Study on Promoting the Role of Social Enterprises in CEE and the CIS (Phase I)

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1 Study on Promoting the Role of Social Enterprises in CEE and the CIS (Phase I) Initial Overview Study Submitted to the UNDP -BRC on April 2006

2 Table of Contents Introduction...4 Part 1. Conceptual Background...7 Part 2. Social Enterprise in EU Historical Overview Social Enterprise Fields of Activity Social Enterprise and Employment C reation Legal Evolution Part 3. Social Enterprise in Target Countries Overview of the Third Sector in the Czech Republic, Estonia, Lithua nia, Poland, Slovenia, Bulgaria, Macedonia, Serbia, Belarus, Kazakhstan, Russia and Ukraine a. The Third Sector in the Pre -Soviet time b. The Third Sector during Soviet Time c. The Impact of Early Transition Reforms on the Third Sector d. Political and Legal Recognition of the Third Sector in Target Countries e. Size of the Third Sector in Target Countries f. Description of the Structure and Dynamics of Unemployment in the Region The Integration of Disadvantaged Workers: A Legacy of Commun ism Review of the Social Enterprise Phenomenon in Target Countries a. Permissibility of Economic Activity for Associations, Foundations, and other Not-for-Profit Organizations in Target Countr ies b. Specific Legal Frameworks for Social Enterprises: the Cases of the Czech Republic, Lithuania, Poland and Slovenia c. Functions and Effects displayed by Social Enterpri ses in Transforming the Economies and Societies of Target Countries...54

3 3.2.d. The Impact of Foreign Donors and the Emergence of Domestic Donors...57 Part 4. Recommendations on How to Support and Facilitate Social Enterpr ises Preliminary Conclusions EMES Proposed Social Enterprise Definition for Target Countries Attributes of an Optimal Policy and Legal Framework for Social Enterprise Development Recommendations for UNDP Intervention Recommendations for National Governments...77 Part 5. References...78 Part 6. Appendices 6.1. National Overview Forms 6.1.a. Czech Republic 6.1.b. Estonia 6.1.c. Lithuania 6.1.d. Poland 6.1.e. Slovenia 6.1.f. Bulgaria 6.1.g. Macedonia 6.1.h. Serbia 6.1.i. Belarus 6.1.j. Kazakhstan 6.1.k. Russia 6.1.l. Ukraine 6.2. Methodological Note 6.3. EMES Definition of Social Enterprise for Target Countries 6.4. Common Questionnaire Model 6.5. Country Analysis Model (Poland) 6.6. Summary of Boxes, Tables and Figures 6.7. Glossary 3

4 Introduction This study explores the social enterprise phenomenon 1 in Central Eastern Euro pe (CEE) and in the Commonwealth of Independent States (CIS). In particular, the research focuses on the following countries: the Czech Republic, Estonia, Lithuania, Poland and Slovenia (new member states); Bulgaria, Macedonia and Serbia (the Balkans); Belarus, Kazakhstan, Russia and Ukraine (former Soviet Union). The general objective is to identify the development paths of social enterprises in the target countries with special regard to: - the main bottlenecks that prevent their expansion in contexts sever ely affected by social and economic concerns, including high levels of unemployment and collapsing welfare systems, as well as the positive enabling factors for their development; - the roles displayed by social enterprises in transition processes. More specifically, this preliminary study attempts to provide some policy recommendations for the creation of an environment conducive to the development of social enterprises. The interest in social enterprises stems from the societal relevance of these organizations in EU-15. The valuable contribution that social enterprises can provide from a social and economic point of view is recognized in the old member states, at both the national and EU levels. Their added value is self -evident in economic terms, as: - they supply especially public and merit goods 2 ; and - they promote the interests of disadvantaged people and groups in transition processes, as confirmed by the history of EU economies. 1 The concept of the social enterprise will be thoroughly analyzed in the next section. Briefly, social enterprises may be defined as private and autonomous organizations providing goods or services with an explicit aim to benefit the community, owned or managed by a group of citizens and in which the material interest of capital investors is subject to limits. For an ex planation of the various definitions used to refer to other than investor -owned organizations and public agencies see the Glossary (Appendix 6.7) or Part 1 of this report. 2 Public goods and merit goods are goods that would either not be provided at all (t hey are nonexcludable and non -rivalrous) or would not be provided in sufficient quantity by the market (for instance education). For a thorough explanation on the various types of goods see Stiglitz, J. E. (2000), Economics of the Public Sector, 3rd ed., New York: W. W. Norton. 4

5 They display both roles through the exploitation of resources which would n ot otherwise be allocated to meet welfare and development needs. Moreover, they contribute to the creation of new employment through the integration of different kinds of disadvantaged workers. Hence, they contribute substantially to the enhancement of so cial cohesion and to a more equal and balanced economic development at the local level. The study conducted shows that a recognition of the real potential of social enterprises is still lacking, albeit to varying degrees, in all the countries of the regio n and especially in the non -Baltic former Soviet Union and Balkan countries. A lack of political recognition prevails and only a marginal role is acknowledged to social enterprises. This approach stems from the prevalence of a traditional political and cultural approach that assigns a merely advocacy and re -distributive role to other than investor-owned (for-profit enterprises) and public agencies (state), 3 hence, the attention paid especially to participatory aspects and the general mistrust towards econom ic activities carried out by Third Sector (TS) organizations. Overall, economic activities carried out by TS organizations appear to be marginal compared to Western European countries. When the carrying out of TS economic activities is permitted by law, th e general trend is that of admitting them as long as they remain marginal and residual, as well as circumscribing them strictly to sustain the statutory goals set. In those countries where the direct engagement of TS organizations in economic activities is not allowed (Belarus, Bulgaria, Macedonia and, to a certain extent, Serbia and Ukraine), the prevailing trend is nonetheless towards the creation of commercial enterprises for managing and organizing economic activities. Both trends presuppose the ascript ion of an integrative role to the TS, additional to those covered by the State and the market. Interestingly, an exception to these prevailing trends is provided by work -integration enterprises, i.e. the co -operatives for the disabled which have been inhe rited from the communist time. The carrying out of economic activities is, in this case, tolerated. It is also noteworthy that productive activities in such cases tend to be aimed at creating niche markets, rather than being addressed to the open market. The report is organized as follows: the first section briefly focuses on the conceptual background, with a view to the approaches and concepts so far developed to define TS 3 Other than investor -owned enterprises and public agencies will be hence forth defined as Third Sector (TS) organizations. 5

6 organizations. The next section investigates the emergence of the social enterprise phenomenon in Western Europe, with special regard to the traditional and new fields of activity of social enterprises, as well as to social enterprise legal frameworks. Section three covers the social enterprise phenomenon in the countries under consideration. After providing an overview of the history of the TS in these countries, attention is drawn on the modernisation processes in the market and in civil society, the impact of early reforms on TS re -emergence and on the sector s political and legal recognition, with a view also to its dimensional aspects. Following the exploration of experiences about enterprises for integrating disadvantaged workers, special attention is paid to the extent to which TS organizations are allowed, in the various legal sys tems, to carry out economic activity. Next, an overview of the specific legal frameworks for social enterprises that have been so far enacted in a few countries including Poland, Czech Republic, Slovenia, and Lithuania is provided. At this point, atten tion is drawn to the functions played by social enterprises in transforming the economies and societies of target countries and to the impact of foreign donors. Section four is focused on the recommendations for both UNDP and national governments intervention on how to support and facilitate social enterprises. The last section includes the country overviews in an effort to synthesise the main findings of the exploratory phase of this study. 6

7 PART 1. Conceptual Background The wide spectrum of socio -economic institutions other than investor -owned organizations (the for -profit sector) and public agencies (the state) has been described in various ways, with the definition used and specific features emphasized depending on the specific traditions and nati onal contexts, and specific features emphasized. It may be said that two theoretical approaches to the TS have gradually spread internationally, accompanied by statistical work aiming to quantify its economic importance - these are the non-profit approach and the social economy approach. The non-profit approach On the one hand, the non -profit school approaches this sector via the statutory ban on the distribution of profits in these organizations. This non -profit-sector approach has been developing s ince the second part of the 1970s, originally to address the US situation. The term voluntary sector, mainly used in the UK, can also be considered to fit into that school. Non -profit organizations (NPOs) fulfil a broad spectrum of societal and political tasks, among which lobbying and interest representation; in some cases, redistribution; and in some cases as well, service provision. This definition excludes co-operatives and mutual aid societies on the grounds that they can generally act in favour of their members and distribute some of their profits to their members and it puts a great emphasis on foundations. The social economy approach On the other hand, the concept of the social economy, that brings together co - operatives, mutual societies a nd associations, with little interest to foundations, stresses the specificity of the mission of these organizations, namely their aim to benefit either their members or a larger collectivity, rather than to generate profits for investors. This approach thus includes the non-profit organizational form, but it highlights the democratic character of the decision -making process within the organizations and the prevalence of people and labor over capital in the distribution of incomes. 7

8 The Third Sector The concept of Third Sector is used as a synonym to the non -profit sector and also to the social economy, especially in European scientific literature. The use of this term allows to overcome the differences between the many national models. This report will mainly rely on this definition to refer to all the entities that sit between the public and private sectors and follow specific social goals, while partially bound to the non - distribution constraint. The definition hereby used includes co -operative organizations. Box 1. Main Legal Frameworks Covered by Third Sector Organizations Voluntary organizations, Non-profits or Associations: include both advocacy organizations and other forms of free association of persons for the production of goods and services where making a profit is not the essential purpose. Associations can be either general-interest (the class of beneficiaries differs from the one of promoters) or mutual-interest organizations (solidarity within a class is decisive). These organizations have a variety of names (associations, non-profit organizations, voluntary organizations, non-governmental organizations, charitable institutions etc.) in the different countries. Co-operatives which have historically developed in those economic sectors in which capitalist activity remained weak. Cooperatives are associations of persons united voluntarily to meet their common economic, social and cultural needs through a jointlyowned and democratically-controlled enterprise. Mutual aid societies, which were launched in the early nineteenth century to handle the problems of work disability, sickness and old age on the basis of solidarity principles by organizing the members of a profession, branch or locality in a group. Foundations and trusts, which are legal entities created to accomplish specific goals for the benefit of a specific group of people or of community at large. They mainly developed in Anglo-Saxon countries and they are above all committed to patronize social, religious, educational activities and more generally general-interest activities according to the founder s will. The main classification is between operating foundations and grant-making foundations. The concept of social enterprise The concept of social enterprise does not seek to suppl ant existing concepts of the TS such as the concept of the social economy or that of the non -profit sector. Rather, it is intended to bridge these two concepts, by shedding light, within these two spheres, on features in the TS that are currently becomi ng more prevalent: entrepreneurial dynamics focused on social aims. Also legal forms typically for -profit can be considered as social enterprises, when showing specific characteristics, including the profit - distribution constraint. 8

9 Figure 1. Social Enterprises, at the Crossroads of the Social Economy and the Non-Profit Sectors For-profit forms SOCIAL ECONOMY Social Enterprise NON-PROFIT Workers co-ops Productionoriented NPOs Foundations Users co-ops Associations On the one hand, compared to traditional associations and operating foundations, social enterprises place a higher value on economic risk -taking related to an ongoing productive activity 4 (in the world of non -profit organizations, production -oriented associations are certainly closer to social enterprises than are advocacy organizations and grant-making foundations). On the other hand, in contrast to many traditional c o- operatives, social enterprises may be seen as more oriented to the whole community and as putting more emphasis on the dimension of general interest. As a consequence, social enterprises are said to combine different types of stakeholders in their member ship, whereas traditional co-operatives and often associations have generally been set up as single-stakeholder organizations. These contrasting elements, however, should not be overestimated: while social enterprises are in some cases new organizations, w hich may be regarded as constituting a new sub -division of the TS, in other cases, they result from evolutionary processes at work in established experiences within the TS. In other words, it can be said that the generic term 'social enterprise' does not r epresent a conceptual break with existing institutions of the TS but, rather, a new dynamic within it 4 That is to say the production and sale of goods and services. 9

10 encompassing both newly-created organizations and older ones which have undergone an evolution. Whether these social enterprises choose a co -operative legal form, an associative legal form or other legal forms often depends primarily on the legal mechanisms provided by national legislations. Box 2. Social Enterprises Social enterprises may be defined as private and autonomous organizations providing goods or services with an explicit aim to benefit the community, owned or managed by a group of citizens and in which the material interest of capital investors is subject to limits. Social enterprises place a high value on their autonomy and on economic risk-taking related to ongoing socio-economic activity. The EMES criteria of social enterprise Since 1996, the EMES European Research Network has devoted itself to the definition of a set of common criteria to identify organisations likely to be called "soc ial enterprises" in each of the fifteen countries that then formed the European Union. A set of criteria both economic and social have been identified to describe an ideal type of social enterprise, i.e. a theoretical definition which does not necess arily correspond to concrete organizations but allows analyzing the latter. A working definition was built up in this way and it was to be considered as a "working hypothesis", not necessarily encompassing the whole reality of social enterprises. However, as it turned out, this initial set of nine indicators proved to be fairly robust and reliable. To reflect the economic and entrepreneurial dimensions of these initiatives, four criteria have been put forward: 1) A continuous activity producing goods and/o r selling services Social enterprises, unlike some traditional non -profit organisations, do not normally have advocacy activities or the redistribution of financial flows (as, for example, grant - giving foundations) as their major activity, but they are dir ectly involved in the production of goods or the provision of services to people on a continuous basis. The productive activity thus represents the reason, or one of the main reasons, for the existence of social enterprises. 2) A high degree of autonomy Social enterprises are created by a group of people on the basis of an autonomous project and they are governed by these people. They may depend on public subsidies 10

11 but they are not managed, directly or indirectly, by public authorities or other organisations (federations, private firms, etc.). They have both the right to take up their own position ("voice") as well as to terminate their activity ("exit"). 3) A significant level of economic risk Those who establish a social enterprise assume totally or partly the risk of the initiative. Unlike most public institutions, their financial viability depends on the efforts of their members and workers to secure adequate resources. 4) A minimum amount of paid work As in the case of most traditional non -profit organisations, social enterprises may also combine monetary and non -monetary resources, voluntary and paid workers. However, the activity carried out in social enterprises requires a minimum level of paid workers. To encapsulate the social dimensions of the init iative, five criteria have been proposed: 5) An explicit aim to benefit the community One of the principal aims of social enterprises is to serve the community or a specific group of people. In the same perspective, a feature of social enterprises is their desire to promote a sense of social responsibility at local level. 6) An initiative launched by a group of citizens Social enterprises are the result of collective dynamics involving people belonging to a community or to a group that shares a well -defined need or aim; this collective dimension must be maintained over time in one way or another, even though the importance of leadership - often embodied by an individual or a small group of leaders must not be neglected. 7) A decision-making power not based on capital ownership This generally means the principle of "one member, one vote" or at least a decision - making process in which voting power is not distributed according to capital shares on the governing body which has the ultimate decision -making rights. Moreover, although the owners of the capital are important, the decision -making rights are generally shared with the other stakeholders. 11

12 8) A participatory nature, which involves the various parties affected by the activity Representation and participat ion of users or customers, stakeholder influence on decision-making and a participative management are often important characteristics of social enterprises. In many cases, one of the aims of social enterprises is to further democracy at local level throug h economic activity. 9) A limited profit distribution Social enterprises not only include organisations that are characterised by a total non-distribution constraint, but also organisations which - like co-operatives in some countries - may distribute profits, but only to a limited extent, thus avoiding a profit - maximising behaviour. As already stressed, rather than constituting prescriptive criteria, the indicators listed above describe a virtual social enterprise that enables researchers to position themselves within the 'galaxy' of social enterprises. Without any normative perspective, they constitute a tool, somewhat analogous to a compass, which can help the researchers locate the position of certain entities relative to one another, and which may en able researchers to establish the boundaries of the set of organizations that they consider as social enterprises. 12

13 Table 1. Main Differences between Traditional Co -operatives, Associations, Foundations and Social Enterprises Organizational form GOAL* (self-help vs. general interest goal) Activities Traditional Co-operative (Consumer, producer, worker, and credit coops) To promote the interests of members (consumers; savers; workers; etc.). Primarily economic activities (production/sale of goods and services). Traditional Association/Foundation (NGOs, voluntary organizations, self-help groups that do not carry out economic activities in a stable and continuous way) To promote the interests of members or of the community a t large. Primarily non-economic activities (marginal economic activities where admitted by law) and grant-making activities. Social Enterprise (Associations, co-operatives and new legal forms specifically recognized as social enterprises) Explicit social aim. Primarily economic activiti es (production of social services; work integration and general interest services). Formatted Formatted Formatted Beneficiaries (members vs. community at large) Members. Narrow solidarity. Both members and users or the community at large. Normally broad solidarity. Disadvantaged groups; disadvantaged workers; community at large. Broad solidarity. Membership (single- vs. multistakeholder) Workers employed Homogeneous stakeholders (consumers, workers, etc.). Both homogeneous / heterogeneous stakeholders. Yes Not necessarily; in many cases only voluntary work employed. Self-interest, self-help. Member-interest/Solidarity. Solidarity. Multi-stakeholder membership (beneficiaries, workers, donors, volunteers, local authorities). Normally, minimum amount of paid workers. Internal propelling force Profit distribution Partially admitted** Non-distribution constraint. Non-distribution constraint. * Objects laid down in the association agreement or by-laws. ** Distribution of patronage refund in proportion to the business done by the member with the co-operative enterprise and limited dividend on paid-up share capital. 13

14 PART 2. Social Enterprise in EU Historical Overview TS organizations first developed in the middle of the nineteenth century all over Europe. Historically, agri cultural co-operatives, credit unions and saving banks were set up in almost every European locality, while other types of co -operatives were consolidated in specific countries: consumers co -operatives developed in the United Kingdom, and housing co -operatives in Germany, the United Kingdom and Sweden; in countries such as France and Italy, which were characterised by a slower industrialisation process, workers production co -operatives took root. 5 The first cooperative experiences were a spontaneous defe nsive response on the part of the workers to the harsh conditions dictated by the industrial revolution. 6 By promoting the interests of their members, co-operatives contributed to improving the quality of life of these disadvantaged groups. Charities and o ther types of NPOs spread in the health and social service sectors. Mutual societies were set up by workers to provide common insurance and assistance. As a result of the development of nation and welfare states, the fight against poverty and the promotion of the weakest segments of the population, the public interest and the re-distributive functions, alongside all the social and health services, were increasingly taken on by the central and local government. The social and economic function of Third Sector organizations was consequently, gradually reduced. 7 The re-emergence of the economic and social commitment of TS organizations was stimulated by the crisis of the traditional welfare state. There is a generalized coincidence between the emergence of the first social enterprises at the end of the 1970s, and the decline in the rates of economic growth and the rise of unemployment that occurred in the same decade, and both the latter factors, were at the origins of the 5 CIRIEC, International Centre of Research a nd Information on the Public and Co -operative Economy, The Enterprises and Organizations of the Third System: A strategic challenge for employment, Final Report 1999, Pilot Action, Third System and Employment, DG V of the European Commission. 6 José Luis Monzón Campos, Contributions of the Social Economy to the General Interest, in Structural Changes and General Interest: Which paradigms for the public, social and co -operative economy?, in Annals of Public and Co -operative Economics, Vol. 68, N. 3, Septemb er Carlo Borzaga and Giulia Galera, Social Economy in Transition Economies: Realities and Perspectives, Discussion Paper, First meeting of the Scientific Group on Social Economy and Social Innovation, OECD Centre for Local Development, Trento, Marc h 17,

15 crisis in western European welfare sys tems. 8 TS organizations became again increasingly involved in the allocation of resources through the production of general interest services, albeit by implementing some organizational innovations, including the transformation of the two main organization al models: associations and co -operatives. In some countries, co-operatives have gradually started to move beyond their traditional mutualistic goals of serving members 9, and embrace general -interest goals, that is to say, not simply the promotion of the i nterests of a specific category of stakeholders, but promoting the interests of the community as a whole, through the production of general - interest services. Meanwhile, voluntary organizations or associations have strengthened their engagement in entrepre neurial activities, arising from their increasing involvement in the production of services. As a consequence, traditional co -operative and associative models have started to come together, with associations becoming more entrepreneurial and co-operatives less member-oriented Social Enterprise Fields of Activity Social enterprises appear to be engaged in very different social activities. Traditionally, the two main fields of activity are services provision and work integration. Furthermore, recent d evelopment trends at the EU level show the expansion of social enterprises in new fields of interest for the community (community services). This is also confirmed by the recent legal evolution in Italy and in the United Kingdom, which has acknowledged the widening of social enterprise commitment. Generally speaking, social enterprises are likely to work in any field of activity, with any profile of workers. However, for the sake of clarity, they may be classified as follows: 1. Social enterprises providing co mmunity services. A significant number of social enterprises have been established to provide new services or to respond to groups of people with needs not recognized by public authorities or excluded from public benefits. Many of the activities were indep endently started by groups of citizens, with little or no public support; however, since the services provided were acknowledged to be of public interest, after some years the state or the local authorities often decided to finance the activity of several of those 8 Carlo Borzaga and Jacques Defourny, The Emergence of Social Enterprise, London: Routledge That is to say, single -stakeholder co -operatives, such as consumer co -operatives, agricultural co - operatives and producer co -operatives. 15

16 social enterprises, according to the level of disadvantage dealt with. 10 In some other cases, their development was prompted by public policies. Nevertheless, the resulting dependence on public funds does not seem to have eliminated their autonomy. Indeed, there are many social enterprises with mixed resource bases they are funded both by public authorities and by fees directly paid by the users or combining public funds with resources coming from donations and volunteers. Moreover, a growing numb er of social enterprises secure the necessary public resources for providing a service by participating in call for tenders, thus competing with other social enterprises, TS organizations and for - profit enterprises. Noteworthy is that recently social ente rprises have expanded in new fields of interest for the community, such as educational, cultural and environmental fields. Austria France Denmark United Kingdom Sweden Italy Portugal Box 3. Social Enterprises Supplying Social Services Children s Groups: childcare services supported by a high level of par ental involvement. Parent-led childcare organizations: childcare services partly led and managed by parents. These organizations formed a national network (ACCEP). Social residences: residential institutions designed as an alternative to conventional institutions for children and adolescents with difficulties. They focus on training and care services. Home Care Co-ops: co-ops employing their members, mainly women with dependents at home, on a part -time basis. Co-operative local development agencies organized at the national level (FKU); their objective is to rehabilitate and reintegrate individuals with a mental handicap. Type A social co-operatives: co-operatives active in the fields of health, training or personal services, and controlled by the legal framework adopted by Italy's national Parliament in Co-operatives for the training and rehabilitation of handicapped children; they merged into a national federation in Work integration social enterprises (WISEs), whose main objective is the work integration of people experiencing serious difficulties in the labor market or at risk of labor as well as social exclusion. There are two main definitions of disadvantaged workers. The first one is more specific and depends upon the specific socio-economic context it refers to. The second one is more general and 10 Subsidized according to the level of disadvantage. 16

17 it refers to any person who belongs to a category which has difficulty in entering the labor market without assistance. 11 WISEs are to be found in all the EU -15. The four main modes of integration used by EU-15 WISEs 12 are: 2.a. Transitional occupation The aim is to give the target group work experience (transitional employment) or on-the-job training, with a view to achieving the integration of these disadvantaged workers in the open labor market. Thus, for example, through productive work and qualifying theoretical training adapted to individual needs, on -the-job training enterprises in Belgium or integration enterprises in Port ugal offer their trainees the possibility of improving their personal, social and professional competencies, i.e. increasing their employability in the labor market. 2.b. Creation of permanent self -financed jobs These WISEs aim to create jobs which are s table and economically sustainable in the medium term for people disadvantaged in the labor market. In the initial stage, public subsidies are granted to make up for the lack of productivity of the target group. These subsidies are often temporary, and the y taper off until the workers become competitive in the mainstream labor market. These WISEs can be illustrated by the example of long -term work integration enterprises (France), which offer unemployed workers a long -term job in order to allow them to acquire social and professional autonomy and to thrive as "economic actors" within a participative management structure. 2.c. Professional integration with permanent subsidies For the most disadvantaged groups, for whom integration in the open labor market would be difficult in the medium term, stable jobs, permanently subsidised by public authorities, are offered, including some in enterprises that are "sheltered" from the open market. These WISEs employ mainly disabled workers, but also people with a severe "social handicap". Thanks to significant public subsidies, sheltered workshops (Portugal, Sweden and Ireland) and 11 See entry disadvantaged worker in the Glossary (Appendix 6.7). 12 This classification is based on CES, HIVA and CERISIS (2001). 17

18 adapted work enterprises (Belgium) can offer various productive activities to physically or mentally disabled people. 2.d. Socialisation through a productive activity In this last category, the aim is not professional integration in the open labor market (even though this possibility is not excluded) but rather the (re)socialisation of the target groups through social contact, respect for rul es, a more "structured" lifestyle, etc. The activity is thus "semi -formal" in the sense that it is not regulated by a real legal status or work contract. These WISEs mainly work with people with serious social problems (alcoholics, drug - addicts, former convicts etc.) and people with a severe physical or mental handicap. Two types of WISE are found in this category. Firstly, centres for adaptation to working life in France, whose aim is not to ensure a defined level of productivity but first of all to "re -socialise through work" people with psychological and social problems. Similarly, WISEs with recycling activities in Belgium recruit people with serious social problems to work salvaging and recycling waste, with the aim of giving them back a certain level of social and professional autonomy. Fin ally, occupational centres in Spain offer occupational therapy as well as adapted social and personal services to people with a serious handicap who thus cannot find work in the open labor market. 13 Whereas the social services and work integration classific ation is sharp in most Belgium Germany Italy Luxemburg Spain Box 4. Work Integration Social Enterprises (WISEs) On-the-job-training enterprises and work integration enterprises in the Southern part of the country, integration enterprises and social workshops in the Northern part of the country. Work-integration enterprises, which are supported by the various Regions, are highly market-oriented and focus on long-term employment. Market-oriented "social enterprises" receiving temporary public assistance. Their goal is to create jobs and promote economic development while aiming at the social and occupational integration of the long-term unemployed. The jobs are created either in existing private enterprises or in new enterprises (in their start-up phase). Type B social co-operatives: co-operatives active in the field of work -integration of individuals in precarious situations (1991 legal framework). Associations (and sometimes co-operatives) providing their members wi th integration through work and economic activities in various fields, including environment, agriculture, construction, recycling of waste, etc.; most are pilot projects subsidised by the State. Work integration enterprises for the handicapped or i ndividuals excluded from the conventional labor market. In both cases, the current trend is to provide access to transitional employment designed to ultimately integrate target groups into the conventional labor market, rather than providing them with long -term "protected" jobs. 18

19 of the EU-15 (such as Italy), in a number of countries social enterprises can operate simultaneously in both fields - social service provision and work integration. For example, in France the régies de quartier provide social services to the local community and integrate low -qualified workers. It is noteworthy that the overlapping of both activities reduces the types of services that can be supplied. Box 5. Belgium: INTRAFOR - WISE INTRAFOR is a Belgian WISE born after a reflection concerning the young persons coming out from another WISE active in the forestry and environmental sector. The director of the second WISE together with two other entrepreneurs decided to create a new structure offering jobs in the forestry sector for the persons who left the organization without still being able to find a job in the "normal" labour market. Being already an entrepreneur, he had the clients necessary for this new enterprise, while his participation in a federation and the contacts of this federation with the Public Bodies provided the required knowledge to launch the new initiative, which they named INTRAFOR. INTRAFOR emerged within the framework of the Belgian Entreprise d Insertion (integration enterprise) legal status, linked to the active labour market policies. The objective of the organisation is the professional integration of persons disadvantaged in relation to the labour market. They try also to have working practices that respect the environment. The production activities are linked to the forestry sector: parks and gardens creation, wood skidding, trees felling, etc. The integration activity has been, until today, the creation of permanent new jobs. But they are planning, for the close future, to adopt more an integration activity of transitional jobs, in order to permit to new disadvantaged workers to find also a chance inside INTRAFOR. Regarding the economic sector, the forestry sector lived a crisis when INTRAFOR began its activity (storm problems in France and a large quantity of wood in the market) which caused the salary costs to increase, while a progressive mechanisation of the sector was beginning to take place. Lacking enough market capacity in order to mechanise - and not being among the organisation s objectives - INTRAFOR lost some competitiveness, which resulted in exclusion from some markets. An additional change related to the market where it operates is the growing level of competition and, particularly, a growing unfair competition due to the increase of the work on the black market. Concerning the socio-political activities, INTRAFOR has always been a member of the federation CAIPS ("Concertation des Ateliers d'insertion Professionnelle et Sociale"). This network, close to a political party in office, is constituted only by Entreprises d Insertion and aims at the defence of this legal status. Through the CAIPS federation, they conduct a political lobbying task, in order to make accept and recognise their position and their initiatives. In practice, they participate in the debates about the new laws that concern the sector. As a result of this investment, there is also the increased visibility of the initiative and the exchanges it permits. Nevertheless, INTRAFOR faces currently some financial difficulties after several years of deficit. According to the managing director, they will thus shortly have to capitalise again the company, otherwise they will be sold. They are thus facing questions today about this problem. One solution would be, according to them, the one of hiring some more qualified workers. 13 Catherine Davister, Jacques Defourny, Olivier Gregoire (2004), Work Integration Social Enterprises in the European Union: An Overview of Existing Models, EMES Working Papers series, N 04/04. 19

20 Box 6. Italy: Social Co-operative L Incontro L Incontro is an A-type social cooperative that takes care of elderly people and people with mental disabilities. It currently employs 150 worker-members and 200 volunteers, including art masters and interns. From an organizational point of view, the cooperative is subdivided into two areas: elderly and mental disabilities. The first area manages directly six units of the rest home for elderly people Domenico Sartor and supports the management of assistancial services of the municipality of Castelfranco Veneto. The area mental disabilities manages four daily occupational centres; a job centres, three sheltered apartments, a therapeutical community and a diurnal centre. In addition, the cooperative coordinates the work of nine work integration cooperatives that join the consorzio In Concerto. L Incontro was founded in 1991 by a group of people that had no employment opportunities in traditional enterprises. The cooperative s first activity was the management of the department of two rest homes for elderly people. The municipality and local services recognized the added value of the initiative promoted and decided to contribute to the project and cooperate with the cooperative. The firs occupational centres were thus established and a number of work integration social cooperatives. In the second phase, L Incontro decided to strenghten its production part and divide the social soul of the cooperative from the productive one, giving ground to L Incontro Industy, work integration social cooperative. As a result, L Incontro currently operates in two separate segments: on the one hand, mental disabilities and, on the other hand, elderly people, albeit appealing to the same values and alternative cultural approach that relies on local resources of the community. Relevant factors were the availability of young retired people of the community, who agreed to follow the production processes, and the testing of training programmes for psychologists and educators that work now with the integrated people inside the production cycle Social Enterprise and Employment Creation Social enterprises contribute to national growth and income and, consequently, to jobs generation in various ways. In general, social enterprises develop new activities and contribute to create new employment in the sectors wherein they specifically operate, that is to say in the social and community care sectors that show a high employment potential owing to their labor -intensiveness. Moreover, they allow to employ unoccupied workers, for instance women with children, who seek flexible jobs such as part-time jobs. Some social enterprises are specifically aimed at integrating into work and at training disadvantaged workers. This goal is pursued by work integration social enterprises that are specifically designed to employ workers with minimal possibilities of finding a job in traditional enterprises. They are autonomous economic entities whose main objective is explicitly the integration within the WISE itself or in mainstream enterprises of people experiencing serious difficulties in the labor market. T his integration is achieved through productive activity and tailored support, or through training to develop the qualifications of the workers. 20

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