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Last week during our networking event in Luxembourg we organised a panel discussion on financing social economy and social enterprises. On the panel were Robert Urbé, President of the Union Luxembourgeoise de l’Economie Sociale et Solidaire, Uli Grabenwarter, Deputy Director – Equity Investments at the European Investment Fund, and Hedda Pahlson-Moller, “business angel” and entrepreneur involved in social impact investing. The panel showed different views on what we mean by social economy and social enterprises, on the role of the state and types of financing.

For one speaker, to qualify that an organisation belongs to the social and solidarity economy, the three main criteria identified by the European Commission in the Social Business Initiative (social or societal objective, reinvestment of most of surpluses in the activities, democratic governance) must be fulfilled. For the other two speakers, what is important is that the organisation has a social purpose, meaning that it intends to achieve a social impact.

According to Robert Urbé, when an organisation is entrusted with the provision of a social service, it fulfills a mission of general interest and therefore it should receive public funding. It could also be the case that undertakings that sell goods and services on the market while employing at the same time disadvantaged persons might be financed through private funding too. The representative of the European Investment Fund counter-argued that public finances are not sustainable, therefore the private sector must become a partner of public authorities. He considers that social impact investing is only one tool and it does not replace philanthropy. Whatever the source of funding, there should always be a focus on efficiency of resources. We need to go beyond the traditional model of service provision. In addition to considering the costs of service delivery, the social value that is created through that service must also be measured.

The “business angel” and entrepreneur Hedda Pahlson-Moller shared the idea that we need to find new models and alternatives. In the social economy and social business, alongside the diversity of organisations, there is also diversity of support structures. This leads to the necessity to promote collaborations between organisations that have never cooperated before (public and private sectors, social enterprises and NGOs) and to develop capacity building in order for organisations to be able to benefit from the new options in financing and service delivery.

At Social Platform, we can agree that in the social economy and among social businesses, there is a big variety among the organisations that can fulfill these main criteria. As a consequence, the needs in access to finance can be very different. However, there are two essential points in this debate to which I want to draw attention.

The first one is about the role of public authorities. Private funding can complement public budgets especially in those countries hit hardest by the economic crisis. However, we should not forget that public authorities remain accountable for the provision of services even when they decide not to deliver them directly. They should bear responsibility for setting strategic social service policy objectives through dialogue with stakeholders. Finally, they also remain responsible for monitoring and evaluating service delivery, by involving users too.  They also need to ensure that services are available throughout the whole territory of a country, including rural and remote regions and for target groups with multiple and complex social needs. When private funders are involved, public authorities must ensure that donors and investors act in the general interest and that private financing is subject to high transparency requirements.

The second point is about the nature of social economy and social enterprises. We consider that all three criteria specified in the Social Business Initiative should be present, whatever the legal form of the organisation. Otherwise, it may be possible to consider an ordinary business engaging in some corporate social responsibility policy as being part of the social economy. Both are positive, but they are two different things. Ordinary businesses deliver social and health services, too. However, the needs in access to finance are not the same as a social economy organisation delivering the same services. Different needs in access to finance require different types of financing and different support structures.

Find out more about our position on financing social services here.