European Commission Initiative Will Unlock Social Sector's Potential

Social businesses make up just 10 percent of European ventures. The European Commission wants to see more. Through the new Social Business Initiative, the Commission plans to create an ecosystem conducive to social businesses, in part by facilitating access to funding.

The belief is that more responsible businesses can foster more sustainable economic growth and generate significant social, environmental, and community impacts. More than $100 billion has already been allocated for social investment across the Single Market. The Commission has also created a Corporate Social Responsibility (CSR) strategy, which includes the creation of a new award and which will serve to scale-up companies’ contributions to community well-being and improve consumer confidence.

“Socially responsible business stems from a realisation that the crisis is not just economic and financial but also about ethics,” said László Andor, commissioner for Employment, Social Affairs, and Inclusion. “Values like solidarity, sustainability, inclusiveness, and integrity are not always upheld by business and I believe our economies have suffered as a result. This is where social business and CSR can have a decisive impact and thus also contribute to Europe’s 2020 goals of more jobs and growth."

Cross-cutting measures in the initiative include 1) simplifying accounting rules for small and medium-sized enterprises (SMEs), the single largest contributor to employment and job creation (the measure could potentially save start-ups more than $2 billion per year); 2) improving the quality of healthcare; and 3) facilitating the participatory use of the Internet. And in an effort to reduce emissions and waste while encouraging the efficient use of natural resources and energy, European mining and forestry companies will have to be more transparent when it comes to paid taxes, royalties, and bonuses.

The Social Business Initiative has a lot of promise, but its effectiveness is not guaranteed. Jonathan Bland, a 30-year veteran in social impact and the founder of Social Business International, wrote in The Guardian that the Commission’s commitment to increasing the visibility and feasibility of social entrepreneurship must not be wasted:  

“At minimum, the ecosystem will require:  

Promoting a deeper understanding of the social enterprise concept in a mixed and more resilient European economy; one that encourages plurality of business forms.

  • Building and sharing knowledge of successful social enterprise business models.
  • Addressing market failures in the supply of finance by linking funds, financial instruments and tailored support to create a viable deal flow from sustainable social enterprises.
  • Making more public support possible for social businesses through reform of state aid and procurement rules.
  • Developing appropriate ways of measuring impact.”

In a sense, the Social Business Initiative is an official justification for what many of us in the social sector already know: Social entrepreneurship, when supported, can make the world a better place. The question is whether it will be an impact solution in a resource-stretched world or just another flash in the pan.