Critical review of policy framework
A critical reading of policies showed that the attempts to institutionalize and regulate SE have been fairly recent. However, that did not occur simultaneously across the four countries under study. Italy was the first among them to establish a comprehensive framework in 2006. The country was also the first to introduce the concept of a “social enterprise”, nearly 40 years ago (European Commission, 2020c). In contrast, Cyprus regulated SE just 2 years ago—in 2020. Aside from that, national policies vary profoundly in their content. Differences start with the very definition of SE (Table 1). As a result, although all countries follow a typology that derives from EU directives, there are types of entities that are registered as social enterprises in some countries whilst in others they are not—for instance, foundations, non-profit civil companies, and agricultural cooperatives are mentioned in all countries’ frameworks but Greece’s (European Commission 2020b).
Similar differences among national policies can be found in regard to the beneficiaries of SE (Table 1). More specifically, in Spain, socially excluded groups and people with disabilities must constitute at least 30% of workers in the employment integration enterprises (EIEs), with this quota increasing to 50% after the fourth year of their operation. In special employment centers of social initiative (CEEs), these groups must amount to at least 70% of their staff. Compared to the rest of the countries studied here, Spain is more proactive in linking SE with the labor market. In this direction, employment is supported by both passive and active employment policies which push the inclusion of young, vulnerable, or disabled people in existing ventures, or by helping these groups to establish their own enterprises. State supports SE enterprises through grants and bonuses, technical assistance, skills upgrading seminars for workers, and entrepreneurial training and consultation. However, although the funding framework in Spain is robust, comprising a wide variety of programs across various scales and utilizing a wide array of sources (both public and private), many eligible enterprises still face difficulties in accessing grants. Moreover, entrepreneurial and workers’ training programs are scarce and of low quality (European Commission, 2020a). Nevertheless, Spain’s monitoring mechanisms are diverse and quite dynamic, being able to supervise regional SE ecosystems.
For its part, the regulatory framework in Italy is slightly more inclusive in terms of its target groups, referring explicitly to people with mental disabilities and psychiatric patients. It is provided that the main role of social cooperatives is to integrate such groups in the labor market (Type B, see Table 1). As in Spain, there is a tight nexus of national and regional support measures. It is acknowledged that the success of such policies depends on the close cooperation of social enterprises with local authorities. Financial support includes subsidies for start-ups, whilst training and coaching are also funded. Resources vary according to the type of entity and funding purpose: for social and educational services, public authorities are the major provider, whereas in Working Integration Social Enterprises (WISEs), funding comes from private sources too. However, a major problem is that social enterprises in Italy have developed a heavy dependence upon public funding. As public grants are often late in being approved, their operation is seriously disrupted. Additionally, many social entrepreneurs lack basic managerial skills despite various coaching and training seminars (European Commission, 2020b). Despite these problems, the operation of SE is facilitated by dynamic and reflective monitoring mechanisms.
In Greece, the main goal of the promulgated policies is to support vulnerable and special groups, as they must constitute 30% and 50% respectively of staff in all social enterprises (Table 1). However, such regulations are rather loose and they are not enforced as strictly as in Italy and Spain (European Commission, 2020c). For instance, SE entities are able to go on for some years without meeting those staff quotas. Another characteristic problem is that financial support only covers the initial phases of an SE enterprise. Most importantly, despite being promulgated since 2011, none of support measures have actually been implemented yet. Thus, state support to SE in Greece just refers to tax breaks, favorable rents when entities lease public property, and a few entrepreneurial incubators and innovation centers. Training programs for workers and entrepreneurs are extremely limited and most are of poor quality. Thus, policy framework is not only loose, but it is also particularly inadequate and fragmented. Indicatively, there is not a dedicated governmental body to implement the framework: a good part of it is implemented by OAED (the Greek Manpower Employment Organization), whilst most of the rest by the Ministry of Economy and Development. As a result of this fragmentation, much of the relevant data is outdated and inconsistencies between different official registries are common. Ultimately, funding for SE enterprises in Greece mainly comes from private institutions. It must be noted, however, that from 2016 onwards much effort has been made by private and public institutions to fill these gaps (European Commission, 2019a).
Lastly, Cyprus had no regulatory framework at all until recently. This gap was eventually filled by Law 207(I)/2020, which identifies two types of social enterprises: those pursuing a social mission and those facilitating the integration of vulnerable population groups in the labor market. The former must reinvest at least 80% of their profits in the social mission they serve, whilst the latter must draw at least 40% of their staff from the abovementioned groups. Despite the recent legislation, financial support to social enterprises remains blurry. More importantly, procedures are overly bureaucratic, as each application for funding is examined by the government’s cabinet as the case may be. With education and training programs largely missing, the needs of social enterprises are currently covered by academic institutions and other independent organizations (European Commission, 2019b). Last, similarly to Greece, the monitoring of SE is limited, and the Cyprus Authority of Cooperative Societies acts in a very bureaucratic manner (EX.CY-1).
Turning to quantitative employment data, certain Spanish regions are those with the highest concentrations of SE workers in comparison to the rest (Fig. 1a). Interestingly, despite the latter, the share of SE workers is lower in Spain than it is in Italy (6% and 6.5% respectively). This happens because in Spain only a few regions share the better part of SE workers, whilst in Italy this allocation is more balanced. Southern Spain in particular, stands out amongst all the study regions. Equally high shares are found in the northern part of the country (namely the Basque Community) as well as in some regions in central Italy. Compared to these countries, Greece and Cyprus do not exhibit notable concentrations. There, on national scale, SE workers occupy a mere 0.3% and 0.9% of the total workforce respectively.
Now, looking into each country separately, we see a crystal-clear north/south divide in Spain, as the southern part concentrates almost all SE workers (Fig. 1b). Madrid has faintest presence of such workers, followed by the Balearic Isles and Catalonia. In contrast, most Italian regions exhibit values near 1, meaning that their shares are closer to the national average. However, some regions exhibit over-concentrations, such as Emilia-Romagna, followed by Umbria, Basilicata, and the insular Sardinia. In Greece, shares indicating an over-concentration of SE workers can be found in the touristy Ionian Islands and South Aegean, as well as in the capital region of Attica.
Overall, we see diverging trends across the EU South regarding the clusters of SE workers, as similar types of regions follow different paths. Spain’s insular regions, for instance, register low shares in contrast to Greece’s. Similarly, metropolitan regions in Spain and Italy document no significant clusters whereas Greece’s capital metropolitan region does.
When counting in SE enterprises, it becomes clear that there are notable differences between Spain and Italy (Fig. 2). For one, most regions which have large shares of SE workers in Spain couple it with equally high shares of social enterprises. Interestingly, even in those where numbers of SE workers are low, enterprises appear to be many, with the exception of Madrid. Overall, in Spain, around 1.191.000 employees/members (6% of total workforce) are employed by approximately 106.000 SE enterprises (1.5% respectively). Nowadays, the main bulk of these enterprises are related to social services. However, one of the oldest and largest social enterprises, the Mondragon Corporation,Footnote 8 founded in 1956, operates in the sectors of finance, industry, retail, and the knowledge economy (EX.SP-1). To get a glimpse of how developed SE is in Spain, Mondragon is the seventh-largest Spanish company in terms of asset turnover, employing more than 80,000 people.
For its part, Italy has more SE workers than Spain: almost 1,209,000 employees/members, or 6.5% of the country’s total workforce. However, enterprises are much fewer—about 58.000, or 1% of all businesses in the country. As becomes clear, in Italy, few SE entities employ a large number of workers. This is not the case only in Emilia Romagna, but in most Italian regions. In contrast, in the country’s island regions (Sardinia and Sicily), enterprises tend to be smaller staff-wise. As in Spain, most Italian social enterprises pertain to social care. For instance, La Mimosa,Footnote 9 operating for 34 years, pursues the social integration of vulnerable citizens by providing them employment opportunities as well as health, welfare, and educational services. An important aspect of its operation is that it has established synergies with a wide network of partner-enterprises (EX.IT-1).
On top of low workers’ numbers, Greece and Cyprus boast equally low numbers of enterprises. Comparing the two countries reveals that Cyprus registers a share of SE workers that is almost five times higher than Greece’s: 0.9% (3.000 in absolute numbers) as opposed to 0.3% (12.500 in absolute terms). Similarly, the share of SE enterprises in Cyprus is four times higher than in Greece: 0.2% (60 entities) as opposed to 0.05% (400). The most common type of an SE enterprise in Cyprus is an agro-food cooperative. In contrast, these co-ops are not even registered as SE entities in Greece.Footnote 10 It is quite interesting that, despite the above, such cooperatives constitute a crucial aspect of bottom-up organization in Greece. Indeed, according to the latest data,Footnote 11 they were found to be more than 600 active, meaning that they exceed the number of all SE entities in the country! In any case, following the current typology, most social enterprises in Greece are related to food services and education activities. However, one of the most characteristic examples falls within a different sector. VIO.ME. in Thessaloniki is the first factory in the country to have its management taken up by workers. The plant used to be one of Greece’s most important units for building materials, however, during the deep recession of the 2009–14 period the owning company filed for bankruptcy. Today the factory employs 22 people and it has diversified its output, producing cleaning products apart from building materials (EX.GR-1).Footnote 12
One additional type of social entity which was not included in the abovementioned examples refers to those engaging with the refugee crisis. Research revealed that numerous such entities were established during the last 5 years across Spain, Italy, and Greece. This comes as no surprise considering that upon the coasts of these countries a myriad displaced people landed from 2015 onwards. Most of these entities, however, proved to be particularly short-lived, due to a change in the pertinent EU legislation and a widespread lack of financial resources (EX.SP-1, EX.GR-2, EX.IT-2). This is quite unexpected and does not reflect the seemingly surging interest around SE and its capacity to ameliorate such crises.
Interviews with key informants
Picking up the last observation, interviews confirmed that, regardless of the increased interest around SE during the last decade, much of the promised support has not arrived. There are cases, especially in Spain and Greece, where promulgated programs never reach the stage of implementation, leading many social enterprises to search for financial stability outside state mechanisms (EX.SP-2, EX.GR-2). Indeed, most enterprises we addressed have turned to private funding and put more effort into increasing the revenue coming from their own commercialized activities. In this process, they “get fully incorporated into the market structures and become dependent upon commercialized ventures” (ST.GR-6). As a result, their operation becomes ‘hybridized’, if not profit-driven. However, with this hybridization taking place amidst the current recessive conjuncture, where the economies of the EU South “are not buoyant […] and see another crisis looming”, most ventures fail to generate a sufficient revenue on their own (ST.GR-10). This is especially so in countries where the third sector does not get recognition and credibility, such as Greece (EX.GR-2). Under the pressure of the adverse economic environment and the unstable external funding framework, most social enterprises end up practically “under-functioning and floundering” (ST.GR-6). On top of that, the “heavily controlling legal framework” poses additional obstacles for the development of SE, as it “turns management a stifling affair” (ST.GR-4).
The hybridization of social enterprises described above has two main implications. First, upon intertwining with market mechanisms, many social enterprises appear to be drifting away from their primary goals which pertain to societal and ecological concerns and the creation of secure and good quality jobs. Struggling enterprises unavoidably prioritize financial stability over these aims (EX.GR-2) and they tend to employ far fewer people since the “payroll cost is unbearable” (ST.GR-6). Τhe weak link between SE and employment programs makes things even worse, with Greece and Cyprus facing the biggest problems in this regard (EX.GR-2, EX.CY-1). However, experts in Spain and Italy reported similar issues as well (EX.SP-2, ST.SP-4). In Italy, in particular, this link is weakened by the fact that regional governments utilize SE so as to channel EU funds into local economies without setting any clear goals for the sector, such as the mitigation of youth unemployment and inactivity (EX.IT-2).
The second crucial implication resulting from SE enterprises’ marketization is that “they tend to offer employment of lower quality” (ST.GR-6). Most enterprises that we engaged during fieldwork were found to be employing people under part-time or temporary arrangements. Most contracts had a duration of less than a year or were project-bounded. In specific enterprises, even, these arrangements were the norm for the majority of their workers (indicatively, ST.IT-5, ST.CY-5, ST.SP-4, ST.SP-5, ST.GR-8). Key informants from all countries confirmed that this low-road flexibilization constitutes a strong tendency within SE as a whole and that the entities we engaged are not exceptional cases. Besides noting that precarity is a common condition for most workers in SE, the experts we interviewed pinpointed that atypical employment is chosen over typical/stable employment even in cases where it could be avoided. In Cyprus, for instance, staff is seasonal even when the nature of the entity’s activity does not necessitate it (ST.CY-1, ST.CY-2, ST.CY-4, EX.CY-1). It must be noted, however, that such practices are mostly adopted by “predatory enterprises, which go against core SE goals” (ST.SP-7), blemishing the picture of SE (indicatively ST.SP-7, ST.IT-4). Still, the problem remains, as the number of conventional businesses which, lured by subsidies and tax cuts, register as social enterprises in official accounts, is often very high (EX.IT-2).
All the above point to the states’ failure to facilitate and effectively monitor SE, something that has been noted by most interviewees. Even after the shock of the 2008/09 Global Crisis and the political and market structural deficiencies that it implied, there is “not enough faith in SE” (ST.GR-4). This is so, despite the engagement of many social enterprises in the public discourse around SE. In any case, especially those focusing on research and policy recommendations, have played a key role in increasing public awareness and contributing to amendments of the pertinent legislation (EX.SP-2). As becomes clear then, state support carries a multiplying effect for the growth of SE. All experts we addressed considered that SE is possible to develop exponentially in the near future, given that budgetary measures become more targeted and efficient (EX.SP-2, EX.IT-2, EX.GR-2, EX.CY-1). These experts further argued that it is important to support SE not only because of its capacity to reinvigorate stagnant labor markets and produce more equitable business structures, but also because it carries innovative characteristics crucial in economic organization that cannot be found in conventional enterprises.