1.2.1 The social enterprise concept

This doctoral thesis focuses on the examination of the social enterprise concept. A comprehensive explanation of the concept of social enterprises is provided in Sub-section 2.1.2 of Chapter 2. The term social enterprise is particularly used to describe organisations, which are socially conscious and demonstrate more responsible and more inclusive entrepreneurial practices, and that seek to contribute to sustainable development in the face of contemporary societal (social and environmental challenges).1 However, due to the existing variations of social entrepreneurial activity in practice, there is a lack of a uniform understanding of the term ‘social enterprise’ across the EU.2

To make the discussion more concrete of what may constitute a social enterprise, and how this term is differently perceived across the EU, the following examples are provided.

In the Netherlands, for instance, an example of a social enterprise is Taxi Electric, a Dutch limited liability company, which serves paying clients, including many tourists who wish to be transported into and in the city of Amsterdam. The company serves a social purpose, which is manifold, namely: (i) to avoid causing exhaust fumes with black carbon and other chemicals that damage the health of the Amsterdam citizens (in contrast to other taxis which continue to drive on diesel); (ii) to avoid polluting the environment in general, and in particular to reduce carbon-dioxide emissions; and (iii) to employ middle-aged individuals over 55 years old who struggle to find employment or who are long-term unemployed.3

For the people of Slovakia, Café Dobre & Dobré is considered a social enterprise. Café Dobre & Dobré is a cafeteria initiated by a Slovak civic association, which employs solely the homeless and those living on the streets.4

Whereas in Greece an example of a social enterprise is the social cooperative Koinsep Ekati (see also Sub-section 3.2 of Chapter 3), which caters for stray animals and abandoned pets in Athens, which could not be afforded anymore by their masters.

The qualitative case studies provided in Chapter 3 demonstrate various other examples of social enterprises.

A distinctive feature of the examples provided above, is the simultaneous pursuit of non-profit societal (social and environmental) objectives and the pursuit of entrepreneurial activities. A social enterprise by definition has a societal and an economic/commercial/entrepreneurial purpose.5 The term social enterprise as reflected in the examples above suggests that the social enterprise is an enterprise with a ‘problem solving nature’ concerning societal issues.6 The foregoing social enterprises pursue the fulfilment of their social mission in response to societal (social and environmental) challenges, such as how to maintain clean air in the city and avoid environmental degradation, how to address poverty and social exclusion, and how to take care of stray animals in the city, and all in an entrepreneurial manner. In general, social enterprises aspire to contribute to the improvement of society, the preservation of natural capital, the independent role of media in democracies, and the protection of human rights.

However, the term social enterprise has been contemplated and debated by various scholars who have developed definitions and typologies for social enterprises. The scholarly debate concerning the social enterprise concept and definition is illustrated in Sub-section 2.1.2 of Chapter 2. It is demonstrated here that scholars from different disciplines and backgrounds may define the social enterprise in various ways, also in relation to their disciplines’ focus and nationalities.

Indeed, international scholarship has agreed that the term social enterprise applies to a broad range of diverse organisations, which do not share one, but rather various organisational and legal characteristics. In particular, the term social enterprise, as it is used in scholarship, refers to a type of hybrid organisations that combine legal and organisational characteristics, which are present in either traditional for-profit and/or non-for-profit organisations.7 The hybridity of social enterprises is defined by Doherty et al. as organisations that span institutional boundaries, which, consequently, ‘do not fit neatly into the conventional categories of private, public or non-profit organizations’ but rather combine elements from all these types of organisations.8 Liao also notes that the social enterprise combines ‘both for-profit and non-profit legal characteristics in its design to enable the dual pursuit of economic and social interests’.9

The different legal and organisational characteristics of social enterprises across the EU and the different understandings of the social enterprise concept in the EU countries have made the development of a uniform definition for the social enterprise almost unattainable.

Nonetheless, the European Commission (hereafter ‘Commission’) in its 2011 communication on the ‘Social Business Initiative’ (hereafter ‘the SBI Communication of 2011’)10 introduced an operational definition for the social enterprise with an aspiration to be uniformly applied by all countries across the EU. The Commission’s definition is elaborated in detail in Sub-section 2.1.4 of Chapter 2 and it states that a social enterprise is:

With this, the Commission aspired to provide more uniformity in the understanding of the social enterprise concept and to open the discussion for the creation of a favourable environment (both economic and legislative) for social enterprises in the EU. The Commission’s definition was subsequently included in the Council Regulation (EU) 346/2013 of 17 April 2013 on European Social Entrepreneurship Funds (see Sub-section 2.2 of Chapter 2) concerning the ‘social undertaking’.12

The Commission further encourages the creation of a favourable legislative environment for social enterprises in the EU.13 The SBI Communication of 2011 addresses the necessity of the EU countries to design appropriate legal forms for social enterprises.14 Additionally, the Commission indicates that more research must be undertaken on the options to: (i) adopt a European framework for social enterprises (i.e. to create a special European legal framework applicable to all social enterprises in the EU) and/or (ii) to introduce EU legislation establishing a ‘label’ that can be utilised by any social enterprise regardless of the type of legal form used (i.e. all Member States then have to incorporate this label in their national company acts).15 The Commission considers the improvement of the legislative environment for social enterprises within the EU to be important, particularly in view of its considerations concerning regulatory and legislative differences in the legislation of EU countries that hinder the development of social enterprises.16

To that end, the EU has made progress in contemplating the creation of a favourable and enabling EU legal environment for social enterprises.17 In particular, it is exploring the possibility of introducing a common legal framework on social enterprises in the EU, to be based on harmonised national laws pertaining to social enterprises that will be applicable to all social enterprises in the EU.18

Alongside these efforts, in 2017, a study conducted on behalf of the European Parliament’s Committee on Legal Affairs, i.e. the study for a European statute for social and solidarity-based enterprise, provided positive recommendations in a report, concerning the harmonisation of national social enterprise laws through an EU Directive.19 In particular, this study recommended the adoption of an EU legal framework for social enterprises in order to enhance the development of social enterprises in the EU. According to this study, the EU legal framework should introduce a tailor-made legal form for social enterprises, in the form of ‘a legal qualification (or status), that of the “European Social Enterprise” (hereafter ‘ESE’).20 Amongst the legal characteristics with which all ESEs should comply is the involvement of ‘various stakeholders in the management’ and ‘specific governance requirements’ of the social enterprise.21

The foregoing developments are important for the social enterprise activity in the EU. The socio-legal study in this doctoral thesis concerning stakeholder participation in the governance of social enterprises can be regarded as a necessary contribution to the development of law in this area.