The Evolution and Evaluation of the Italian Legislation on Social Cooperatives and Social Enterprises: Facilitator or Obstacle to Their Diffusion?

Abstract

Historically, the Italian cooperative movement has represented a pivotal backbone of the national economy, since cooperatives were able to satisfy their members’ needs through the provision of products and services at affordable conditions. Started as grassroot organizations to answer local social needs, social cooperatives have become key actors in the provision of welfare services in Italy over the last decades. The legal acknowledgment came long after the establishment of social cooperatives in the civil society and the legal framework defined social cooperatives as the first multistakeholder entrepreneurial form with a social mission, rather than a profit maximization objective. Several laws on socially-oriented organizations have followed. Over time, social cooperatives have progressively accomplished the social mission of cooperative organizations, while cooperatives are more focused on growth. In the context of grand societal challenges, the strong orientation of social cooperatives on their social impact and their embeddedness in the local territory supports them in the development and implementation of local resolution to these global challenges.

1 Introduction

This chapter focuses on the Italian legislative evolution on social cooperatives and social enterprises and provides a characterization and evaluation of the legislative frameworks that have been passed over time. Together with the legislative framework, I also provide evidence for the evolution of cooperatives. As such, it provides a complement and comparison to the chapters examining these dimensions in the Swiss context (in particular Chaps. 2, 3, and 5).

In general, cooperatives have always been part of the Italian economic backbone. Similar to in other countries, many cooperatives were founded in order to answer the needs of their members. The economic changes of the late twentieth century have left a void in terms of welfare services that have been answered by voluntary private social initiatives which adopted different organizational forms, including cooperatives. Over time, these initiatives have grown, and in 1991 Italy legally acknowledged and regulated social cooperatives. The Italian legislative framework is a pioneer in the definition and regulation of social cooperatives and it inspired also legislative frameworks of other countries. Gradually, the term social enterprise gained traction across Europe and the Italian legislator identified social cooperatives as the primary organizational form of social enterprises. The Italian nonprofit sector continued to grow. In 2016, the Italian legislator passed a reform regulating the Third Sector (so, nonprofit organizations) with a dedicated law on social enterprises declaring social cooperatives as de jure social enterprises. However, we will see, building on a short case study, how the separation between cooperatives and social cooperatives brought a shift in cooperatives in terms of attention to the social mission.

Grand societal challenges such as climate change and poverty might even enhance this shift, since social cooperatives might be more embedded in the local context and more prone to find a concrete answer to such challenges.

The chapter is structured as follows: first, I provide data on the cooperative and Third sector in Italy. Next, I describe the history of emergence of social cooperatives and the first legislative framework (law 381 of 1991) on social cooperatives. Then, I describe the evolution of the Italian legislative framework with a depiction of the first law on social enterprises and its evolution inside the Third Sector reform. Subsequently, I will provide an evolution of the social function in cooperatives building on a short case study. Finally, building on the Italian context, I will highlight the role that (social) cooperatives might cover in addressing grand societal challenges.

2 Swiss and Italian Cooperative Context

Both in Switzerland and in Italy, cooperatives are lawfully regulated by the national Civil Code, which provides a definition of cooperatives. As stated in Chap. 3, the Swiss legal framework defines cooperatives as “a corporate entity consisting of an unlimited number of persons or commercial enterprises which primarily aims to promote or safeguard the economic interests of the cooperative’s members by way of collective self-help or which is founded for charitable purposes.” (art. 828 of the Code of Obligations¹) (see also Chap. 3). Compared to the Swiss legislative framework, article 2511 of the Italian Civil Code defines cooperatives based on the type of mutual exchange they perform. As such, the Italian legislator recognizes and categorizes the following cooperatives:

• 1. Cooperatives that perform their activities in favor of their members, consumers, or users of goods or services

• 2. Cooperatives that leverage mainly on the job performance of their members

• 3. Cooperatives that leverage mainly on the provision of goods and services from their members in order to implement their activities (Italian Civil Code, art. 2511, 2512)

The Italian law regards the mutual exchange as the main aim of cooperatives, while the Swiss legislative framework defines as the main purpose the generation and safeguard of the economic interest. The economic trait of the Swiss cooperatives is entailed also in the definition of cooperatives: the Swiss legislator defines them as “corporate entity,” whereas in the Italian context, cooperatives are seen as an organizational form with ad hoc regulations compared to the corporate form. As stated in Chap. 3 only in 2021 the Swiss legislative framework acknowledged the possibility for cooperatives to have charitable purposes, whereas in Italy, this was regulated in 1991.

2.1 Data About the Italian Cooperative Sector

Cooperatives have been a pivotal backbone of the Italian economy since the nineteenth century. In line with the evolution of cooperatives represented in Chap. 5, the first Italian cooperative dates back to 1854 (Legacoop Lazio, 2021) and was located near Torino, in Northern Italy. It was a consumption cooperative that ensured the working class could access essential grocery goods at accessible prices. At the end of the nineteenth century, the Catholic Church supported the cooperative movement, which encompassed different political orientations: in the early twentieth century, cooperatives were either adhering to the Catholic or the left-wing orientation, thus being direct expression of political parties (Sacchetto & Semenzin, 2014). Starting from the 1950s and from the 1970s onward, cooperatives were able to shift from a working class, anti-capitalistic to a market orientation (Sacchetto & Semenzin, 2014).

Figure 12.1 shows an overview of the evolution of cooperatives in Italy in terms of number of organizations and number of employees.

Fig. 12.1

The evolution of cooperatives in Italy. Personal elaboration from data of Giarè and Petriccione (2014)

With the aim of satisfying the needs of their members and not maximizing profits, cooperatives have grown over time and have survived economic crisis through the implementation of different strategies (Giarè & Petriccione, 2014).

For example, amidst the 2008 economic crisis, employment in cooperatives saw a significant rise of 6.8% with an increase of 80,000 employees over the period from 2008 to 2013 (Carini et al., 2015). However, the increase in costs due to the safeguard of jobs brought a reduction in the income of the cooperatives (Carini et al., 2015).

In 2015, around 60,000 cooperatives were registered in Italy (Calzaroni et al., 2019). They generated more than 28 billion Euro in added value² with work and social cooperatives contributing to more than 73% of the total value generated by the entire cooperative sector. In the same year, cooperatives employed more than 1.1 million individuals and were mainly active in the healthcare and social assistance sector as well as in the transportation and storage sector (Calzaroni et al., 2019; ISTAT, 2019). Looking at the type of cooperatives, the most diffused forms are production and working cooperatives (around 30,000) and social cooperatives (about 14,000).

Table 12.1 provides an overview of the different cooperative types, while Figs. 12.2 and 12.3 show the distribution of cooperative types and employees in 2015 (ISTAT, 2019).

Table 12.1 Overview of different cooperative types and number of employees per cooperative type. Personal elaboration from data of ISTAT (2019)

Fig. 12.2

Distribution of cooperative type in Italy. Personal elaboration from data of ISTAT (2019)

Fig. 12.3

Employees distribution per cooperative type. Personal elaboration from data of ISTAT (2019)

Cooperatives are heterogeneously distributed across the entire national territory with a higher number of cooperatives registered in Lazio, Lombardia, Sicilia, Campania, and Puglia (see Fig. 12.4).

Fig. 12.4

Geographic distribution of cooperatives in Italy in 2015. Personal elaboration from data of ISTAT (2019)

Over time, the number of cooperatives active in Italy has grown. In December 2021 more than 110,000 cooperatives were registered (Ministero delle Imprese e del Made in Italy, 2022), nearly doubling the number of cooperatives in 2015. Looking at the type of cooperatives, 70% of them are either production and work cooperatives (more than 53,000) or social cooperatives (around 24,000). As shown in Fig. 12.5, cooperatives are diffused across the whole national territory with the highest numbers registered in Lombardia, Lazio, Campania, Puglia, and Sicilia. In 2021, these regions register more than 10,000 cooperatives on the territory, respectively.

Fig. 12.5

Geographic distribution of cooperatives in Italy. Personal elaboration from data of Ministero delle Imprese e del Made in Italy (2022)

Compared to Switzerland (Chap. 2), the Italian cooperative system has a mixed reputation. At a local level, cooperatives benefit from a good reputation. However, some large scandals have undermined the public image and reputation of cooperatives. For example, the scandal related to the merger of two organizations. One of the merging organizations happened to be a group of insurance cooperatives (Il Sole 24Ore, 2014). In the realm of these scandal, accusations of insider trading had been done. Another form of prejudice and bias toward cooperatives is their alleged lack of growth compared to capital-based for-profit organizations (Damaggio, 2019). However, the most recent edition of World Cooperative Monitor counts 14 Italian cooperatives in the top 300 ranking based on their turnover (World Cooperative Monitor, 2022). These cooperatives register more than 66 billion USD in turnover (World Cooperative Monitor, 2022). Similarly to Switzerland, two retail and trade cooperatives, Conad (18,22 billion USD) and Coop (16,45 billion USD), dominate the ranking (World Cooperative Monitor, 2022). However, they both generate around 50% less turnover compared to the Swiss competitors Migros and Coop.

2.2 Data About the Italian Third Sector and the Role of Social Cooperatives

The Italian Third sector comprises different types of socially-oriented organizations, such as associations, foundations, and social cooperatives and, in 2020, around 363,000 nonprofit organizations were active in Italy (ISTAT, 2022). Around 85% of them are associations and they employ around 170,000 workers (more than 19% of the sector). Overall, Italy has a rather fervent Third Sector and registers one association every 160 citizens (Carli, 2021).

In 2020, this sector involves around 4.6 million volunteers and, in total, around 870,000 employees (ISTAT, 2022). Social cooperatives cover a pivotal role in the Italian Third Sector: in fact, notwithstanding their minor diffusion (4% of the nonprofit organizations active in Italy), social cooperatives employ more than half of the workforce (more than 460,000 employees) active in the Third sector in 2020 (ISTAT, 2022).

Figures 12.6 and 12.7 provide an overview of the organizational and employees’ distribution in the Italian Third Sector.

Fig. 12.6

The organizational distribution in the Italian Third Sector in 2020. Personal elaboration from data of ISTAT (2022)

Fig. 12.7

Employees’ distribution in the Third Sector in 2020. Personal elaboration from data of ISTAT (2022)

Over the last decade (2011–2020), the number of Italian nonprofit organizations has grown by around 20% and the sector in which these organizations mostly intervene are culture, sports, and recreational activities (ISTAT, 2022). The Third sector has been especially proactive and flexible in organizing effective answers throughout emergency contexts, such as COVID-19 pandemic, leveraging on different strategies, such as new investments, re-crafting of services, and/or production and catalyzation of the digital transformation (Barbetta et al., 2021). From an economic perspective, the Italian Third Sector has generated in 2020 80 billion Euro of economic value generation, which represents around 5% of the national GDP (Viola, 2020). Social cooperatives are responsible for creating one-fifth of the total value generation (Vita, 2021).

Similarly to cooperatives, social cooperatives in Italy have a mixed reputation. In 2014, Italian public authorities unveiled a criminal network of several organizations which were intimidating and corrupting public authorities to obtain public contracts. Several of these organizations were active social cooperatives in the reception of refugees and social housing sector (Martone, 2016). This scandal undermined the image of social cooperatives in public opinion (Borzaga 2014) and representatives of the sector sought to recover from this negative campaign (Il Foglio, 2015). In general, cooperatives are perceived mixed and prejudices are still persistent (Damaggio, 2019). These prejudices touch upon different aspects of social cooperatives. For example, it is common knowledge that social cooperatives, and the Third Sector in general, pay less compared to comparable positions in the private sector (Becchetti & Castriota, 2010), thus cooperatives rely on the intrinsic motivation of workers as core driver of job satisfaction (Borzaga & Tortia, 2006). The existence of a salary difference is true to a certain extent; however, it may be highlighted that employment in cooperatives has risen over the years and has provided stable work opportunities (Ministero delle Imprese e del Made in Italy report, 2022).

The description of the historical context in which social cooperatives emerged is necessary in order to gain a comprehensive understanding of the emergence and evolution of the legislative framework focused on social cooperatives. This will be the focus of the next section.

3 History of Emergence of Social Cooperatives in Italy

The first voluntary organizations such as “Opere Pie” (literal translation: Pious works) based on private initiative developed throughout the eighteenth century until mid-nineteenth century (Borzaga & Santuari, 2001) (for a comparison to the Swiss historical evolution, see Chap. 5). These organizations implemented social programs to support the less wealthy social classes (Ianes, 2020; Borzaga, 2021) and were supported from the Catholic Church (Borzaga & Santuari, 2001). The first cooperatives date back to the nineteenth century and were founded as forms of self-help organizations through which their members received insurance coverage against negative events, such as accidents (Ianes, 2020). After the two World Wars and with the rising role of the welfare states, the role of these private initiatives diminished, and government-driven policies became more prominent (Ianes, 2020). Hence, the Italian State was responsible for the redistribution of resources and the provision of services. Subsequently, many social private initiatives were turned into public institutions or urged to provide their services in dependency to the public authorities (Borzaga & Santuari, 2001). Cooperatives were the only private organization with a lawfully recognized social goal,³ but the outcome of their activities could be distributed exclusively among their members. However, in the 1970s the oil crises, the subsequent inflation, and the rising unemployment rates catalyzed the demand for social services that the State was not able to satisfy. According to experts, the rise of socially-oriented organizations was mainly due to a cut in public expenditures (Marzocchi, 2012). However, this is a partial representation of what was happening in that period (Borzaga, 2021). More specifically, together with the diminishing public resources devoted to social services, a grassroots movement sought to develop concrete answers to the citizens’ needs (Borzaga & Santuari, 2001; Ianes, 2020).

The emerging voluntary organizations increasingly replaced the State through the provision of services, adopting either the associative or the cooperative legal form. However, the Italian law did not allow nonprofit organizations, such as associations and foundations, to implement productive activities, such as the provision of services (Ianes, 2020). Hence, associations were not adequate organizational forms that supported this voluntary movement in providing a concrete answer to citizens’ needs. Cooperatives represent the only legal form that could simultaneously address an economic and social goal by blending entrepreneurial opportunities with the public general interest (Ianes, 2020). These social cooperatives took three different forms, namely social solidarity cooperatives, social services cooperatives, and integrated production/work cooperatives (Ianes, 2020, p. 10). In the latter type of cooperatives, disabled and non-disabled people worked together and their contribution to the organizational purpose varied depending on individual skills, while social services cooperatives represented the employment opportunity for professionals of the healthcare and social sector who did not find a job in the public sector (Ianes, 2020). Conversely, social solidarity cooperatives impacted on the Italian legislative framework, since it represents a paradigm change of the cooperative framework in two main ways: first, it provides a novel perspective on cooperatives, since social solidarity cooperatives expand their mission also to non-members of the cooperative and aim at pursuing the broader interest of the community (Scalvini, 1987; Ianes, 2020; Ianes & Borzaga, 2021).

Social solidarity cooperatives (…) went beyond the boundary of a mutual aid society whose mission was to meet the needs of its members, by adopting a wholly new approach for a cooperative, pursuing the general interest of the community (Ianes, 2020, p. 10)

Second, social solidarity cooperatives represent the first multistakeholder organization, since it allows to have a heterogenous member base made of volunteers, workers, and beneficiaries members. Consequently, the first social cooperatives struggled to receive legal acknowledgment, since they did not fulfill the organizational requirements foreseen by the Italian law (Ianes & Borzaga, 2021).

The social cooperatives pushed on their formal acknowledgment leveraging on the fact that the Italian Constitution had long recognized cooperatives’ social role (Ianes & Borzaga, 2021), thus the Constitution explicitly stated the social function of cooperatives, thus expanding their mission through the leverage on an external mutuality principle: the impact and scope of the cooperatives’ activities are not limited to the members, but also to external beneficiaries (Borzaga & Santuari, 2001).

4 Law on Social Cooperation

The adoption of the Law 381 in 1991 represents the formal acknowledgment and recognition of the bottom-up movement of voluntary organizations that drove the emergence of the social cooperation in Italy. This law was a pioneer in defining and regulating social cooperating and inspired legislators of other countries (Defourny & Nyssens, 2012) in doing so. Moreover, the law on social cooperation influenced the development of the later laws of 2006 and 2016 related to social enterprises and Third Sector, respectively (Fici, 2021).

4.1 Characteristics of Law 381/1991

The law defines social cooperatives as organizations to pursue the “general interest” of the civic society through two main types of social cooperatives:

• 1. Type A cooperatives: which provide health, social, and educational services

• 2. Type B cooperatives: which operate in different sectors and integrate marginalized individuals who struggle to be integrated in the job market (e.g., convicts, drug addicts)

Relatively to Type B cooperatives, the law provides a categorization of marginalized individuals, such as individuals with physical or mental impairment, individuals with addiction, minors with working age, convicts with condemns alternative to imprisonment, and other categories that the legislator may identify. Moreover, the law foresees that marginalized individuals have to constitute at least the 30% of the cooperative working force, and if compatible with their subjective state, to be member of the cooperative (Marvulli, 2021).

By defining the mission of social cooperatives as “the pursuit of the general community interest of human promotion/development and the social integration of citizens” (Gazzetta della Repubblica Italiana, 1991), the Italian law recognizes that a private organization develops productive activities not to accommodate or fulfill a self-interest, but rather to realize the social function of cooperatives foreseen by the article 45 of the Italian Constitution (Scalvini, 1991).

The concept of solidarity characterizes this new form of cooperation and distinguishes it from the ordinary cooperation founded above all on the mutuality principle. (Scalvini, 1991)

The law 381 of 1991 regulates the first entrepreneurial form which foresees as general purpose of the organization, the generation of social value and not only profit. It paves the way for a concept of “open solidarity” (Borzaga, 2021), so the social cooperatives are not required to generate value for their members only, but also to external beneficiaries. Moreover, the social cooperative represents the first type of multistakeholder enterprise, since the law does not include any specific requirement relatively to the kind of stakeholders that can be eligible as members of the social cooperative. Thus, workers, volunteers, and beneficiaries can participate actively to the decision-making process of the social cooperatives. This has several advantages, such as the possibility of including multiple perspectives, such as the one of the beneficiaries of the cooperative services, inside the decision-making process. Moreover, the inclusion of volunteers in the governance of the cooperatives might support the organization in developing effective services to beneficiaries (Fici, 2021). However, a multistakeholder governance also slows down and complicates the decision-making process due to the higher risk of conflict (Depedri, 2007). This risk can be mitigated through the involvement of other stakeholders who might have super partes interest and could avoid opportunistic behaviors at the expenses of beneficiaries. This might be the case, for example, of volunteers and judicial persons willing to support the social cooperative in its activities (Fici, 2021). The legislator foresees the possibility to integrate into the decision-making process also the beneficiaries in cooperatives of type B, however, their involvement is dependent on their subjective status (Fici, 2021). Over time, the number of volunteers involved in cooperative governance diminished, while the number of workers has risen (Depedri, 2007). However, the study of Depedri (2007) shows that volunteers contribute to the governance of younger cooperatives and that the stakeholder category excluded from the cooperative control is the one of the beneficiaries of the organizational activity. The inclusion of different stakeholder types in the decision-making process of social cooperatives is voluntary and few social cooperatives implemented it. Also, the later 2006 reform does not make it a mandatory requirement for social cooperatives (Fici, 2021).

By law, social cooperatives are recognized as cooperatives (Marvulli, 2021) and follow the legislative prescriptions of the national Civil Code.

Relatively to fiscal rules, the law categorizes social cooperatives as cooperatives with prevailing mutual purpose, thus the tax benefits that apply to cooperatives are transferred also to social cooperatives. Moreover, the law also entails limits to the distribution of dividends and the prohibition of the distribution of the reserves. Soon after the law passed, some critics emerged related to the adequacy of the proposed framework in terms of stakeholders’ involvement. Preite (1991) argues that conflict may arise due to a potential misalignment of interests between workers and beneficiaries. More specifically, members are entitled to dividends that result from the services provision. Subsequently, the limits to dividend distribution safeguard beneficiaries only when the organization is able to ensure a profit reinvestment considerable enough to improve the quality of the service provided (Preite, 1991). Ten years after introducing the law 381/1991, Italy adopted a constitutional law that introduced the principle of subsidiarity. In general, subsidiarity foresees that the hierarchical superior administrative level does not intervene if the hierarchically lower level is able to perform its duty alone. For example, Regions or local governments are autonomous in performing tasks without requiring the intervention of the local government.

The last comma of the article states that:

“State, Regions, Metropolitian Cities, Provinces and City governments favour the autonomous initiatives of single or associated citizens for the development of activities of general interest on the basis of the subsidiarity principle (art. 118 of the Italian Constitution)”

This principle will cover a pivotal role in the reform of the Third sector described in the next paragraph. However, Borzaga (2021) sustains that if the Italian constitution and Third Sector code foresee the implementation of the principle of subsidiarity it is through the grassroot volunteering and social cooperation movements. Moreover, it induced a paradigm change in the conception of the welfare state, since the public institutions were not led to privatize the services that they did not provide, but rather to foster the strengthening and consolidation of the volunteering and social cooperation sector through the contracting out of services to social cooperatives (Borzaga & Santuari, 2001).

4.2 The Impact of Law 381/1991

The law 381/1991 catalyzed the foundation of new social cooperatives: in 1991, Italy counted around 2000 social cooperatives, while in 1997 this number increased by 125% with 4500 social cooperatives. The diffusion of social cooperatives was possible because local authorities started to contract-out social services to cooperatives (Borzaga & Santuari, 2001). The rising contracting out of services through public tenders increased the demand for workers inside cooperatives, since the involvement of volunteers represents a long-term commitment (Borzaga & Santuari, 2001). Consequently, the number of workers increased after 1991, while the number of volunteers diminished. This also has consequences on the governance of the cooperatives, since the lack of volunteers limits the participation of multiple and diverse stakeholders in the cooperative decision-making process. One incentive foreseen by the law 381/1991 is the contribution rate that for cooperatives of type B is zero, thus representing a fiscal incentive for employing marginalized individuals. One disadvantage of the law has been that the public administration contracted out services to social cooperatives or volunteers-based organizations launching tenders based on the lowest economic offer.

5 The 2006 Reform on Social Enterprises

With the law 381 of 1991, the Italian legislator attributed mainly to the cooperative form of the private social entrepreneurial efforts that had been developing throughout the territory. The cooperative form has been chosen also because, as we have seen in the previous paragraph, the Italian Constitution foresees a social function to cooperatives (Borzaga, 2002). Similarly to Italy, also other countries were assisting to a rise of private social activities that were not operating under a cooperative form (Defourny & Nyssens, 2008). Thus, there was a cross-country need to establish a broad definition of social enterprises independently of the cultural and legislative context in which they were embedded (Borzaga, 2002). This led to the EMES⁴ definition of social enterprise that backs on three different criteria, namely economic, social, and governance criteria. Each one of them encompasses several different dimensions.

Table 12.2 reported below provides an overview and characterization of the different dimensions composing the criteria (Defourny & Nyssens, 2012; Defourny & Nyssens, 2008)

Table 12.2 The multidimensional definition of social enterprises of EMES. Personal elaboration from Defourny and Nyssens (2012)

The criteria developed by EMES do not require social enterprises to adopt a specific organizational form but provide a characterization of the attributes of social enterprises. Several countries, such as UK, Belgium, and Italy took inspiration from the EMES definition in order to legislate and regulate the organizational form of social enterprises in each country.

The success of law 381/1991 and the rising role of private actor as “substitutes” of the State in providing social services called for a need of the state to regulate and define these private social entrepreneurial initiatives (Bolognino, 2007; Venturi, 2008). After the law 381 had passed, Italy implemented in the subsequent years laws that regulated various areas of the Third Sector, such as the law on nonprofit organizations in 1997 and the law focused on social associations in 2000 (Venturi, 2008). The 2006 law on social enterprises (law 155) represented part of the attempt of the Italian legislator to reorganize the Third Sector (Bolognino, 2007). However, the development of the law on social enterprises can be regarded as an acknowledgment of the limits of existing judicial forms to support the development and growth of voluntary organizations that were increasingly adopting an entrepreneurial orientation in the delivery of social services (Venturi, 2008). For example, foundations, associations, and social cooperatives have difficulties in diversifying their sectors of activity and face obstacles to growth, since they are partnership-based and not commercial companies (Venturi, 2008).

5.1 Characteristics of the Law

The first article of the law defines social enterprises as:

All private organizations that continuously and predominantly exercise an economic activity aimed at producing or exchanging goods or services of social utility (…) can be qualified as social enterprises. (Gazzetta Ufficiale della Repubblica Italiana, 2006)

The term “economic activity” left experts puzzled, since it is not clear whether it implies generating profit or conducting the activity following the principle of economy, thus developing an activity that covers at least the costs (Bolognino, 2007).

Departing from the assumption that the generation of a profit is not the founding trait of businesses, then it emerges that this law represents an attempt to reconcile the juxtaposition between for-profit and nonprofit organizations (Bolognino, 2007; Venturi, 2008) not through the definition of a new judicial form, but through the characterization of the mission that social enterprises pursue and structural characteristics (Borzaga, 2002). Thus, the law “crosses the boundaries of legal and organizational forms” (Defourny & Nyssens, 2008, p. 218) and allows organizations (so, not only companies) to be eligible for being categorized as social enterprise. A further innovative trait of the Italian law on social enterprises is the definition of the sectors of activity of social enterprises, such as welfare, health, welfare-health, education, instruction and professional training, development and cultural heritage, social tourism, academic and post-academic education, research activities and delivery of cultural services, extra-curricular training and support to social enterprises (Defourny & Nyssens, 2008). Moreover, building on law 381/1991, also social enterprises that integrate at least 30% of marginalized individuals independent from the field of activity can also be categorized as social enterprises. Thus, this law makes social cooperatives social enterprises by law.

The other three elements that characterize the law are the profit non-distribution constraint, the requirement of stakeholders’ involvement (Defourny & Nyssens, 2008) and of social reporting (Verde, 2008).

First, the profit non-distribution constraint implies the internal reinvestment of surplus and the constraint of not providing higher than average salaries to Board members of the social enterprise. The absence of profit distribution has been identified as one obstacle for the diffusion and increase in social enterprises in Italy (Colombo, 2021). This is particularly relevant also because the law does not compensate this requirement with fiscal incentives or with ad hoc financial measures. Relatively to the stakeholders’ involvement, it leaves the degree and type of involvement open to organizational autonomous decisions. More specifically, the law defines involvement as “each mechanism, including information, consultation or participation through which workers and beneficiaries of the enterprise activities can exercise an influence on the issues that directly impact the working conditions, or the quality of the goods and services produced or exchanged” (Art. 12). Thus, the crucial governance issue already identified as weakness of law 381/1991 is not solved with this law. The risk consists in the fact that without clear guidelines relatively to the involvement degree and type of stakeholders, members might limit the participation of beneficiaries and workers to the decision-making process (Matacena, 2007). Third, the requirement of developing an annual social report that shows the social outcomes of the social enterprise, the law limits to establish this requisite leaving to another public body (the Ministry of Labour and Social Policies), the task of developing the guidelines that social enterprises have to follow when drafting the social report (Matacena, 2007).

5.2 Critics of the Law 155 of 2006 on Social Enterprises

Notwithstanding the good intentions that have driven the development of the law on social enterprises, experts have been skeptical about the effectiveness of this law (Venturi & Zandonai, 2012). The difference between the success of law 381/1991 and the limited impact of law 55/2006 can be attributed to the fact that social cooperation was well established and institutionalized before being regulated with a dedicated law, whereas with the law 55/2006, the legislator tried to foster the growth of social enterprises (Ianes & Borzaga, 2021). The limited impact of the law is also numerically visible: in 2011, the number of newly founded social enterprises registered in the Chamber of Commerce was 365 and social cooperatives represent the vast category of social enterprises (11,808 organizations) constituted from law 381 of 1991: this is due to the fact that social cooperative is the judicial form that encompasses the characteristics of the social enterprise comprised in law 55 (Venturi & Zandonai, 2012). Furthermore, the ban on profit distribution has limited the dissemination of social enterprises: consequently, a limited profit distribution, as possible for social cooperatives, may have increased the spread of social enterprises across the country (Giustolisi, 2018). This limit makes the social enterprise not attractive to entrepreneurs willing to found a new social venture not in the form of social cooperative (Bonfante, 2013). In fact, the partial profit distribution represents an incentive for the investment in cooperatives and social cooperatives (Fici, 2015). Moreover, the lack of fiscal incentives dedicated to social enterprises hinders their dissemination (Bolognino, 2007).

Bonfante (2013) regards the choice of the legislator of being agnostic relatively to the organizational form that social enterprises can adopt as a misstep.

I think that the big mistake is to think that it is possible to manage an entrepreneurial activity with an associative organizational form (Bonfante, 2013, p. 57)

Thus, he proposes that the limited liability company represents the best organizational form, since it can attract investors and generate profit that would allow the capitalization of the social enterprise. Furthermore, Bonfante (2013) recommends to attract external investments through equity and reward-based crowdfunding in order to increase the social enterprise capitalization and allow the organization to pursue its social mission.

6 The Third Sector Reform

In 2016, several factors contributed to the development of a comprehensive reform that backed the development of a legislative framework, which defines and regulates the Third sector. First, in 2016, before the law’s passing, the Italian Third Sector registered more than 340,000 nonprofit institutions and employed more than 810,000 individuals (ISTAT, 2016). Thus, the relevant dimensions of the sector made it pivotal for the State to develop a comprehensive legal framework that provides the formal acknowledgment and regulation of the entire Third sector. Second, the Third sector had been regulated with fragmented and specific legislative frameworks that had a partial outreach. For example, the Italian Parliament had passed a law related to volunteering. Third and connected with the other two factors, the Third Sector had been waiting for years to have a judicial recognition of its work and impact. I will very briefly provide an overview of the most relevant changes introduced with the reform of the Third Sector:

• 1. The law clearly defines the organizations that are part of the Third Sector, namely associations, foundations, social enterprises (including social cooperatives), voluntary organizations, associative networks, mutual aid societies, and the other private organizations which do not have a corporate form and pursue solidaristic and social objectives. These organizations do so through the implementation of one or more activities of greater interest, such as voluntary action, donation of money, goods or services, mutuality or production, and exchange of goods and services

• 2. These organizations pursue the common good and follow general principles acknowledged by the Constitution, such as solidarity (art. 2) and subsidiarity (art. 118)

• 3. These organizations pursue social goals without the objective of generating profit and are registered in the National Register of the Third Sector

• 4. The introduction of fiscal incentives (flat-rate tax regimes) and financial incentives. For example, the law introduces social bonuses, which entails a tax credit of 65% for individuals and 50% for organizations which donate economic resources to organizations of the Third Sector which seek to regenerate either a public space or mafia-seized assets.

It emerges that with the Third Sector reform, the legislator seeks to clearly define the perimeter of the Third Sector (Cantiere Terzo Settore, 2021).

In the realm of the Third Sector reform, the legislator develops an ad hoc law for the institute of social enterprises to promote its dissemination. The two relevant areas of intervention of the legislator are the following: the characterization of the social enterprise and the incentives dedicated to social enterprises.

Similarly to law 155 of 2006, the legislator does not identify the social enterprise as a new type of enterprise, but as a category and a status that can be acquired by different kind of organizations (Fici, 2020). The law defines a social enterprise as a “private organization that carries out business activities for solidaristic or social objectives and allocates the profits mainly to the pursuit of its purpose. Furthermore, the law states that the social enterprise “has to adopt responsible and transparent managerial practices, promote the involvement of the workers, beneficiaries and all subjects interested in its activities” (art. 1). Related to this, the law requires social enterprises to develop a consulting or involvement mechanisms through which the interested stakeholders can participate directly to the decision-making process (art. 11). The specific type of mechanisms has to be autonomously defined by the social enterprise. Compared to the law of 2006, the reform extends the number of sectors in which social enterprises can operate, including social agriculture and sustainable tourism.

With reference to social cooperatives, the most relevant innovation with the law consists in the equalization of social cooperatives and social enterprise, thus social cooperatives are by law recognized as social enterprises.

Building on the limited impact of law 155 of 2006 due to the lack of financial incentives and the prohibition of distributing profit (Giustolisi, 2018; Colombo, 2021). The legislator introduced a detaxation of profits if the latter flows into a reserve which either serves the statutory activity of the organization or is used as equity increase. Furthermore, the detaxation regime also applies if the reserves are used to cover profit losses. Moreover, the law aims to attract financial resources from individual and organizational investments through a detaxation of the personal or corporate income tax. Being social cooperatives recognized as social enterprises, these incentives apply also to social cooperatives (Commissione Terzo Settore e No Profit, 2019).

Furthermore, the law establishes the creation of a fund fostered by the profits of social enterprises and dedicated to the support and growth of social enterprises (Musella, 2017).

7 How “Social” Is the Social Function of Cooperatives Today?

It emerged from the chapter that the Italian Constitution acknowledged the social function of cooperatives, since the latter follow the principle of mutuality and follow collective objectives that apply to all members. As stated in the beginning of the chapter, the Italian legislator identifies the prevailing mutual purpose in cooperatives, which:

• (a) Develop their activities mainly in favor of their members, consumers, or users of goods and services

• (b) Leverage mainly on the work of their members during their activities

• (c) Leverage mainly on the provision of goods and services from their members during their activities

Over time, cooperatives have grown and, as emerged in the first part of the chapter, they perform well by competing on the market against “regular” corporates.

Over time, the longer standing history of cooperatives allowed them to develop different growth strategies, which supported the cooperatives’ sustainability during periods of economic crises (Euricse, 2015).

One example of growth strategy consists in the creation of a network among multiple cooperatives in order to better compete on the market. Conserve Italia, a major player in the European canned food market, represents a case study of this growth strategy. This case study has been developed using information of the cooperative website⁵ and of its Sustainability Report of 2021.⁶

7.1 Conserve Italia

Conserve Italia is an agricultural cooperative and is a top European player in the preserved food sector. Currently, Conserve Italia entails 40 cooperatives to whom are associated 14,000 agricultural producers and, as a group, it registered a turnover of 870 million Euro in 2021 and more than 2700 employees. Around half of its turnover derives from the national market and the other half from other EU (e.g., France, Spain) and non-EU countries (e.g., USA, Australia).

The history of Conserve Italia starts in 1966 when three fresh produce cooperatives found an agricultural consortium (CALPO) and acquire six years later a stock company, Valfrutta, in order to transform their produce in final products (e.g., canned fruits, jams). The possibility to market both fresh and transformed products enables CALPO to value the fruit that could not enter the fresh market and economically gain from the transformation process. This enabled the vertical integration from the entire production, transformation, and commercialization process and in 1976 other 14 transformation cooperatives join CALPO and give rise to the foundation of Conserve Italia. Conserve Italia aims to enhance the value of cooperatives’ production through successful brands (mainly acquired through targeted acquisitions) and provide an extensive product offer that could satisfy the needs of the large organized distribution. Over time, Conserve Italia has grown through several acquisitions, which enabled both the offer of other products (e.g., juices), the increase in productive capacity and the internationalization process. Today, the products of Conserve Italia are distributed across Europe, in the USA, and in Australia.

In his letter to the stakeholders, the President of Conserve Italia states the following:

In 45 years of history, our mission has never changed: “be a leading European company in the food conserve sector to realize both the best valorization of the agricultural products of our member cooperatives and to provide to consumers quality and food security guarantees. (Sustainability Report, 2021)

It emerges how the cooperative organizational form represents a means to an end, which ultimately encompasses gaining a better market positioning and, subsequently, profit generation. The current governance is represented by a holding structure in which Conserve Italia, an agricultural cooperative, controls seven subsidiaries which are both the results of acquisition operations and ad hoc creations to, for example, manage sales in specific markets. Hence, cooperatives can behave like “regular” for profit companies over time and implement growth strategies as well as governance structures typical of corporates.

From an analysis of the social report and the website, it seems that the social function of Conserve Italia is rather in the realm of CSR strategies and reporting. Conserve Italia takes inspiration from the UN Sustainable Development Goals and adopts sustainable practices along its value chain (e.g., sustainable packaging). Moreover, Conserve Italia creates social impact through partnerships with Third Sector organizations. For example, Conserve Italia collaborates with Banco Alimentare, a nonprofit organization that collects production surpluses from organizations and redistributes them to poor individuals. Furthermore, Conserve Italia sponsors local sports team.

Thus, it seems that the social function and mission that the Italian Constitution entrusts to cooperatives has changed over time especially if cooperatives have undergone significant growth paths.

8 Italian Social Cooperatives and Grand Societal Challenges

Grand societal challenges, such as climate change and poverty, require the involvement of multiple and different actors, such as governmental authorities or organizations, to be addressed (Ferraro et al., 2015). These challenges occur at a global scale meaning that they transcend economic and geographical boundaries; however, they are evident also at a local level. For instance, poverty represents a global challenge, manifesting locally in most suburban areas, schools, and emarginated contexts. More specifically, almost half of the world’s population lived with less than 6.85 dollars per day in 2019 (Schoch et al., 2022), demonstrating the severity of this phenomenon.

Grand societal challenges cannot be addressed through a standardized approach at a global level, but through the development and implementation of local (potentially scalable) resolutions. Socially-oriented organizations, such as social enterprises and (social) cooperatives, play a pivotal role in creating these solutions. It emerged from this chapter that Italian social cooperatives have shown a strong ability in acknowledging the presence of social needs (long before the public authorities did) and in providing concrete solutions to them. Being locally rooted, social cooperatives and social enterprises own deep knowledge of the needs of a given territory. This puts them in the position to concretely develop local solutions to these issues. For instance, Quid Impresa Sociale (Quid Social Enterprise) creates fashion products through leftover fabric of fashion companies and provides training and job opportunities to individuals (mainly women) coming from vulnerable contexts (Company profile, 2023). Further, in 2023, Quid has managed to employ 144 individuals of which 61% is at risk of social exclusion (Company profile, 2023). By doing so, Quid simultaneously addresses two grand challenges: waste reduction and fair access to the job market for vulnerable subjects. This business model could potentially be replicated on a larger scale, even though its aim is to focus on resolving social issues in a bounded territory. In other words, the activity of Quid cannot solve waste management or provide fair accesses to the job market on a global scale; however, its approach can provide a concrete and replicable solution in other contexts. Or further, the fabric used in creating Quid products derive from businesses within a radius of 250 km from the headquarter of Quid (Company profile, 2023) once more demonstrating its strong connection and embeddedness in the local territory.

Hence, Italian social cooperatives are at the frontline in providing concrete responses to grand societal challenges. Thereby, they accomplish the social function of cooperatives as foreseen in the Italian Constitution. The development of answers to grand societal challenges emphasizes the division and distinction between social cooperatives and cooperatives. As emerged from the case study of Conserve Italia, cooperatives might be more centered on growth and performance distancing them from the local territory and the social nature of cooperation. Conversely, social cooperatives remain, on average, smaller in size and more connected to local needs.

9 Conclusions

This chapter has portrayed the legislative evolution of Italian social cooperatives and social enterprises and has provided an evaluation of the different frameworks which regulated either social cooperatives or social enterprises. The chapter sheds light on the evolution from the grassroot movement of voluntary organizations that “substitute” the State in providing welfare services to the definition of Third Sector. The legislative frameworks have had different outcomes on the diffusion on both social cooperatives and social enterprises. The law 381 of 1991 acknowledged the existence of social cooperatives and catalyzed the dissemination of this organizational type across Italy. Conversely, the law 155 on social enterprises did not provide any fiscal nor financial incentives for the creation and diffusion of social enterprises. Notwithstanding that the Italian Constitution recognized the social function of cooperatives, the latter might have progressively adopted “for profit” strategies in order to grow. The social function of cooperatives has been progressively taken over by social cooperatives, which are smaller in size and more embedded in the local community and whose mission impacts also other stakeholder categories apart from members. Due to their strong connection and embeddedness in the local territory, social cooperatives are able to develop concrete solution to grand challenges.