Toby Johnson
30 June 2014

Social entrepreneurship conference in Greece: capitalism 2.0 or a democratic social economy?

Welcome panel: S. Arnaoutakis, V. Kegeroglou, A. Ioakimidis & I. Kourakis

SEN made three inputs to the Greek EU Presidency social entrepreneurship conference, held in Iraklion, Crete, on 10 & 11 June 2014. It contributed on networking, finance and impact measurement, and has been invited to present its results to the European Commission policy-makers planning the continuation of the Social Business Initiative.

The Greek Presidency’s conference on social entrepreneurship gave Greek participants a panorama of develop­ments and initiatives in social enterprises across Europe, which could inform Greek policy and practice. At national and local level there is plenty of political commitment to building a social enterprise sector, but equally there was sadly evidence of blockages in implementation.

SEN made three significant contributions. Małgorzata Lublinska relayed lessons from the Warsaw per review on finance, Floriana Nappini described Better Future of Social Economy work on social impact assessment, and Dorotea Daniele outlined the network’s structure and conclusion to date.

The event was preceded by a meeting of the advisory committee GECES, and also saw the awards for the best three business plans from new Greek social enterprises. Some 200 people attended, including 50 from other countries.

The environment is receptive, and there were some important statements of policy intentions. Greece’s Deputy Minister of Labour, Social Security and Welfare, Vasilios Kegeroglou noted that during its EU presidency, Greece has stressed the importance of the European social model, based on social dialogue, and the need to find a new model of production based on partnership between the private, public and third sectors. He was particularly keen to learn for the experiences of other social enterprises and from networks such as REVES. He regretted the delays in improving support for social enterprises in Greece, but promised that it will happen. Emphasising that the government cannot just bring a social enterprise sector into existence on its own if the business culture is not there, he said: “Political will and funding is not enough – it has to be done at local and regional level.”

These good intentions were echoes by Stavros Arnaoutakis, regional governor of Crete, who hoped to achieve better outcomes in the forthcoming Structural Funds programming period, especially in creating jobs for unemployed people.

It should be added that Greece is a member of SEN, but although the government could learn a lot from SEN’s peer reviews, has only attended them sporadically.

Capitalism 2.0…

It was time to peer into the future. In the ‘what’s happening in Europe’ panel, Anastasia Andritsou of the British Council reported some of the trends identified in their recent scenario exercise. She noted that 38% of UK social enterprises are led by women, and that 75% involved their beneficiaries in their governance. There is shift from identification by organisational form to a focus on social impact. Charities are under pressure to improve the quality of their services and to be more competitive. There is a drift from grant to loan finance. Bottom-up growth mechanisms are benefiting from crowdfunding and social franchising. The role of social enterprises is to create ‘Capitalism 2.0’.

Felix Oldenburg of the Ashoka Foundation expounded on the concept of ‘changemakers’ – young confident people who share the trait that they were trusted to solve a problem. Destination Change – New Solutions for Greece competition as attracted 100 projects, half of which are hybrids between an NGO and an investor-owned social business. He sees a future in a social innovation system that can ‘leapfrog’ over the welfare state.

Amaryllis Verhoeven, the new head of the unit dealing with social enterprise in the Internal Market DG, and Ariane Rodert of the Economic and Social Committee summed up the Social Business Initiative. The EESC’s Social Enterprise Project runs till November this year, and is taking stock of the recommendations of the Strasbourg conference in January, defining new actions, and keeping up the momentum as regards visibility and awareness. It is focusing on Strasbourg recommendations 1, 3 and 5: to co-create new policies, to built capacity through partnerships, and to develop a second phase of the SBI. In September it will produce a set of recommendations on the questions the new Commission and Parliament should address when they get going.

… versus democratic governance

A second panel presented developments in legal structures from four countries. The contrast between north and south was instructive. João Leite told how Portugal insists on democratic governance, and had deleted a proposed category of “social enterprises” from its Social Economy Framework Law in 2013, because “we don’t know what social enterprises are”. Similarly, according to Pablo García Valdecasas, Spain’s 2011 Social Economy Act insists on democracy. There are separate State Councils for the social economy and for corporate social responsibility. Rania Oikonomou described Greece’s 2011 Law on Social Economy and Social entrepreneurship, which also includes democratic governance. It has led to the establishment of 500 social co-operatives or KoinSEps. The government is now trying to create an ecosystem of support, including central and regional support organisations, incubator vouchers, business plan grants per job created and training. It is working with the European investment fund to create financial instruments.

This was in contrast with the approach taken in Denmark, as Ulrik Boe Kjeldsen explained. Here, the government has opted to set up a voluntary registration scheme later this year to raise the visibility of social enterprises, but not a new type of corporate entity. The register will have five criteria: a social, environmental or cultural purpose; independence; an inclusive and responsible nature; profit used for the social purpose; and a commercial activity. However there is no mention of participation. To help them attract capital, social enterprises will be able to pay dividends to investors, but these will be restricted.

How to network

In the networking workshop, Jonathan Bland described is experience as the first Chief Executive of the UK’s Social Enterprise Coalition as being about “networking for influence”. This he said, was a matter of defragmenting the movement, working  hard on the technical issues, identifying the good people to work with in administrations, avoiding the blocking tactics of the many “Sir Humphreys”, and adapting to politics. A bottom-up approach with lots of consultation is essential, he said: “Governments can’t do it alone.”

Dorotea Daniele presented ESN’s work so far, summarising the lessons of SEN’s peer reviews as follows:

Public sector capacity:

  • partnership for policy planning
  • build capacity on both sides
  • visible sector – increase capacity of support bodies
  • interministerial co-ordination to break silos

Growth:

  • open markets through public procurement and partnership
  • consortia
  • social franchising

Finance:

  • combine grants, loans and guarantees
  • combine public–private and ERDF–ESF
  • different funds for different needs

The presentation aroused considerable interest among the Commission representatives there. This is to be followed up with a presentation to high-level Commission staff involved in the Social Business Initiative on 9th July.

Designing financial instruments

Małgorzata Lublinska relayed some of the lessons for fund programmers that come out of SEN’s peer review on finance, held in Warsaw in April:

The €20m global grant scheme in the Czech Republic offers valuable lessons. It suffered from differing criteria and evaluators between the ERDF and ESF, had no mechanism to evaluate business plans, and was not accompanied by a business support structure. The 157 enterprises aided created 827 jobs.

The Polish financial institution TISE administers an €7.5m pilot loan fund for social enterprises funded by the Structural Funds. Its target is to make 380 loans by 2017. So far, 115 loans have been made, and 156 jobs created. Experience reveals various problems with some of the design features:

  • €25,000 is too low a ceiling for the loans
  • the fixed loan period of 5 years is too rigid
  • the requirement that only job creation and investment can be financed is counterproductive – working capital is also needed
  • the ceiling of 50 employees excluded many social enterprises employing disabled people
  • the scheme is not available to start-ups and to enterprises with no legal personality (such as vocational training centres (ZAZs)

For the forthcoming programming period, Poland has carried out a financial gap analysis. This shows that grants should be the main means of support for start-ups, with a flexible loan scheme for established businesses. This will have a single fund manager with regional access points. There are to be additional grants scheme for enterprises with an exceptionally high social impact.

Talking to private wealth

In the finance panel, Paul Cheng of Shared Impact gave an insight into the mindset of philanthropists, who have billions of euros to invest strategically and want to create an impact. “Money is not scarce,” he said. “What’s scarce is well-presented investment opportunities.” You need to know your numbers and have a good business plan of course, but there is also a psychological aspect. What investors buy is your motivation, your ‘why’? So you can’t assume you’re doing great work – you have to tell your human impact story first. Secondly, don’t try to raise money too soon. Ideas are cheap – you need to have done something already. Thirdly, investors look for an investable team – they want to invest in good people.

Analysing the different types of finance, he said “Everything started with a grant, even in the commercial world.” grants are the appropriate type of finance for development capital, which is high-risk, equity or quasi-equity for working capital, unsecured loan for prefunding capital, overdraft for cashflow bridging and secured loans for property. “Don’t take on debt to finance growth!” he said.

He cautioned that impact investment is 10 years old in the US and UK, and will take another 20 years to mature across Europe.

Toby Johnson

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