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Small and medium-sized enterprises (SMEs)

Social Enterprises

Social enterprises are positioned between the traditional private and public sectors.

Although there is no universally accepted definition of a social enterprise, their key distinguishing characteristics are the social and societal purpose combined with an entrepreneurial spirit of the private sector.

Social enterprises devote their activities and reinvest their surpluses to achieving a wider social or community objective either in their members' or a wider interest.

Economic and entrepreneurial nature of initiatives

  • Continuous activity of producing goods and/or selling services
  • High degree of autonomy
  • Significant level of economic risk
  • Minimum amount of paid work

Social dimension of the initiatives

  • An initiative launched by a group of citizens
  • A decision-making power not based on capital ownership
  • A participatory nature, which involves the persons affected by the activity
  • Limited profit distribution
  • An explicit aim to benefit the community

Social enterprises exist in all Member States. However, there is no single legal model for these enterprises. Many social enterprises are registered as private companies, others are in the form of social co-operatives, associations, voluntary organisations, charities or mutuals, and some organisations are unincorporated.

Despite their diversity, social enterprises operate mainly in the following three fields:

  • Work integration (training and integration of unemployed persons);
  • Personal services (e.g. childcare services, services for elderly people, 'proximity' services, aid for disadvantaged people) and
  • Local development of disadvantaged areas (e.g. social enterprises in remote rural areas, neighbourhood development/rehabilitations schemes in urban areas).

Declaration 38 attached to the Treaty of Amsterdam recognises the major contribution made by voluntary associations, and affirms the need to encourage such associations at European level.

The European Commission carried out a Study on "Practices and Policies in the Social Enterprise Sector in Europe" , which was published in June 2007. It describes the key features of the social enterprise sector and identifies relevant support measures for social enterprises in 31 European countries, among which a group of good practices in the promotion of social enterprises was selected.

Commission Support for Social Enterprises

  • Social economy and social entrepreneurship - Social Europe guide / Volume 4  (29/04/2013) 
     
  • (29/02/2012): Call for applications to set up a new Commission Group of Experts : "Groupe d'Experts de la Commission sur l'entrepreneuriat social" ('GECES').

    Deadline: 9 April 2012
     
  • Commission results pdf - 27 KB [27 KB] of awarded projects on Statistics and Social enteprises February 2013

Given the importance of social economy enterprises, various community policies and specific measures are in place to support their development.

The Single Market Act (COM(2011) 206, final) proposes twelve levers to boost growth and strengthen confidence and Lever 8 is especially for the social entrepreneurship.

The Social Business Initiative is aimed to create a favourable environment for social entrepreneurship.

  • European Agenda for Entrepreneurship (COM(2004) 70 final, 11.02.2004 български (bg) czech (cs) dansk (da) Deutsch (de) eesti (et) ελληνικά (el) español (es) Français (fr) Gaeilge (ga) hrvatski (hr) italiano (it) latviešu (lv) lietuvių (lt) magyar (hu) Malti (mt) Nederlands (nl) polski (pl) português (pt) română (ro) slovenčina (sk) slovenščina (sl) suomi (fi) svenska (sv) )

The European Agenda for Entrepreneurship introduced the Commission's action on promoting entrepreneurship in social sectors. The policy should take account of the differing needs of entrepreneurs, who run businesses ranging from university spin-outs to family-owned SMEs to social enterprises.

  • The Communications on Social Services and on Health Services

The Commission has adopted in November 2007 a Communication in the area of services of general interest including social services, in order to assess how better to promote a transparent and reliable EU framework in which social services can be offered. Another Communication with the same objectives has been adopted in 2006 concerning health services. These policy documents are important for the numerous "third sector" enterprises, operating in these fields as is any improvement of the legislation affecting the provision of social and health services.

  • Public procurement

The directives on public procurement provide, under certain conditions, derogations favouring social enterprises. They allow the contracting authorities, when identified in the terms of reference, to limit access to certain contracts for social services to sheltered workshops, i.e. to social enterprises, employing mostly disabled people in order to unable them to gain normal employment.

See frequently asked questions concerning the application of public procurement rules to social services of general interest pdf - 63 KB [63 KB]

Furthermore, awarding authorities are authorised to insert social -and environmental- clauses in public contracts, such as an obligation to train or to give jobs to long-term unemployed. Such conditions give social enterprises an advantage in competing for public contracts.

More information

  • Public-private partnerships (PPP)

In recent years, a great number of social enterprises have developed as Public-Private Partnerships (PPP). This form of cooperation, which is generally geared to the longer term, is characterised by the role of the private partner, who is involved in the various phases of the project (planning, implementation and operation), who is intended to bear risks that are traditionally borne by the public sector and who often contributes to financing the project. Institutionalised PPP (IPPP) are understood by the Commission as a cooperation between public and private parties involving the establishment of a mixed capital entity which performs public contracts or concessions.

See Commission Interpretative Communication on the application of Community law on Public Procurement and Concessions to Institutionalised Public-Private Partnerships (IPPP) български (bg) czech (cs) dansk (da) Deutsch (de) eesti (et) ελληνικά (el) español (es) Français (fr) Gaeilge (ga) hrvatski (hr) italiano (it) latviešu (lv) lietuvių (lt) magyar (hu) Malti (mt) Nederlands (nl) polski (pl) português (pt) română (ro) slovenčina (sk) slovenščina (sl) suomi (fi) svenska (sv)

  • State aids

The EU State aids legislation also recognises the need to ensure that social enterprises can fulfil their general public missions in legal security. Legislation adopted in 2005 specifies the conditions under which compensation to companies for the provision of public services is compatible with State aid legislation and does not have to be notified to the Commission in advance. For instance, compensation granted to hospitals and social housing for services of general economic interest benefits from these rules irrespective of the amounts involved. Furthermore, the new General Block Exemption Regulation for SMEs contains a provision allowing the Member States to grant aid to small social enterprises without the obligation to notify it to the Commission. For instance, recruitment of disadvantaged and disabled workers in the form of wage subsidies, and compensation of the additional costs of employing disabled workers can benefit from these provisions.

See: 

  1. Legislation: Services of General Economic Interest (SGEI)
  2. Commission Regulation (EC) No 800/2008 of 6 August 2008 български (bg) czech (cs) dansk (da) Deutsch (de) eesti (et) ελληνικά (el) español (es) Français (fr) Gaeilge (ga) hrvatski (hr) italiano (it) latviešu (lv) lietuvių (lt) magyar (hu) Malti (mt) Nederlands (nl) polski (pl) português (pt) română (ro) slovenčina (sk) slovenščina (sl) suomi (fi) svenska (sv) declaring certain categories of aid compatible with the common market in application of Article 87 and 88 of the Treaty (General block exemption Regulation). Press release
  • Concessions

In the field of concessions, the general principle of equal treatment and the specific expressions of that principle, namely the prohibition of discrimination on grounds of nationality and Articles 43 EC Treaty on freedom of establishment and 49 EC on freedom to provide services, are to be applied in cases where a public authority entrusts the supply of economic activities to a third party. More specifically, the principles arising from Articles 43 and 49 include not only non-discrimination and equality of treatment, but also transparency, mutual recognition and proportionality.

See useful links and publications on this topic

  • Employment Policy and the European Social Fund

The Integrated Lisbon Guidelines for Growth and Jobs (2005-2008) български (bg) czech (cs) dansk (da) Deutsch (de) eesti (et) ελληνικά (el) español (es) Français (fr) Gaeilge (ga) hrvatski (hr) italiano (it) latviešu (lv) lietuvių (lt) magyar (hu) Malti (mt) Nederlands (nl) polski (pl) português (pt) română (ro) slovenčina (sk) slovenščina (sl) suomi (fi) svenska (sv)  called for the expansion of social services and the social economy in the context of the Lisbon Strategy aiming to raise the labour force participation rate in the EU to 70% partly through the involvement of people who at present face disadvantages in the labour market. In this context a large number of projects have been financed by the EQUAL initiative of the European Social Fund (ESF), in order to enhance the social enterprises' role to combat exclusion and to promote employment, job creation and social integration. As the EQUAL Programme has now been completed, the European Regional Development Fund (ERDF) and ESF have intervened in many countries to support third sector organisations.

Finally, in the context of the Open Method of Coordination for Social Protection and Social Inclusion, the role of the social economy in contributing to the inclusion in society and in the labour market of the most disadvantaged is recognised.

  • Tax rules

Direct taxation of social enterprises falls within the competence of the Member States, which are free to offer to social enterprises some corporate revenue tax exemptions as long as these are consistent with the Community law on State aids. In addition, the Member States have to ensure that social enterprises having their registered office and main establishment in other Member States are not treated less favourably for tax purposes. As far as the application of the Value Added Tax (VAT) is concerned, the Council Directive 2006/112/EC of 28 November 2006 български (bg) czech (cs) dansk (da) Deutsch (de) eesti (et) ελληνικά (el) español (es) Français (fr) Gaeilge (ga) hrvatski (hr) italiano (it) latviešu (lv) lietuvių (lt) magyar (hu) Malti (mt) Nederlands (nl) polski (pl) português (pt) română (ro) slovenčina (sk) slovenščina (sl) suomi (fi) svenska (sv) on the common system of value added tax allows Member States to authorize social enterprises not to charge VAT on the goods and services they provide for various activities carried out for the general interest.

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