Opinion of the Economic and Social Committee on 'The Social Economy and the Single Market'
Date: 2000-03-02
Institutions: European Economic and Social Committee
Subjects: Structural Funds, cooperation policy, single market, social economy, type of business

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Opinion of the Economic and Social Committee on ‘The Social Economy and the Single Market’

(2000/C 117/11)

On 25 February 1999, the Economic and Social Committee, acting under the third paragraph of Rule 23
of its Rules of Procedure, decided to draw up an Opinion on ‘The Social Economy and the Single Market’.

The Section for the Single Market, Production and Consumption, which was responsible for preparing
the Committee’s work on the subject, adopted its opinion on 15 February 2000. The rapporteur was
Mr Olsson.

At its 370th plenary session on 1 and 2 March 2000 (meeting of 2 March), the Economic and Social
Committee adopted the following opinion by 105 votes in favour, 3 against and 16 abstentions.

1.

Introduction

1.1.
The purpose of this own-initiative opinion is to focus
attention on the social economy at European level, and to put
forward practical proposals for the EU institutions, the Member
in order to help it boost its
States and the sector itself,
contribution to social welfare, employment,
sustainable
growth and social cohesion.

1.2.
The Committee has adopted several opinions on the
social economy (1). As early as 1986, the Committee published
a comprehensive survey of cooperatives, associations and
mutual societies, which subsequently came to be regarded as a
European reference work (2).

2. The social economy’s role in society

2.1.
In preparing the Opinion a Hearing was organised in
Brussels on 12 October 1999 in which the role of the social
economy in society was highlighted.

2.2.
Social economy activities start as a means of satisfying
the needs of members and users which have been left either
ignored or inadequately fulfilled by the market or the State.
The social economy gives people the opportunity to organize
their production and consumption patterns through indepen-
dent, democratic forms of cooperation. By targeting people’s
outstanding or inadequately met needs, the social economy
can come up with innovative, forward-looking solutions.

(1) Business in the ‘Economie Sociale’ sector. OJ C 332, 31.12.1990,
p. 81; Opinion on SEC(89) 2187, Multi-annual programme
(1994-96) of work for cooperatives, mutual societies, associations
and foundations in the Community, OJ C 388, 31.12.1994, p. 22;
Opinion on COM(93) 650.

(2) The Cooperative, mutual and non-profit sector and its organis-

ations in the European Community. Published by the ESC.

The social economy is very diverse and can be found
2.3.
in all sectors of economic life. Social economy organisations
are active in a competitive market including both private and
public players. Many of
them, however, provide welfare
services, social protection, and labour market initiatives, often
acting in conjunction with the public sector.

2.4.
The welfare State is confronted with challenges. Unem-
ployment in Europe remains high and social exclusion is on
the increase. Social protection systems are being weakened by
continued low growth and an ageing population. Public sector
responsibility for some welfare functions is declining. In any
event, the public sector is unable to keep up with growth in
demand, and there is a shift towards privately organized
provision and financing, while preserving the fundamental
elements of social justice on which such functions were built.

2.5.
The social economy is, in some countries, an important
provider of services in healthcare, social housing, community
care, environment, efficient use of energy resources, education
and training, and it also sometimes arranges funding for these
services. It is thus an element of the European welfare model
and plays a role in enabling it
to reach its objectives.
Concrete support to develop the sector should therefore aim
to guarantee high quality services to European citizens.

The social economy is present at all

levels, both
2.6.
national and European, but its roots are local. It plays an
important role in achieving social cohesion. The local social
economy works alongside the public sector to provide society’s
infrastructure. At the same time, social economy firms often
play an important role in rural and urban development.
Notwithstanding its local
the social economy is
sometimes organised in big units with national or even
transnational activities. By forging partnerships with the public
sector, private enterprise and trades unions, the social economy
can contribute to the strengthening of local business competi-
tiveness in a global environment. For example, appropriate

impact,

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partnerships between social economy organisations working
in the area of occupational integration and private enterprise
can offer a development model based on integration into
working life by means of the economic system, to combat
social exclusion and meet
the
workforce.

the outstanding needs of

2.7.
The social economy can provide a blueprint for greater
competitiveness, founded on cooperation between people and
enterprises, and on its ability to satisfy people’s needs and
develop human capital. Since it focuses on people-centred
relations, the social economy will be stimulated by the shift
towards a service society and new forms of work.

2.8.
The social economy can tap emerging sources of
employment, particularly in the sectors of social services,
culture, leisure, education and environment, not only through
labour intensive production but also through the use of new
technology. It can thereby also make a contribution to the
social integration of vulnerable groups.

3. The ‘social economy’ concept

Even if not labelled as ‘social economy’ in all Member
3.1.
States, comparable activities sharing the same features exist
everywhere. They have developed over the centuries in differ-
ent organizational forms and under different names according
to the national economic, social and legal circumstances. These
differences explain the absence of and the difficulties in finding
a common definition at EU level.

3.2.
The expression ‘social economy’ is, however, gaining
ground, and is used, inter alia in the Employment Guidelines (1)
and in the new Regulation on the European Social Fund (2).

3.3.
In order to overcome the problem of definition, the
social economy is often described as being composed of
‘four families’: cooperatives, mutual societies, associations and
foundations, which in fact are organizational and/or legal
forms.

3.3.1.
In line with this, the European Commission estab-
lished a Consultative Committee for Cooperatives, Mutual
Societies, Associations and Foundations in 1998 (CMAF)(3).

3.3.2.
However, not all organizations that are included
within the four families wish to be considered part of the
‘social economy’. At the same time, other players identify
themselves with the social economy but do not meet the
specific legal requirements of those four families that differ
from one Member State to the other.

3.4.
The lack of clarity surrounding the expression of ‘social
economy’ is not only due to different ways of interpretation, it
is also the result of linguistic confusion. It is clear from the
expression that economic activity is involved. The adjective
‘social’ should be understood to mean both mutual self-help
and ‘public spiritedness’.

3.5.
During the last few years the socio-economic environ-
ment has changed. New phenomena and new economic
players are emerging to meet new needs and demands in a
flexible, innovative and efficient way. Old activities have to be
adapted.

3.6.
Since an activity within the social economy may be
linked to certain rights and advantages, the Committee believes
that it is important — even if difficult — for the Commission
to come up with a definition that is workable, accepted and
understood by the public and the Member States.

3.7.
Against this background, the Committee questions
whether the legal and organizational ground for defining the
social economy is not outdated notwithstanding the fact that
most social economy activities will be organized in the
above-mentioned forms.

The Committee suggests that a definition should be
3.8.
based upon the main features that distinguish the social
economy from classic private enterprise and the public sector.
Focus should be given to the people-centred objectives and
activities.

3.8.1.
This means that the aim of the social economy
should be to work for its members, users and/or society in
order to meet well defined needs of public interest.

3.8.2. Membership of a social economy body must be open
to all who meet the criteria and accept the conditions.

(1) Point 12 of the 1999 Employment Guidelines, Council Decision
of 22.2.1999. The same point can be found in the Commission’s
proposal for the Employment Guidelines from the year 2000.
(2) Regulation on the European Social Fund, Article 3,1(d) OJ L 161,

26.6.1999.

(3) CMAF recently published a paper ‘Social Economy in the Develop-
ment of the European Union’ which states its view on common
principles of the social economy.

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3.8.3.
People’s needs and commitments are central, as are
the organizational requirements of democratic control and
independent management.

5.3. Within social economy firms social efficiency must go
hand in hand with economic efficiency, without depriving
them of their special features or undermining their special
nature and objectives.

3.8.4.
The social economy firms are ‘not-for-profit’ organ-
izations — i.e. profit is not the primary objective —, but
nevertheless they must be economically efficient so that they
can use financial surpluses to promote their objectives.

4. Significance of the social economy

4.1.
The social economy firms and organizations have
millions of members. While some of these firms and organ-
izations are of substantial size, most of them are very small.
Many of the large organizations are long-established, but the
majority started up recently. Associations, small cooperatives
and other new social economy organizations are growing fast.

4.2.
In order to get an even better grasp of the significance
of the social economy, the Committee feels that both the
Member States and the Commission should provide more
comprehensive and clearly defined statistics for the sector,
using common, standardised criteria and models.

5.4.
Previous Committee opinions have expressed support
for the promotion of an enterprise culture and a climate
which is conducive to business — including social economy
businesses (2).

5.5.
There are a number of obstacles to the growth of the
social economy: demand for the goods and services it produces
is too weak in terms of purchasing power; the skills of workers
and management must be improved; and the lack of capital is
plain to see in some sectors (though not all). In addition,
legislation does not always take account of the specific nature
of the social economy.

5.6.
The social economy is a type of enterprise which often
appeals to groups that traditionally would not dare to set up
an enterprise. Collective enterprise enables them to pool
resources and share risks. The security thus provided is more
conducive to risk-taking.

According to some studies,

the social economy
4.3.
accounts for a substantial part of EU economy and employ-
ment (1).

The social economy combines voluntary and paid
5.7.
work. The voluntary work is multi-faceted. It can include the
time elected representatives devote to carrying out an activity,
or general work carried out by volunteers in an association.

5. The social economy — a different type of entrepreneu-

rial initiative

5.1.
The features of the social economy’s entrepreneurial
initiative distinguishes it from other types of economic activity.
It thus contributes to the necessary diversity of economic life.

5.2.
New types of organizations and companies are spring-
ing up which adopt social economy principles. These include
multi-stakeholder cooperatives , enterprises with social objec-
tives, workforce insertion agencies, intermediate labour market
enterprises, local community organizations, etc.

5.2.1.
At the same time, traditional social economy firms
sometimes need to compete in a market situation and/or
overcome some legal obstacles to their growth by converting
to the legal form of a private firm where profit is the primary
objective.

(1) The social economy employs some 6 %-7 % of the total EU
workforce (circa 9 million jobs) according to a recent study made
by Ciriec, (‘Les entreprises et organisations du troisième système:
Un enjeu stratégique pour l’emploi’, Liège 1999). In addition,
voluntary work, particularly in the associative sector, could be
estimated at the equivalent of a few million jobs.

5.7.1.
The Committee believes that voluntary work pro-
vides a channel for citizens’ active participation in society and
is increasing in certain fields. It often exists alongside salaried
work and can engender employment growth, particularly in
sectors where demand is low owing to lack of resources.
However, in the Committee’s view it cannot replace salaried
work, which must be subject
labour market
conditions.

to normal

5.8.
At the same time, the social economy needs to improve
the skills of its workforce — both salaried and voluntary — so
that it can provide quality services which can cope with
competition.

Given the specific and multi-functional character of
5.8.1.
the social economy firm, there should be ample scope for
management and workers to set up a ‘learning’ organisation in
order to promote adaptability through flexibility and new
work organisation patterns and to find ways to make work
compatible with family life.

(2) Cf. inter alia Fostering entrepreneurship in Europe: priorities for
the future, Opinion on COM(1998) 222, OJ C 235, 27.7.1998,
p. 69.

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6. Employment

6.1.
The social economy as a whole rejects any attempt to
turn it into a labour market policy instrument. Most social
economy activities — like business activities in general — do
not focus on employment, but have different primary objec-
tives. However, new jobs are an important by-product of
growth in the sector.

6.2.
A large number of social economy players focus
however on employment/integration for the unemployed, for
people with disabilities and other groups which are — in
labour market terms — vulnerable. The social economy can
motivate people, giving them self-respect to run their own
business, or to find a job in the traditional labour market.
Many social economy players also have,
for reasons of
solidarity, heeded the calls made by political and social bodies
to play a part in employment policy.

6.3.
These organizations, which are often new to the social
economy, thus play an important role in helping people step
up from the secondary to the primary labour market. They
differ from country to country, go under different names, and
their structure and organization are diverse. Many job schemes
run by the trades unions or private enterprises rely on social
economy players.

Among the many examples of labour market policy
6.4.
measures which have boosted employment
in the social
economy, some may be mentioned. The French employment
(CES) has provided
initiative ‘Contrat Emploi Solidarité’
200 000 jobs in the associative sector, which, moreover, has
recruited around 250 000 young people until now via the
special programme to combat youth unemployment. In Italy
today the social cooperatives employ more than 100 000
persons. In Belgium, a programme to absorb unemployment
helped create 40 000 jobs. In Ireland, the Community Employ-
ment measure has created just over 30 000 new jobs in the
associative sector and in local community organizations. In
Spain, the Mondragon Group and Once aim to provide jobs
for 37 000 people.

6.5.
The social economy’s positive effect on employment
has been taken on board in the EU employment guidelines,
which emphasize its role in creating new jobs at local level in
particular, and in tapping into new employment sources (1).

6.6.
The Committee notes that as a consequence of the
employment guidelines, the social economy is increasingly
being asked to play a part in the national action plans for
employment. Countries such as Italy, Spain, France, Ireland
and Belgium are good examples of this (2).

In order to achieve effective participation in national
6.7.
labour market policy, the Committee would stress the need to
consult social economy representatives when drafting the
national action plans, and calls on social economy organ-
izations to present their governments with concrete proposals
for the year 2000 action plan.

6.8.
Given that in a number of countries mutual societies
the
are a major plank in the social protection system,
Committee believes they could play an important role in
promoting employment, new enterprise and employability.
There are already examples of this (3). Mutual social protection
societies could also be involved in organizing services for the
ageing population, thus creating new job opportunities in
cooperation with other sections of the social economy.

6.9.
If new employment opportunities are to be created,
the Committee highlights the need for support structures,
inclusion in national economic and labour market policy, and
support from the Structural Funds (4).

7. The Structural Funds

7.1.
Regarding the implementation of the EU’s new Struc-
tural Funds programme for 2000-2006, the Commission
guidelines state that the social economy’s potential for creating
new jobs has not been sufficiently exploited. The European
Social Funds Regulation states explicitly that funding may be
provided for social economy activities.

The Committee assumes the Member States and the
7.2.
Commission will
incorporate the guidelines in the actual
programmes. The role played by the social economy in local
development,
integrating vulnerable groups and fostering
entrepreneurship should be highlighted in the priorities to be
implemented. At the same time, the Committee calls on the
Member States to ensure representation of the social economy
in the partnership which must be set up according to the
Structural Funds Regulation.

(1) Point 12 of the 1999 Employment Guidelines, Council Decision
of 22.2.1999. This role was also underlined in the ‘Third system
and employment’ programme capitalisation committee report.

(2) Joint Employment Report 1999, part 1, p. 59, and part 2, reports

on various countries. Published by the EU Commission.

(3) ‘The contribution of mutual and bilateral social protection to

employment and employability’, KOOPi Sweden 1998.

(4) COM(1999) 167, Community policies in support of employment,

point 2, Regional and Local support.

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8. The single market

8.1. Access to finance

Several new, alternative,

social economy-related
8.1.1.
banks and credit institutions are springing up alongside the
traditional cooperative banks in order to provide capital to
new initiatives. Small loans, credit guarantees and special risk
capital have proved effective in encouraging new enterprise in
the social economy (1). Funding is often provided by people
who want to invest in the social economy.

8.1.2.
However, the Committee recognizes that access to
finance still remains one of the most important hurdles for
players in the social economy sector — especially for the very
small enterprises.

The Committee is positive to initiatives that enable
8.1.3.
these new social economy financial instruments to progress
and fulfil their important tasks. The Commission and the
Member States should examine this matter as well as the
for the
possibility of other initiatives to provide capital
emerging social economy.

8.2. Social protection

8.2.1.
In some countries mutual societies perform an
important role in social protection. Their work is based on
solidarity between stronger and weaker groups, and they do
not discriminate on grounds of risk.

The Committee believes that social protection mutual
8.2.2.
societies play an important role in national social security
systems, and calls on the Commission to ensure that this
general interest role is not undermined by unfair competition.
Furthermore, all players must respect
the clearly-defined
obligations connected with service provision.

8.3. The rules of competition, public procurement and taxation

Due to its special

8.3.1.
the social economy
sector needs tailor-made solutions as far as taxation, public
for
procurement and competition rules are concerned,
example:

features,

— Social economy organizations are not allowed to establish
activities in certain branches in some Member States (e.g.
petrol distribution in Spain).

— Public procurement rules are not always compatible with
local employment initiatives and the social economy’s
provision of welfare services.

— Public procurement does not always contain requirements
that affect the quality of services and is often limited to the
lowest economic bid.

— Taxation benefits due to the fact that the social economy

differs from traditional economic sectors.

8.3.2.
For this very reason, the Committee believes that
applying specific solutions makes it possible to achieve a level
playing field between firms of the social economy and private
enterprises.

8.3.3.
The Committee suggests that the Commission should
look into these matters in order to present guidelines stating
criteria for supporting the social economy. The creation of
firms in the social economy sector must not upset the structure
of existing markets by providing unfair competition for
private-sector firms, working under the same conditions and
selling goods and services below market prices.

8.3.4.
The Committee believes that these criteria should be
clear, transparent and based upon the fundamental features of
the social economy. Nor should the rules produce negative
social fall-out for disadvantaged groups.

8.3.5. When elaborating the guidelines, the social economy
organizations should be consulted.

8.4. European cooperation models

8.4.1.
There is an increasing need to set up European
networks in order to be competitive in the Internal Market.
The Committee has already called for cooperatives, and
mutual societies and associations to be allowed to develop
cross-border European cooperatives, European mutual soci-
eties and European associations (2). The necessary European
Statutes are still missing.
It should also be possible for
individuals and small businesses to establish such European
legal forms, should they wish to be involved in cross-border
cooperation in order to strengthen their competitiveness.

8.4.2.
The Committee has already expressed its opinion
that, in order to provide for a swift Council Decision, these
legal and organizational forms should be treated separately
from the European Company Statute (3). Clearly, the proposal
for a Directive on worker participation must be adopted
simultaneously.

(1) In ‘Financial Instruments of the Social Economy in Europe and
their impact on job creation’, published by Inaise, some of these
instruments are described. Another example are the Italian mutual
funds to develop new cooperatives.

(2) OJ C 233, 31.8.1993, p. 42.
(3) Information and Consultation of Workers, OJ C 212, 22.7.1996,

p. 36. Opinion on COM(95) 547, 29.5.1996, point 14.

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8.4.3.
The Committee would renew this call, whilst empha-
sising that the new regulations must be sufficiently flexible as
to allow cooperation between organizations and companies
from different sections of the social economy. Such flexibility
is particularly necessary to take account of the differences in
national legislation. French legislation on the ‘Union d’Eco-
nomie Sociale’ and Italian legislation on consortia could
provide a blueprint here.

8.5. EU enlargement

8.5.1.
In the run-up to EU enlargement, the Committee
would call on the Commission to ensure that accession
negotiations take account of the role of the social economy in
the applicant countries, both in terms of single market
legislation and other opportunities for full participation in
European cooperation.

9. Commission support programmes

9.1.
The Committee notes the fact that the programme for
cooperatives, mutual societies, associations and foundations,
proposed by the Commission in 1993, has not been
implemented. A decision on this required unanimous approval
by the Member States, which proved impossible to achieve.
One argument against the programme was that funding was
insufficient (EUR 5.6 million over three years).

9.2.
The Commission is currently preparing a programme
to promote enterprise. The programme framework should also
include promotion of the social economy, and introduce
particular funding for social economy-specific issues such as
training for members, dissemination of best practice and
research.

9.3.
The Committee assumes the resources earmarked for
social economy organizations and companies will be more
substantial than those contemplated in the previous pro-
gramme proposal. But, even so, eligibility criteria should be
clear and transparent, and should relate to the particular
features of the social economy in order to support emerging
new and/or innovative initiatives.

9.6.
The Committee believes that voluntary and unpaid
work should count as co-funding in social economy-run EU
projects.

10. White Papers on Cooperatives and Mutual Societies

10.1.
The Committee is disappointed that the Commission
according to its work programme, will not adopt the two
White Papers initially foreseen for this year, one on cooperat-
ives and the other on mutual societies. The Committee would
warmly support such an initiative which, however, must be
given the necessary resources if it is to succeed. It will make it
possible to assess the situation in these sectors and come
up with some recommendations aimed at stimulating the
development of cooperatives and mutual societies in the EU.

11. Commission organization

Social economy organisations and firms are in close
11.1.
contact with almost every Directorate-General. The Director-
ate-General for Enterprise which is planned to have responsi-
bility for cooperatives, mutuals and new forms of entrepreneur-
ship, and the Directorate-General for Employment and Social
Affairs, which would have responsibility for social economy
and local development, are the main focus of attention. To
distinguish between organisations in this way would trigger
the break-up of the unity of the social economy sector. It is
important urgently to find a satisfactory, coordinated response
to overall organisational matters and that social economy
players receive assistance. At the same time the Committee
wonders what the Commission means by ‘new forms of
entrepreneurship’.

12. What can the social economy do?

12.1.
At the Hearing in October, several cases of good
practice were presented. The Committee feels that the dissemi-
nation of good practice is a key element in achieving progress
for the social economy.

12.2.

Some examples are:

9.4.
In addition, the Committee takes a positive view of the
proposal presented by Commissioner Diamantopoulou to
launch pilot projects linking social economy organizations
and other social players to achieve good practice of such
partnerships.

— setting up coordination agencies at national and European

level;

— creating information networks;

9.5.
As regards other EU programmes, such as the 5th RTD
framework programme and EU aid programmes, special
initiatives should be introduced to make it easier for the social
economy to access the support available.

— cooperation with business in general and with the trades

unions;

— concluding partnerships with regional and local authorities;

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— working out ways of assessing both economic and social
effectiveness, by means, for example, of relevant social
auditing methods and systems of improved governance;

— harnessing available EU programmes particularly those for

human resource development.

— setting up strategic development centres;

13. Conclusions

— developing benchmarking systems;

— making a concerted effort to raise the profile of voluntary
enterprise, by getting large social economy companies and
organizations to draw up ‘Managing Change Reports’ (1);

— providing examples of best practice in skills development,

organization of work and equal opportunities;

(1) ESC Opinion on ‘Managing Change’

(Gyllenhammar Report),

OJ C 258, 10.9.1999, p. 1.

13.1.
The social economy is on one hand an important
part of economic life and at the same time part of organised
civil society. This own initiative opinion is the Committee’s
contribution to the debate on the social economy at European
and national level, its definition and its role both in general
and in relation to the Internal Market.

13.2.
The Committee recommends that the Commission,
the European Parliament and the Member States follow up this
opinion by drawing up a strategy to fully integrate the social
economy into the creation of welfare activities and the
promotion of new entrepreneurial initiatives in Europe.

Brussels, 2 March 2000.

The President

of the Economic and Social Committee

Beatrice RANGONI MACHIAVELLI

APPENDIX

to the Opinion of the Economic and Social Committee

The following amendment, which obtained more than one quarter of the votes cast, was rejected during the
discussions.

Point 8.4.2

Delete the last sentence.

Reason

The proposal for a directive on worker participation is not acceptable in its present form to SMEs in the commercial
sector. It creates obligations that are too onerous for small firms. Also, the two things are independent.