The experience of consortia supporting growing enterprises in Italy
Consortia as a way to scale up and grow in social business
Authors and organizational affiliations: Sabina Bellione and Floriana Nappini from Consorzio Sociale LIGHT
1. Context and history of how the good practice has been developed
Italy has been historically characterised by a strong ability in terms of self-organisation of citizens and civil society. This has created, throughout the years, a peculiar richness of social enterprises (in terms of numbers but also types and quality). Therefore, Italy has traditionally enjoyed the presence of a rich social fabric made up of non-profit organisations widely disseminated in all its territories.
According to EURICSE data, at the end of 2011 active non-profit organisations in Italy amounted to 301.191 (i.e. 28% more than in 2001). Also very important is the contribution of the sector in terms of human resources: 4,7 million volunteers, 681,000 employees, 271,000 external workers and 5,000 temporary workers. Within the Italian productive fabric, the non-profit sector represents 6.4% of the active economic units and 3.4% of employees. As far as the specific economic activities are concerned, it is important to notice that, the non-profit sector represents the key productive entity within the social assistance area (with 361 non-profit entities every 100 enterprises) and the cultural, sports and entertainment areas (with 239 non-profit entities every 100 enterprises).
The institutional framework has managed to adapt to and support the evolution and the growth of the social enterprises sector in Italy for example through the Law no. 328 of 8 November 2000 “Framework law for the implementation of the integrated system of social interventions and services”. This is a key law which has favoured the implementation of the subsidiarity principle (both horizontal and vertical) and the promotion of actions for the support and qualification of non-profit organisations and social enterprises.
In this context, a very important role has been played by the Constitutional modification of 2001 which has revised the competences of State bodies and public authorities and has changed the distribution of competences and powers. In particular, the Constitutional changes have introduced the principle of vertical subsidiarity (attributing to the Regions and the local authorities specific competences within the social policy area) and of horizontal subsidiarity (promoting the involvement of civil society organisations in the programming and management of services).
As it has happened in other EU countries, during the last 30 years, the Italian non-profit sector has developed a strong entrepreneurial character and has significantly increased its employment capacity. However, the Italian case has been characterised by the development of a plurality of models so that “social enterprise” in Italy is a very fluid concept which is in continuous evolution and which encompasses a number of organisational and legal forms. It is interesting to notice that, in Italy, the potential of social enterprises is still very significant: beyond the definitions given by the relevant legislation there are around 88,000 enterprises (profit and mutualistic) that work within the social area in the country (2012 data from IRIS Network).
The practice presented in this paper relates to a specific type of Italian social enterprise i.e. social cooperative. Social cooperatives are in fact the most common type of social enterprise in Italy. Italian social cooperatives are economic organisations of a small-medium size which are strongly integrated into the social fabric within which they developed. They collaborate very closely with local public authorities and the communities where they operate by offering social, health-care and educational services as well as work integration opportunities for disadvantaged people (Euricse 2010).
In Italy, social cooperation is a strong economic actor constantly growing and increasingly playing a key role within the national economy. The social cooperative has been the first structured and operational form of social enterprise in Italy and a model used by other EU countries to develop their social entrepreneurship sector. Following the emergence, during the 70s, and then the strong development in the 90s of numerous social cooperatives, the Italian Legislator passed a specific law in 1991. This law (n. 381) is still one of the most interesting and innovative laws on social enterprises in Europe (and in fact, other European countries - for example Poland - have taken it as a model for elaborating their own national legislation).
During the last twenty years, the growing importance and role of social cooperation in Italy (between 2001 and 2011 the number of social cooperatives has grown by 98% reaching 12,264 units in 2011 while the number of employees has grown by 115% reaching more than 365,000 employees and 42,000 associates volunteers), has widened and legitimised the cultural, scientific and political debate around social cooperation itself and has promoted new ideas and visions. For example it allowed overcoming the old idea that social activities and economic activities are incompatible.
The key role in modifying this type of misleading assumption has been played in Italy by those social cooperatives working in the social, educational and health-care sectors and those working for the work integration of disadvantaged people. The work of those social cooperatives has shown how, within the solidaristic action, economic and entrepreneurial aspects are not antagonistic but, on the contrary, are complementary and can accomplish economic as well as social goals.
In this context it is important to notice that, nowadays, there is a clear difference between bodies characterised by a simple service-delivery function (with a limited economic activity and impact) and those which act within the market as true economic and social actors developing real entrepreneurial activities within community markets. This crucial difference has emerged throughout the years thanks to the evolution of both social entrepreneurship and of its relevant legislation and it represents today a true challenge for the Italian Third Sector and for the economy as a whole.
The rapid development of the sector has brought to the elaboration, in 2006, of a new law concerning social entrepreneurship. The legislative decree no. 155/2006 on social entrepreneurship is the result of a cultural evolution.
The law does not introduce a new legal form but rather it introduces a “qualification” that can be acquired by a number of entities that are normally part of the so-called “Third Sector” such as: associations, foundations, religious bodies but also private companies and cooperatives. Even though of a significant political importance, this law has not had a strong practical impact yet. Organisations have been reluctant to apply to this qualification because it would bring additional bureaucratic burdens (e.g. producing official balance sheets) without bringing significant advantages. Nonetheless, this law is currently being revised and in the future it may play a greater practical role in supporting the social entrepreneurship sector in Italy.
The growth of the sector in the Italian case has been supported by a number of factors. The creation of strong collaborative structures (e.g. consortia) has certainly played a key role. However, other concurrent factors have been very important and their role should not be underestimated. Therefore, the creation of consortia should be seen within the larger context of Italian social enterprises sector because, without such context the creation of consortia may not have had the impact it has had up to now.
Among the aspects that have determined the success of the Italian experience of social entrepreneurship the following are probably the most important:
The participation of stakeholders within social enterprises represents a fundamental structural element since it guarantees (in the long run), the pursuit of altruistic and redistributive aims and it brings important elements of economic democracy. Social enterprises in Italy involve many different types of stakeholders from workers (probably the most important and most involved ones) to local authorities and other entities working in the same territory (e.g. foundations). Public authorities and private entities are generally involved through actions of joint programming and design of services and policies. As far as workers are concerned, participation, can act as an important leverage in tackling industrial crisis and in fact, this aspect has been a key element (even though not the only one) in making the sector more resilient to the attacks of the current crisis compared to other types of SMES.
This aspect is very important and in the future it will surely play a very important role in the development of the sector. Forms of enterprises characterised by a wide stakeholder involvement (with a strong territorial identity) can in fact offer significant development margins. This is particularly true for economies characterised by a mature capitalism (like the italian and generally the European ones), where a solidarity and participatory culture can represent an important component of their competitive advantage.
Social enterprises’ industrial relations
Industrial relations within social enterprises are based on the interaction between motivated individuals and companies that value the social components of work. This has brought to the creation of a new model of industrial relations where salary it is only one of the components.
Research and knowledge
Those are two fundamental aspects for the creation of social cooperation and social enterprises models. They have in fact supported the analysis of the phenomenon and the development of a deep understanding of its working and impact through specific studies of both theoretical and practical models. These processes have significantly supported the evolution and the development of the sector.
In the Italian experience, a key contribution to the development of the sector has come from the specialised finance and the ethical finance that has grown around the sector. Specialised actors (both private and public) have in fact created a number of specific tools and innovative financial solutions dedicated to the support of entrepreneurial projects particularly within the credit sector, the fundraising and the workers-buy-out of enterprises hit by the crisis mechanisms. These financial solutions have significantly helped the growth of the sector by bringing venture capital and investments which, by selecting projects where to invest on the basis of sustainability criteria aimed at evaluating the objectives, the feasibility and economic viability of initiatives, have helped the implementation of innovative projects.
Measuring impact and social accounting
In Italy there has been the development of both a strong theoretical framework as well as practical tools for the measurement of the social and economic impact of social cooperatives and social enterprises (for example through the development of social accounting models). The legislation in the field has supported this development by providing for a standard “social balance sheet” which contains the minimum requirements for social accounting process therefore allowing for a development of specific tools adapted to specific contexts and objectives.
Innovative public-private partnerships
The Italian social cooperation represents a unique model from a historical point of view as well as for the type of solutions it offers to the different territorial needs (also in terms of work-related needs). The current crisis has made work integration activities for disadvantaged people even more difficult than before. At the same time, it has created new social vulnerabilities and therefore new employment needs. Work integration should therefore be seen as a multidimensional and crucial aspect to be tackled from different point of views starting from social cooperatives but including also a number of entities that share the same competences and objectives. This approach has been used in Italy and it has brought to the creation of innovative forms of public-private collaborations. For example, the renovation of public spaces and public real estate through joint investments from the public sector itself and social enterprises has allowed for the creation of new social activities (social services, cultural initiatives etc.). These collaborations have represented true management challenges (for both social enterprises and public authorities) but have proved to be forward-looking approaches producing very positive impacts for local communities who benefit from new social or cultural initiatives and at the same time see reduced public spending (for example in maintenance of unused real estate).
As far as the actual focus of this paper is concerned (i.e. the creation of consortia as growth factor for social enterprises), it is important to underline that social cooperatives in Italy have always shown a strong tendency towards creating collaborative structures of different types. Initially, this tendency towards formal collaborative structures represented a sort of reaction of social cooperatives against a general institutional system that seemed to be very supportive mostly of enterprises based on capital and which looked at social cooperatives as an anomaly rather than a resource in which to invest. Therefore, social cooperatives found alternative ways to support their growth by developing support structures.
A second important aspect that has contributed to the creation of consortia (and other types of support structures), is the traditional structure of social cooperatives in Italy. They in fact have historically developed as small-medium size enterprises and have therefore always been characterised by a number of weaknesses in terms of abilities to compete in open markets, ability to find new markets, ability to access medium and big contracts and tenders, ability to improve their competitiveness through economies of scale.
A third important aspect that has favoured the development of consortia of social cooperatives is the structure of the services and products they provide. Generally speaking, social cooperatives do not work in sectors with a high economic added value. Therefore, they are very much exposed to competition based on cost-reduction. This aspect, coupled with their relatively small size already mentioned put social enterprises at a tangible risk of being driven out of markets by their inability to compete as a consequence of many perverse factors.
On the other hand, Italian social enterprises have always been characterised by a strong innovative character and a marked problem-solving attitude. This is how, to overcome their own weaknesses and guarantee their own survival as well as ensuring growth, they have started to work together.
2. Summary of main characteristics of good practice approach
As already briefly mentioned, the practice described relates to a specific type of social enterprise working in Italy i.e. social cooperatives. Social cooperatives represent, within the Italian third sector, the most widespread type of social enterprise and, at the same time, the organisations with the greatest economic and social role. This importance can be deduced by comparing the data already provided concerning the non-profit sector and the social cooperative specific sector: in 2011 social cooperatives represented around 4% of total organisations within the non-profit sector in Italy but employed more than 50% of total workers within the sector. Moreover, while the non-profit sector grew by 28% from 2001 to 2011, social cooperatives grew by 98% within the same period.
Together with the relevance of the sector there is another very important reason why the present paper concentrates on consortia of social cooperatives. Compared with other types of organisations within the sector, social cooperatives have always shown a strong tendency towards structured forms of collaboration and in fact they have created the most interesting and the best working collaborative structures (and consortia are one of them). This ability of social enterprises to work together and create specific collaborative structures (such as consortia, networks etc.) have indeed represented a growth factor for social enterprises in Italy and in Lombardy.
In general terms, social cooperatives’ collaborative structures are of two main kinds (within which they can take different forms):
a) Political (e.g. federations, confederations etc.)
b) Economic (e.g. consortia, joint groups, network contracts etc.)
The paragraphs below briefly describe the characteristics and functions of the most important collaborative structures (among which we find consortia). This is to show how rich the support system is in Italy and clarify that, while consortia and networks have indeed a key role in social enterprises development, the overall support structure should not be underestimated and the synergies of this type of system should be well understood.
Federations and confederations are characterised by the following functions:
1) They have a watchdog function (e.g. they carry out external audits on behalf of the public national authorities; they watch on the implementation of the mutualistic objectives of cooperatives etc.)
2) Represent the voice of cooperatives and their needs towards public authorities at different levels as well as other type of entities (e.g. trade unions)
3) Promote the creation of new cooperatives
4) Promote restructuring and merging processes among cooperatives
5) Provide legal, administrative and fiscal advice
6) Support cooperatives in accessing credit and funding
In general terms, the aims of cooperatives’ networks include:
1) Collaborating in specific segments of the relevant markets (as defined by the cooperatives themselves when signing the network contracts)
2) Exchanging information or services (industrial, commercial, technical or technological)
3) Carrying out one or more activities that are part of their daily life together
4) Sharing services
Consortia are the main tool used by Italian cooperatives to create economies of scale and sustain their growth. Even though their objectives may seem similar to those of cooperatives networks, their scope is in practice much wider and they represent a more stable structure with a greater impact on growth. In general terms (i.e. not specifically for social cooperatives), the creation of consortia has three main economic functions:
1) Productive integration
2) Joint purchasing of goods and services on behalf of the members
3) Participation and access to tenders and contracts
However, consortia of social cooperatives are different from other types of consortia. On the one hand, they have, as other types of consortia, a marked service function (e.g. procurement of raw materials to increase purchasing power etc.). On the other hand, they have a significantly greater impact on the development of activities. Consortia of social cooperatives are themselves social cooperatives however made up of legal entities (cooperatives) and not physical persons. Therefore they are legal entities themselves and they can use their legal form to act directly on markets (for example by participating directly to tenders or by concluding contracts and other operations for themselves as well as in the name of their members). Hence, consortia of social cooperatives do not simply deliver services to their members but they act as economic and legal actors.
The key features of consortia include:
- Strong territorial identity
Consortia are in fact built by cooperatives working within the same geographical area (usually at provincial or regional level but also national);
The actions of consortia (like those of social cooperatives) need to have a social utility function for the local community;
- Cross-sector composition
As already mentioned, consortia bring together cooperatives from different sectors so that they avoid being over-specialised, they can create synergies among different types of cooperatives and can experiment activities in new sectors.
The main activities of consortia are:
- Promoting collaboration between cooperatives;
- Providing support services as well as technical and administrative consultancy;
- Promoting training activities;
- Supporting activity development for their members by helping them sell their products or by offering services to third parties (public and private entities);
- Promoting and managing relations with public authorities;
- Acting as a general contractor in public tenders (which means that consortia can participate in public tenders in the name of their members and then manage the contract directly however involving the members of the consortia in the activity);
- Promoting access to credit and funding of their members
It is important to notice that not all consortia carry out all the above activities. In fact, the specific activities and responsibilities of consortia are determined by the founding cooperatives and are included in their statutes. This means that, depending on the will, needs and agreements made by the founding cooperatives, the role of a consortium can be very different. In general term, it is possible to distinguish between two types of consortia:
- “Light” consortia
Providing only basic services and support to their members (i.e. training opportunities, administrative support etc.).
- “Heavy” consortia
Having a more structured approach and many key functions (including the general contractor function).
Yet, it is very important to stress that in reality this distinction is not at all rigid and that in between the two extremes there is a wide range of consortia having different roles and determining very different degrees of collaboration.
In the Italian experience, most types of consortia have proved to be effective in delivering their objectives and in supporting the growth of social cooperatives.
These consortia represent in Italy a real tool for increasing the critical mass of social cooperatives allowing for a better and more effective placement on relevant markets. In practice, consortia have, in many cases saved social enterprises (particularly the smaller ones) and have allowed for greater (and at the same time more equitable) competition among cooperatives and between cooperatives and other types of enterprises.
As far as funding is concerned, it should be mentioned that are no special sources of funding for consortia or cooperatives’ network. The costs of creating a consortia or a network are normally borne by the cooperatives that are involved in the action. However, once they are set up, they can enjoy a very similar access to funding than single cooperatives. Similarly, they can access private funding (foundations but also credit institutions) and sometimes they have indeed an easier access to such resources compared to single cooperatives as a consequence of the critical mass they have reached.
The paragraphs below briefly describe the funding context at national and regional level (in Lombardy Region). The paragraphs only mention those funding that are accessible to consortia (while the funding only accessible to single cooperatives are not described).
At national level, the funding available to consortia are:
- 5X1.000 Funding
The aim of this national fund is to support social activities as well as health activities (particularly research) and work inclusion activities implemented by foundations, non-profit organisation (ONLUS) and social enterprises. The 5X1.000 has been engineered by the central State together with all the organisations working in the third sector which in Italy have a national structure called Third Sector Forum.
The Fund is built thanks to the collaboration established with single taxpayers who freely decide to devolve the 5X1.000 of their taxes to a social enterprise. In fact, all taxpayers in Italy have the possibility of earmarking a small percentage of the taxes they owe to the State (i.e. 5x1.000) to support no-profit organisations (social enterprises as well as universities, research centres etc.).
Hence, to be able to seize this opportunity, social enterprises have to, by themselves, establish effective communication strategies to let citizens know about their activities and show them how such activity has positive impacts within the territory.
To be eligible for funding, social enterprises (as well as all other third sector organisations) need to be defined as ONLUS (i.e. non-profit and socially useful enterprises). ONLUS is a qualification defined by national law. Social cooperatives and their consortia are entitled to receive this qualification by law whereas other organisations within the third sector (e.g. associations, other types of social enterprises etc.) have to apply to the central government to request the attribution of this qualification. To give an idea of the volume of this financial tool it can be mentioned that, for example, in 2009 the overall funding amounted to €584 millions.
- System of Mutualistic Funds
Social cooperatives contribute directly to the creation of these Mutualistic Funds by paying in 3% of their profits each year. These Funds then re-invest the funding collected with the aim of helping new and existing social cooperatives develop, supporting innovative social projects and opening up new markets to social cooperation.
- Tax relieves and tax incentives applicable to social enterprises
Social enterprises are exempted from paying the tax on company’s income (IRES tax in Italy). Moreover they do not pay taxes on profits if they are classified as indivisible reserve (i.e. reserves which cannot be distributed to the associates).
- Other support instruments
Law 460/97 establishes that social enterprises have to be “ONLUS” i.e. non-profit making and socially useful. For this reason, they are entitled to other special terms such as the exemption from the stamp tax (i.e. a tax normally paid to produce official documents and certificates) and other specific taxes such the tax on government concessions.
At Regional level (in the Lombardy Region), funding available to consortia include:
- Regional law n. 1/2008
It provides for a tax break for NGOs (among which we find social cooperatives as well) which reduces workforce costs by 4.25%.
- Subsidies on newly created jobs
Work integration of disadvantaged people (particularly disabled) benefits, within the Lombardy region, from additional funding known as “Disabled Work Dowry”. The Dowry is distribute by the Region to the different provinces and the dowry allocated to each beneficiary can vary between €7.000,00 and €12.000,00 per year for each disadvantaged worker. The same Dowry system provides for a small grant for new social enterprises start-ups working in the field of work integration (in 2010 the maximum amount allocated to each new start-up amounted to €35,000).
- Other subsidies related to social enterprises
The Lombardy Region has set up the so-called FRIM Cooperation fund (i.e. Entrepreneurship Rotation Fund) which provides funding for setting up new social cooperatives (max €250,000 for each new cooperative) or for widening and developing existing activities (max €1,000,000). Under FRIM, funding allocated may not cover more that 80% of the overall costs of the project or initiative.
Together with public funding, in Italy and in Lombardy a significant role is played by banking Foundations. Such foundations represents a very important source of funding to create new jobs for disadvantaged people. Normally, they allocate grants for around 60% of the overall project costs.
3. Evidence/Justification for Good Practice
According to the relevant legislation in the field, consortia of social cooperatives (also known as “second level” social cooperatives), can be founded by a minimum of 3 social cooperatives with an initial capital of only 516€. They can be constituted as corporations or as a limited liability companies. However, they are subject to all the regulations and legislation that are relevant to social enterprises. As already mentioned, their members have to be cooperatives legal entities. A consortium does not necessarily have to include similar cooperatives or entities working on the same markets. On the contrary, it can also include cooperatives working in different or complementary sectors.
Consortia of social cooperatives have been created to carry out commercial and service activities and to integrate productive and social activities by creating a stable link among cooperatives. The choice of creating consortia (for example at provincial or regional level among cooperatives working within those territories) provides an effective response to the needs of the local community through a greater integration of actions and initiatives.
Consortia represent an aggregation of enterprises that intends to carry out an entrepreneurial function in itself, by bringing together cooperatives working in different sectors so as to improve the quality of the actions carried out within the territory and making them more “complete”. from this point of view, consortia play a key role in widening cooperatives’ actions into new sectors.
As it appears from the above description, consortia of social cooperatives are very flexible tools which can easily be used by cooperatives to increase their ability to act on markets, improve the quality of their services (e.g. by coordinating with complementary cooperatives), create economies of scale, increase their competitiveness, improve their ability to access both funding and public tenders etc without significantly increasing their operational costs. Particularly interesting in this context is the symbiotic aspect that Italian legislation attributes to social cooperatives and their consortia. As mentioned, consortia can access public funding and tenders in the name and on behalf of their members. It is very important to underline that, this basically means that in applying for funding and tenders, consortia can:
- present the experiences of all their members as if they were its own (and this is because consortia are the result of different entities getting together);
- whenever they win a contract or see a project approved they can ask their members to carry out specific activities and spend funding within those contracts and project and still consider this spending a their own (and not as a subcontracting)
- in financial reporting they can provide expenses borne by their members as if they were their own.
These are very important element of flexibility provided for in the Italian legislation and which have helped consortia of social enterprises develop significantly ultimately achieving all the positive impacts in terms of growth and development of social enterprises already mentioned.
Together with all the positive effects already described it is important to notice the impact that the creation of consortia has had on the ability of social enterprises to absorb public funding. This is especially true for the European Social Fund. The ESF is a particularly difficult fund to be used and organisations and institutions without specific competences may be easily be discouraged (or excluded) from its utilisation. Consortia have significantly helped social enterprises (especially the smaller ones) in two ways. They have managed ESF funding for them (therefore carrying out all the bureaucratic and administrative procedures to access and manage ESF projects) but they have also contributed to increasing their competences in managing this type of funding.
In sum, consortia represent a stable (however very flexible) form of entrepreneurial collaboration among cooperatives which respects their mutualistic and social character but at the same time increases their purely entrepreneurial features.
Hard evidence concerning the importance of social cooperatives consortia can be derived from data concerning their rapid expansion (in Italy and in the Lombardy Region).
The most recent official national data for social cooperatives’ consortia go back to 2005 (more recent data will be released by the end of this year by the National institute of Statistics - ISTAT). In 2005 there were in Italy a total of 284 consortia of which 89 in the North-west Regions (i.e. the Regions with the highest number of consortia. Other areas had: 69 in The North-east; 65 in the Central regions and 61 in the Southern regions).
From the Lombardy region point of view, it is important to underline that, the creation of consortia has been very dynamic. In 2005 there were 48 consortia (i.e. more than 16% of the total number of consortia at national level and more than 53% of the total in the North-west area). In Lombardy the number of consortia has historically grown rather fast: in the period of 1998 to 2007 the number of consortia has increased from 22 to 58 (+163%). In 2012 in Lombardy there were no less than 70 consortia of social cooperatives.
4. Outcomes (for different stakeholders)
The outcomes of this practice have been very positive for a number of stakeholders.
Firstly, the outcomes for social cooperatives, as already briefly mentioned, have been numerous. The creation and development of consortia has in fact allowed social cooperatives to overcome their specific structural weakness (e.g. exposure to cost-reduction strategies, small-medium size etc.). This has improved their abilities to work and compete on open markets. Consortia have therefore allowed social cooperatives to reach results that they would have not been able to reach otherwise and they have improved their abilities and opportunities (for example by making social enterprises able to access and manage the ESF, complex public tenders etc.).
Secondly, consortia have had an indirect impact on users (i.e. on social cooperatives’ direct stakeholders). In fact, by helping social cooperatives to coordinate among themselves (for example through a restructuring and reorganisation of services) and to access new markets, consortia have contributed to the increase in the number of users reached by social cooperatives’ products and services and to improve the quality of such products and services.
Finally, consortia have had an impact on public authorities. In fact, through the work of consortia public authorities (particularly at provincial and regional level) have grown increasingly aware of the role played by social enterprises and have increasingly recognised their importance.
5. Strengths and Weaknesses
The strengths of this practice are manifold (particularly from the point of view of social enterprises) and can be summarised as follows:
- Attainment of economies of scale
- Attainment of new knowledge and of common objectives
- Accessing new markets
- Overcoming of legislative barriers
- Greater flexibility
- Greater recognition from public authorities (as well as from the private sector)
- Ability to influence policies (particularly at the provincial and regional level
- Increasing competences
From the public authorities side, one of the key strengths is that they can create a dialogue with a few key stakeholders that represent a variety of organisations at provincial and local level. this simplifies the dialogue and helps local authorities see the true value of social cooperatives.
However, there are two potential weaknesses of this type of model which need to be avoided in the creation and management of consortia.
This first concern the absence of coercive tools in the management of the consortium. Being a structure mainly at the service of its members (even though it has its own room for maneuvering), the consortium may lack the ability of directing the different needs and objectives of its members towards the common objectives and the common good.
The second concerns the risk of deleting (from the part of the member) their own entrepreneurial role in favour of the consortium up to the extreme case where the social enterprises would give up their business autonomy.
6. Comparisons with other experiences (alternatives or complementary - in same territory or elsewhere)
In recent years, new forms of enterprise’s aggregation have emerged in Italy. As if often happens, these aggregations have begun to operate at an informal level which has subsequently been regulated (and promoted) by the Legislator.
A particularly interesting case is that of the Network Contracts. The key legislation in this field was issued in July 2009 but subsequent laws (2010 and 2012) have contributed to shape these new contracts and have supported their diffusion and positive impacts. This new form of enterprise cooperation has emerged in recent years as a way to counteract the latest developments within the world economy (e.g. the economic globalisation, the introduction of the euro, the increasing competition from emerging economies -particularly China and India etc.). Network contracts are not peculiar of social enterprises (or cooperatives). Up to today, these contracts have been in fact largely used by all types of small and medium-size enterprises in Italy (even though a very recent qualitative study carried out on network Contracts has showed significant differences in the objectives and models adopted by cooperatives compared to other types of enterprises).
Network contracts are an additional tool for creating cooperation among enterprises. Even though their objectives may seem very similar to those of consortia, they are characterised by significant differences (which explain the reasons why social enterprises may decide to opt for this kind of tool instead of the consortium tool).
The objectives of Network Contracts include:
- Increase the innovative abilities and the knowhow of enterprises involved in the network;
- Improve the competition capacity of enterprises;
- Improve the penetration capacity of enterprises into the markets (traditional and new);
- Promote access to credit;
- Improve commercial relations (internally to the network but particularly externally).
In sum, contract networks are agreements among entrepreneurs in relation to specific interests, activities or projects which aim at increasing the individual and collective ability to innovate and to compete on open markets. Network Contracts allow for the creation of important links among enterprises which can aggregate themselves (even if they are based in different and distant geographical areas) to share know-how, activities and projects (for example they can make joint investments in research, create common development strategies for internationalisation, share the cost of high-quality professional resources etc.). In practice, small and medium size enterprises can, thought these contracts, share resources, knowledge, and markets ultimately increasing their dimension not through a “physical” expansion of their structures but through the expansion of their “economic area of influence” mainly through the relations that they establish with other enterprises.
Compared to other collaborative tools (including consortia), Network Contracts are even more flexible and lighter tools (from the bureaucratic point of view), through which entrepreneurs can increase their economic weight without reducing their autonomy. For example, Networks of this type can collectively decide to create a common structure to manage the network. However, this is only a possibility and not an obligation. Also, Network Contracts can decide whether to create a common capital fund to be used for joint investments. Again, this is only a possibility and not an obligation of the tool. However, it is important to notice that Network Contracts (and particularly the common capital funds) can enjoy important fiscal benefits. For example, the net profits from the network activities, if invested in the common capital fund, are exempted from taxes. This is a very important measure which promotes the investment capacity of those networks. Also this type of fiscal benefit has already been discussed at the European level and has been declared, from the European Commission, as not representing state-aid (mainly because it benefits a variety of enterprises and not specific enterprises to the detriment of others within the same sector and as such can be regarded as a measure of a general character).
Other important differences between Consortia and Network Contracts include:
- The possibility of building links with enterprises of very different kinds (e.g. not social cooperatives only);
- The possibility of building ties beyond the purely local areas (as already noted, consortia are normally built are provincial and regional level);
- Network Contracts have mainly a commercial aim and they do not necessarily need to share specific values (like consortia of social cooperatives do).
Italian cooperatives (not only the social ones) have, in recent years increasingly resorted to this type of tool (in addition to the most traditional consortia tool) but, compared to other types of enterprises have tended to have specific objectives and carry out specific activities. For example, in building Network Contracts, cooperatives have concentrated on objectives concerning the innovation of products or services, the innovation of internal processes and the creation and promotion of common brands. Other typical objectives of these types of contracts (e.g. the internationalisation of products and activities) have played a more limited role compared to other types of enterprises. Moreover, Contract Networks promoted by cooperatives seem to have had so far a greater tendency (compared to other types of enterprises), in building specific structures for the management of the networks and in creating common capital funds. This is most probably due to their traditional tendency to form collaborative structures (such as consortia) and therefore their capacity to collaborate.
In the context of the present paper this type of example is very important. It in fact shows that support structures for the development of the social enterprises sector can be created following different models which can be all very valid in pursuing the development objectives. Both public authorities and social enterprises themselves can find in the description of this kind of practice, very good inspiration and starting point to develop informal ties or to start working on an official framework for the development of such ties.
7. Overall assessment and transferability
The example of consortia can be very useful for other regions or countries as it shows important mechanisms for the development of social enterprises. In spite of the inevitably different characteristics of the sector in different countries, there are common elements (such as for example the services and products that social enterprises produce or the relatively small size etc.) which make the Italian example a possible model from which to take specific aspects that are relevant to the specific context in which they will be applied (for example key elements of the legislative framework).
During the meeting, the issue of a possible conflict of interest within consortia (i.e. whether they risk seeking their own interest instead of or, even worse, to the detriment of their member’s own interest) was largely discussed particularly in connection with the issue of transferability. In general terms it was noted that, the impact of consortia on their members is (at least in the Italian case) usually positive. The activities carried out by consortia and their members are different. Consortia do not provide services to third parties themselves but they coordinate activities and services provided directly by the member cooperatives; they provide inputs to new activities and help social enterprises access new markets.
Therefore, in general terms, even though there might be bad examples, consortia do not have conflicting interests with their social enterprises because they are built to help them develop. During the discussions, positive examples from other countries where a similar model already exists (even though at an early stage compared to the Italian case) were presented. For example in Greece, a group of social enterprises providing cleaning services have joined their forces to be able to be more competitive and win bigger contracts with a local hospital. Similarly, in Scotland, social enterprises are collaborating in the form of networks (not consortia because there is no legal framework for that); this collaboration is bringing very good results.
Experiences from UK and Sweden show that social enterprises do tend to get together to share back-office type of activities and reduce costs which is a model very similar to the “light” type of consortia. Nevertheless, warnings were raised during the discussions in relation to the transferability of the practice. The Italian case of consortia is a very peculiar one because it has a very long tradition, it has built throughout the years and therefore it has already solved problems, difficulties and conflicts. Countries where these structures are starting to develop, should be aware of this type of risk and should be prepared to tackle this kind of difficulties. It was noted that, a way to prevent this kind of risk is to make sure that collaborative structures have at their heart (e.g. clearly written in their statutes) the development of their members and that they have a clear mandate to pursue these development objectives.
A second interesting strand of discussion that was also linked to transferability was the discussion concerning how the ESF could be a key actor in the creation of sustainable social and economic growth. Many different ideas were considered from investing in training and skills building to funding social innovation initiatives to funding consultancy services or collaborations between social enterprises and the private sector. A few of the ideas were related directly to the development of consortia. It was in fact noted that, to be able to build a culture for collaboration in countries were social enterprises are not so inclined to it, it would be necessary to try to promote funded activities which could show the benefits of cooperation hopefully setting off a virtuous process of increasing collaboration.
Also trying to transfer best practices from one country to another is often hampered by language differences as well as other types of differences (e.g. legal framework, cultural issues etc.). For example, all legislation and documentation concerning consortia in Italy is, in general terms, not available in English. Resources from ESF could fund not only the translation of such material but also the implementation of pilot projects which would see experts being employed to study the material and adapt elements of the practice to the specific context of the country where the practice should be transferred.
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