directors, or other stakeholders, and must retain any profits they accumulate for the same public purpose in the event they cease operation or undergo a transformation into a for-profit entity. Along with the non-compulsory feature, this prohibition on the distribution of profit served as a convenient and workable proxy for the notion of public purpose. The central rationale is that a set of organizations that individuals must choose to join, work for, or support freely and without compulsion and from which they cannot receive any distribution of profit must be an organization that the individuals view as serving some public purpose.

With this as a starting point, however, it was an easy jump to realize, based on the input from our bottom-up investigation, that the other potential in-scope institutional components of the TSE sector could be identified by relaxing just one of the key operational features of in-scope NPIs. This is the case because virtually all organizations engaged in the production of public goods or public benefits of any kind face significant limitations on their ability to generate surplus and distribute it to investors or owners. Many such organizations provide their goods or services at reduced cost or free of charge. Others engage individuals with disabilities or other barriers to employment, which can affect their productivity and increase costs. Still other organizations cross-subsidize certain members or participants based on their need rather than their ability to pay for goods or services. All such practices significantly limit the ability of these organizations to generate and distribute profits. Relaxing the nonprofit-distribution constraint to include organizations that can distribute some surpluses generated by their activities, but by law or custom are “significantly limited” in the extent of such distribution, thus provided the operational basis, we were seeking to differentiate in-scope cooperatives, mutuals, and social enterprises from their out-of-scope counterparts and hence a suitable proxy for the concept of public purpose that is central to our philosophical concept of the third sector.

Still needed, however, was a further clarification of what it means to be “significantly limited” in the distribution of profits. For this, it was necessary to examine existing practice in a wide range of countries, from which a number of more specific and concrete specifications were derived.

Out of this set of considerations emerged an agreed conceptualization of the institutional components of the third sector that focuses on five defining features, each of which is translated into operational terms. An institutional unit—whether a NPO, an association, a cooperative, a mutual, a social enterprise, or any other type of institutional entity in a country—must meet all five of these features to be considered “in-scope” of the third, or TSE, sector.

In particular, to be considered part of the TSE sector, entities must be
  • Organizations, whether formal or informal;

  • Private;

  • Self-governed;

  • Non-compulsory; and

  • Totally or significantly limited from distributing any surplus they earn to investors, members, or other stakeholders.

Each of these features then had to be translated into more precise operational terms. Thus given below.

The Organization Feature

To be considered an organization, a unit need not be legally registered. What is important is that it involves groups of people who interact according to some understood procedures and pursue one or more common purposes for a meaningfully extended period (e.g., longer than several months). Groupings that lack even these minimum features of permanence and understood operating procedures (e.g., ad hoc social movements or protest actions) can still be considered parts of the third sector under the individual action component of the TSE sector.

The Private Feature

To be considered private, an entity must be institutionally separate from government and not controlled by government.7 This means that the organization is not a government unit, does not exercise governmental authority in its own right, and is able to dissolve itself and cease operations on its own authority.

Borderline cases include organizations created by political processes but that operate quasi-independently of the agencies that established them (so-called GONGOs) as well as organizations that implement government-created responsibilities to oversee certain areas of economic or professional activity, such as regulating who can practice a profession, arbitrating labor-management relations, etc. Such organizations may operate in close relationship with government authorities such that it may be difficult to decide whether they are institutional parts of government. The ultimate test is whether the leadership of such entities can dissolve the units on their own authority. If not, the entities are out of scope of the third sector as here defined.

The Self-Governing Feature

To be considered self-governing, an entity must be able to control its own activities and not be under the effective control of any other entity, private, or governmental. To be sure, no organization is wholly independent. To be considered self-governing, however, the organization must control its general policy and operations to a significant extent, have its own internal governance procedures, and enjoy a meaningful degree of autonomy. Key indicators of these capacities include any of the following, but no one of them can be determinative:
  • The capacity to own assets, incur liabilities, or engage in transactions in its own right;

  • Control over the selection of all or most of the organization’s governing officials;

  • A meaningful degree of financial autonomy, including the ability to refuse funding from an external source; and

  • The ability to determine the basic mission and purpose of the organization.

The Non-compulsory Feature

To be considered non-compulsory, participation with the organization must be free of compulsion or coercion, that is, it must involve a meaningful degree of choice. Organizations in which participation is dictated by birth (e.g., tribes, families, and castes), legally mandated, or otherwise coerced, are excluded. Organizations in which membership is required in order to practice a trade or profession, or operate a business, can be in-scope so long as the choice of profession or business is itself a matter of choice.

This feature combined with the limited profit-distribution requirement outlined below serves as a proxy for a public interest purpose, since organizations in which individuals freely choose to participate but from which they can expect to secure only limited profit or none at all must be organizations that serve some public purpose in the minds of those who are involved with them.

The Totally or Significantly Limited Profit-Distribution Feature

To be considered totally or significantly limited from distributing any surplus, or profit, an organization must be subject to some formal or legally binding constraint that completely prohibits, or places some significant limitation on, the portion of any profit it may generate that it can distribute to directors, shareholders, members, or other individuals. This means that the organization can compensate its employees for work performed, but is subject to either a total prohibition, or significant limitation, on any distribution of its profits.

This feature embraces the full non-distribution of profit feature used to define “nonprofit institutions” but relaxes it somewhat to embrace organizations that permit some distribution of profit (e.g., cooperatives, mutuals, and social enterprises), but still restricts it only to those entities that are required by law or custom to place some significant limit on such distribution.

As reflected in Fig. 2, based on our investigations into existing laws and practices, such limitations may either be direct, involving a direct limit on the share of profit distributed, or indirect, involving some constraint on the organization’s operations that effectively constitutes such a limit.
Fig. 2

Operational characteristics defining total or significant limitation on surplus distribution

Total non-distribution of profit involves a legal prohibition on an organization’s directors, shareholders, members, workers, or other stakeholders from receiving any portion of the surplus generated by the organization’s activities. This characteristic is identical to that stipulated by the definition of NPIs and should be considered first to determine if any particular unit, or class of units, is in scope.

Even if this requirement is not met, a class of organizations can still be considered in-scope of our expanded TSE sector if there is a legal or other authoritative significant limit on the extent of its profit distribution. As noted in Fig. 2 to meet the “significantly limited profit distribution” feature of our definition of the TSE sector, organizations would have to fulfill four of the following five conditions, the first three of which are mandatory and the final one a choice between two options.

In particular, the three mandatory conditions are that the organizations:
  1. (i)

    Have a legally binding social mission that may limit the surplus generated by their activities;

     
  2. (ii)

    Be prohibited from distributing any more than 50 % of any profit they may earn to any stakeholders or investors; and

     
  3. (iii)

    Operate under a “capital lock” that requires that all retained profits must be used to support the organization or, in the case of its dissolution or conversion, to support another entity with a similar social purpose.

     
The final requirement is that the organizations either
  1. (iv)

    Include at least 30 % of individuals with specified special needs among their employees and/or beneficiaries; or

     
  2. (v)

    Be prohibited from distributing any profits they may earn in proportion to capital invested or fees paid.

     

Each of these requirements is based on actual practice among at least some cooperatives, mutuals, or social enterprises, though each may need further refinement once the range of practice is further analyzed. Thus, for example, the 30 % cutoff is based on the “social cooperative” law in Italy and the standards of many social enterprise networks in other countries. The prohibition on the distribution of profit on the basis of investment or fees reflects one of the defining features of “social cooperatives” found in a prominent analysis of European cooperatives (Barea and Monzón 2006).

Summary

Taken together, therefore, this set of operational features meets the criteria we set for an acceptable conceptualization of a third sector that is at once broader than the nonprofit sector, while still being operationalizable and consistent with the consensus philosophical precepts of the third sector concept that emerged from our bottom-up investigation. In the process, these features make it possible to identify a much broader set of in-scope institutional components of the TSE sector and to differentiate them from out-of-scope entities that may share the same legal status as in-scope cooperatives, mutuals, or social enterprises in many countries. This conceptualization brings us much closer to standard national accounts statistical guidelines than would a simple legal definition and therefore more likely to be institutionalized in national accounts satellite account procedures than conceptions that embrace all entities defined as cooperatives, mutuals, or social enterprises in the varied national laws and treatments in various countries. Indeed, such institutionalization is already under way with the incorporation of this conceptualization in a revision of the UN NPI Handbook.

In-scope under this core definition of the TSE sector, as outlined more explicitly in Appendix Table 1, are
  1. (i)

    Virtually all NPIs as defined in the UN Handbook on Nonprofit Institutions in the System of National Accounts. This includes not only NPISH, but also “market NPIs” assigned to the corporations sectors in the SNAs so long as they embody the definitional features of NPIs. The only exceptions are those NPIs that are controlled by government (including official state churches) and units nominally registered as NPIs that de facto distribute profits (e.g., in the form of excessive compensation of directors or key stakeholders). Particular types of organizations—e.g., hospitals, universities, and cultural institutions—may be organized as “third sector” organizations in some countries and as governmental institutions or for-profit institutions in others. Indeed, all three forms of such institutions can exist in particular countries, but only those considered in-scope here would be covered by the recommended TSE satellite accounts. Borderline cases can include political parties (in some countries they may be controlled by government) and indigenous peoples’ associations (in some countries their membership may be decided by birth or the organizations may exercise governmental authority).

     
  2. (ii)

    Some, but not all, cooperatives and mutuals. Only cooperatives that are organized as nonprofits, or social cooperatives that operate under legal requirements stipulating a minimum portion of employees or beneficiaries that exhibit certain “special needs,” would be clearly in scope. Most other types of cooperatives and mutuals are either borderline cases or out-of-scope, depending on whether they operate under meaningful limits on their distribution of profit. As a general rule, cooperatives and mutuals in northern European countries (such as Belgium, Germany, or the Scandinavian countries) tend to lack such clear limitations on their distribution of profits and are therefore likely to be out of scope of the TSE sector unless they are organized under nonprofit laws. By contrast, southern European countries (Bulgaria, Greece, Hungary, Italy, Malta, Spain, and Portugal) more often impose conditions on cooperatives and mutuals that have the effect of significantly limiting their distribution of profit. These cooperatives are more likely to be in-scope of the TSE sector so long as they meet the operational criteria for limited profit-distribution identified above. By contrast, all market-oriented cooperatives that operate as profit-distributing businesses and are free to distribute profits are out-of-scope.

     
  3. (iii)

    Social enterprises that are registered as NPIs, social or mutual activity cooperatives, community benefit corporations in the UK, or special B-Corps in the US or other countries in which this form exists are likely in-scope of the third sector as identified here. So, too, are enterprises that belong to social enterprise networks that require meaningful retention of profit. Social enterprises registered as regular corporations are either borderline cases or out of scope, as are companies that operate corporate social responsibility programs but otherwise have no significant limitation on their generation or distribution of profits.

     

Finally, all privately owned for-profit businesses, all government agencies and units controlled by them, and all households are out of scope of the TSE sector.

Informal and Individual Components

In addition to organizations, the TSE sector also embraces a variety of individual and informal activities. That portion of such activity undertaken to or through organizations is naturally recorded as part of the workforce of the in-scope organizations. Strictly speaking, the additional portion is the portion done directly. In both cases, however, the task here is to differentiate the in-scope individual activities from normal unpaid household activity, such as leisure activities, recreation, performing household chores, or helping members of one’s close family.

Fortunately, much of the work of operationalizing this border has already been done and captured in an official ILO Manual on the Measurement of Household Work issued in 2011, and subsequently further ratified at the 19th Conference of Labour Statisticians in 2013, which built the central features of the Manuals definition into an ILO regulation. The concept underlying this definition is to portray such in-scope TSE sector individual activity as a form of work, thus differentiating it from activity one does for one’s own or one’s family’s enjoyment, edification, or quality of life. The resulting official, internationally sanctioned definition of individual activity that is in-scope of the TSE sector as “unpaid, non-compulsory work; that is, time individuals give without pay to activities performed either through an organization or directly for others outside their own household or family.”

We adopt this recommended definition here as suitable for identifying the features of the individual activity considered in-scope of the TSE sector, with one difference: while all direct volunteering embraced within the ILO definition is considered in-scope of the TSE sector, the only organization-based volunteer work that is considered in-scope is that which is performed through organizations that are themselves in-scope of the TSE sector. This means that volunteer work performed for government organizations or corporations cannot be attributed to the TSE sector. More specifically, individual activities in-scope of the TSE sector as volunteer work under this ILO definition must exhibit the following operational features.

They Produce Benefits for Others and Not Just, or Chiefly, for the Person Performing Them

The test here is whether the activity could be replaced by that of a paid substitute. Thus, for example, time spent playing the piano for one’s personal enjoyment would not be considered a TSE sector activity, whereas playing the piano for residents of a nursing home would qualify.

They are Not Casual or Episodic

Rather, the activity must be carried on for a meaningful period of time, typically defined as an hour in a certain “reference period.” Helping an elderly person across the street 1 day would thus not qualify as volunteer work, but serving as the crossing guard at a school would.

They are Unpaid

That is, the person performing them is not entitled to any compensation in cash or kind. Although this feature is straightforward and self-explanatory, its application may be problematic in those circumstances where people performing these activities receive something of value that is not formally defined as compensation or wages. This may include token gifts of appreciation, accommodations, reimbursement of expenses, or stipends. Under provisions embodied in a new regulation on the measurement of work issued by the ILO, receipt of pay that is less than one-third of the normal pay for a particular job does not disqualify such an activity from being in-scope of the TSE sector.

The Activity is Not Aimed at Benefiting Members of One’s Household or Close Family or Families

The activity is not aimed at benefiting members of ones household or their close family or families (e.g., next of kin—brothers, sisters, parents, grandparents, and respective children).

The Activity is Non-compulsory

The activity is non-compulsory, which means it involves a meaningful element of individual choice. To be considered non-compulsory:
  • The person performing the activity must have the capacity to choose whether to undertake it. This excludes activities undertaken by minors or the mentally challenged.

  • The person performing the activity must be able to cease performing it at any time if they so choose. If not, the activity is not non-compulsory.

  • Performing the activity is not required by law, governmental decree, or other legal obligation.

  • If performing the activity is required to practice a trade, profession, or similar economic activity or to complete educational requirements, then there must be a meaningful element of choice in the selection of that trade, profession, economic activity, or educational program.

  • Responding to a social norm or religiously inspired sense of personal obligation does not violate this non-compulsory feature.

Summary

The human action in-scope of the TSE sector under this definition is quite broad. It includes all uncompensated work performed either directly for people outside of one’s close family or through an in-scope TSE organization to (i) improve a community, (ii) organize public, cultural, or religious events, (iii) promote public health, safety, or education, (iv) provide emergency relief or preparedness, (v) clean up the environment or rescue animals, (vi) help a person in need with food, assistance, or companionship, (vii) take part in, or organize, a demonstration or advocacy campaign, and (viii) uncompensated pro-bono work undertaken in a professional capacity (e.g., legal or emotional counseling, review of scientific papers for publication, arbitration, etc.).

Forms of human action that are out of the scope of the TSE sector include all forms of legally mandated public service, such as volunteer work in lieu of compulsory military service, court-ordered community service, as well as public service requirements to fulfill mandatory educational requirements (e.g., volunteering required to graduate from high school); all forms of uncompensated training activities whose main purpose is the acquisition of occupational skills by the person performing them; and all activities linked to common crime (e.g., criminal gang involvement or acts of street violence).

All forms of employment-related activities and all forms of household activities (socializing, leisure, etc.) are out of scope by definition as is pro-bono technical assistance to the members of one’s own household in any other way.

Conclusion and Next Steps

This article has offered a much broadened operational conceptualization of a third sector/social economy/civil society sector that is rooted in an intensive review of different conceptions of third sector realities in the various regions of Europe as well as previous similar inquiries in other regions of the world, and one that can meet the standard of being institutionalizable in the major official statistical systems for measuring the size and scope if different sectors and forms of work globally. The conceptualization describes a broad common core of institutions and forms of individual behavior that can reliably be considered to be within scope of a broadened TSE sector within Europe and that holds promise of identifying a similar in-scope constellation of institutions and individual activities in other parts of the world while differentiating them from for-profit firms, governments, and households. At the same time, the “modularity” of this framework allows the separate identification of five different components that are of interest to various stakeholders and relevant to particular regions.

The next step in this process, however, is to test this conceptualization more fully and systematically against the laws and customs of different countries, including countries in the Global South as well as the Global North, to see how fully its “red lines” of demarcation between in-scope and out-of-scope entities and behaviors correspond with existing laws and data systems, or can be made to do so. A start has been made on this next step in the course of fashioning the conceptualization, and more in-depth investigation is under way as of this writing in order to assess how fully the data needed to portray the scope, structure, funding, and impact of the TSE sector so defined are available. We invite others to join in this task and help us move toward a conceptualization of this broadened TSE sector that is both universally applicable and technically rigorous. In this way, we can secure the benefits of improved visibility, credibility, and validation that better information about this sector can produce while taking care to avoid whatever risks such improved information may entail.

Footnotes
1

We acknowledge that any one of the many terms being used to refer to this social space carries with it potential connotations in the minds of readers that may be completely unintended on the part of the writers. Readers are therefore invited to replace this term mentally with any of the other ones with which they are more comfortable to avoid being diverted by unintended connotations. Later in this article we suggest a rebranding that combines elements of the “third sector” with key elements of what has been termed “social economy,” which we refer to as the “third sector/social economy” and abbreviate as the “TSE sector.”

 
2

The 11 research institutions involved in the project are Vienna University of Economics and Business, Institute for Social Policy of the University of Zagreb, The Institute of Social Policy (IPS) of Warsaw University, The School of Social Policy, Sociology and Social Research of the University of Kent, The Third Sector Research Centre of the University of Birmingham, Johns Hopkins University SAIS Bologna Centre, The Department of Political Science and Public Administration at Radboud University Nijmegen in the Netherlands, The Department of Political Science of the Westfälische Wilhelms-Universität Münster in Germany, The Institute for Social Research in Norway, IUDESCOOP of the University of Valencia, Spain, and The Institute of Labour Economics and Industrial Sociology, Aix-Marseille University (AMU) in France.

 
3

For more information on institutional sectoring, see 2008 SNA Chapter 4. Although a 2008 revision of the System of National Accounts provided an explicit recommendation that statistical agencies separately identify at least the nonprofit components of the various institutional sectors into which NPIs are allocated and to report on them separately from other units (SNA 2008, para. 4.35), this recommendation has not been adopted by Eurostat in the European System of Accounts, which governs the assembly of economic statistics in Europe.

 
4

Financed by the European Commission, this project sought to gauge the impact of the third sector, primarily in Europe, but within a framework able to permit comparisons among different European regions and between Europe and other regions. For the purpose of this project, detailed literature review and consultation were undertaken separately in five regions of Europe: the Nordic region, embracing Norway, Denmark, and Sweden; Northern Europe, embracing the Netherlands, Belgium, Germany, and Austria; Anglo-Saxon UK and Ireland; Southern Europe, embracing France, Spain, Italy, and Portugal; and Central and Eastern Europe, including Poland, Hungary, Slovakia, Croatia, Slovenia, Romania, Bulgaria, and the Czech Republic. Simultaneously, similar inquiries were launched into the relevant characteristics of several possible institutional and individual manifestations of the third sector. For more information on the Third Sector Impact Project (TSI), see the project website at: thirdsectorimpact.eu.

 
5

In its Latin American manifestations, the term “social and solidarity economy” is used more widely. See, for example: Mogrovejo et al. (2012).

 
6

The Social Economy concept has also been recognized in political and legal circles, both national and European. Thus, for example, the European Economic and Social Committee issued an Opinion on 1 October 2009 on “Diverse Forms of Enterprise,” and the European Parliament issued a Report of 26 January 2009 on Social Economy. In a December 2015, the Council of the European Union issued a “Conclusion” identifying the social economy as “a key driver of social and economic development in Europe” and encouraging “Eurostat and national statistical authorities” to “consider developing and implementing satellite accounts in their respective statistics aimed at establishing the effective contribution of the social economy to economic growth and social cohesion….” (General Secretariat of the Council of the European Union 2015).

 
7

The language used in the SNA includes entities that may be institutionally separate from government but are “controlled by government,” where “controlled by” is defined as more than receipt of government funding.

 

Funding

This article was prepared as part of the Third Sector Impact Project (TSI). This Project has received funding from the European Union’s Seventh Framework Programme (FP7) for research, technological development, and demonstration under Grant Agreement No. 613034.

Compliance with Ethical Standards

Conflict of Interest

The authors declare that there is no conflict of interest.

Copyright information

© International Society for Third-Sector Research and The Johns Hopkins University 2016

Authors and Affiliations

  1. 1.Center for Civil Society StudiesJohns Hopkins UniversityBaltimoreUSA
  2. 2.Johns Hopkins School of Advanced International Studies Bologna CenterBolognaItaly
  3. 3.International Laboratory for Nonprofit Sector ResearchNational Research University Higher School of EconomicsMoscowRussia

Personalised recommendations