Social enterprise

The Social Enterprises

Prof. Irene Bengo, Ph.D.

Department of Management, Economics and Industrial Engineering

Politecnico di Milano

President of Engineers Without Borders - Milan

I. Bengo – Social Enterprise AH-DESIGN, EU PROJECT

The Social Enterprises (SE)The Social Enterprises (SE)2

"The social enterprise (SE) can make a contribution of great importance to the strategic reorientation of growth towards a new model of development, more sustainable and equitable, that might focus on the work and the human person”. General Secretary of Unioncamere of Italy (2011)

“The importance to the European economy and society of cooperatives, mutual societies, associations, foundations and social enterprises (which together are sometimes referred to as the Social Economy) is nowreceiving greater recognition at Member State and European levels. Not only are they significant economic actors, they also play a key role in involving their members and European citizens more fully in Society. Social Economy enterprises are helping to meet the demands of a changing Europe. They are important sources of entrepreneurship and jobs in areas where traditional “investor driven" enterprise structures may not always be viable”Erkki Liikanen Member for Enterprise and Society of European Commission (2010)


Area of Investigation: SSome Numbers 3

Growth in social entrepreneurship globally over the last decade has been impressive

social entrepreneurship is a “good thing”

�European Commission 2011: more than 11 million jobs in the social economy membership of social economy enterprises: 160 million

�Social economy enterprises represent 2 million enterprises (i.e. 10% of all European businesses)

� employ over 11 million paid employees (the equivalent of 6% of the working population of the EU).

� Italian case, the report of Iris Network 2011: 15000 SEs, 350000 employees


Area of Investigation: Idea of SEs4

The Social Enterprises (SEs):private, autonomous, entrepreneurial organizationsproducing goods or services with the goal of providing benefits for the community.

SEs • Have relevant expected impact in term of social value creation• They represent a potential response to critical problems in the North/South of the world

The SEs has 3 main pillars: 1- maximization of profit is transformed into means (goal in classical theory)2- “social entrepreneur” satisfies unmet social needs. 3- transforming the social benefit into a real “business idea”


Development of SEDevelopment of SE5

Different reasons of social economy’s development during last 20 year

� Privatization of the public responsibility for public welfare:

• government’s participation decline regarding the services offered to the community• the experimentation with "new forms of solidarity and collectivity" by civil society and social movements as they enter high politics

�The development of a culture better oriented to the responsibility and personal

involvement towards social problems:

�Increase of the entrepreneurial spirit of no profit sector (association, ONGs, Cooperatives)

• introduction a social purpose to a business company, corporation or even government

the third sector’s will to increase its entrepreneurship and the social enterprise’s interest to unify its values with the standard profit sector business’s principles

• changes occurred into the no-profit sector for increase the opportunities of funding


SE as a middle way between two extremesSE as a middle way between two extremes6

SE represents a hybrid form, located somewhere in between the traditional non-profit and for-profit organizations

� SEs pursue a broad social goal, they try to promote a new model of economic development, fostering a more democratic decision-making process

� From an economic standpoint, SEs need to assure their economic sustainability: market oriented activities and fundrising are strictly “at the service” of the social goal

Compared to not for profit entities, SEs have the purpose to achieve social benefit, but their vision, organization and processes are quite different when compared to non-profits

Ses achieve social goals that meld socio-political, environmental, and financial objectives: give them a major importance compared to profit organizations (social purpose is central to the Se operation)

ensure access to basic services

Role: contribute to

more balanced use of local resources

promotion of inclusive governance models

creation of new job opportunites

strengthening social capital

convey informal activities



Hybrid Model of Social Entrepreneurship:

Alter (2004): "Hybrid Spectrum of sustainability" to underline the Ses position respect the other organizations.

On the right hand side of the spectrum are for-profit entities that create social value but whose main motives are profit-making and distribution of profit to shareholders

On the left hand side of the spectrum are nonprofits with commercial activities that generate economic value to fund social programs but whose main motive is mission realization as

dictated by stakeholder mandate. The characteristic that separates the two groups is purpose.

As a hybrid, the social enterprise is driven by two strong forces



4°Sector: For -benefit organizations

Figure 1 details the traditional organizations � new kind of firm: for-benefit organizations.

These organizations are driven by a social purpose, they are economically self-sustaining and seek to be socially, ethically, and environmentally responsible.

Dennis A. Pitta and J. Howard Kucher,University of Baltimore, Baltimore, Maryland, USA, Journal of Product & Brand ManagementVolume 18 · Number 2 · 2009 · 154–158

Social enterprises are prime examples of for-benefit organizations


Context : Different definitionsDifferent definitions9

SOURCE DEFINITION

DTI, Department of Trade and Industry; 2002

Businesses with primarily social objectives whose surpluses are principally reinvested for that purpose in the business or in the community, rather than being driven by the need to maximise profit for shareholders and owners

M. Bull, H. Crompton; 2007

Enterprises with the specific purpose of addressing social issues, in favor of the community or the environment and employ a business structure that allows it to remain sustainable

EMES Borzaga, Defourny; 2001defines of a set of

common criteria

To reflect the economic and entrepreneurial dimensions:a) A continuous activity producing goods and/or selling servicesb) A high degree of autonomyc) A significant level of economic riskd) A minimum amount of paid workTo encapsulate the social dimensions:e) An explicit aim to benefit the communityf) An initiative launched by a group of citizensg) A decision-making power not based on capital ownershiph) A participatory nature, which involves the various parties affected by the activityi) A limited profit distribution

The academic and professional literature provides several definitions of SE


10

1. SEs are multi – objective organizations

2. SEs have a multi-stakeholder governanceexternal players more relevant compared to the private sector:

• Participation of stakeholders in the decision making processes is mandatory to understand the real needs of the context

SE Specificities

SEECONOMICENVIRONMENTAL

SOCIAL

The are different definitions and different legal frameworks across European and non European countries

Susta

inability m

odel

Susta

inability m

odel


Legal frameworks 11

Law 155/2006

and by the

decrees of

2007 & 2008

The social enterprise is neither a new legal form, nor a new type of organization, but a legal category in which all eligible organizations may be included, regardless of their organizational structure.


Different typology of the activities12

Activity Yes/no Yes/no

Work integration Agriculture

Personal services Education

Economic Development University education

Environmental Conservation

Non-formal training

Arts and Cultural Preservation

Tourism

Social Welfare and Human Development

Water management

Health Production Energy

Recycling Catering and hospitality


Different typology of the activities13

Activity Yes/no Yes/no

Work integration Agriculture

Personal services Education

Economic Development University education

Environmental Conservation

Non-formal training

Arts and Cultural Preservation

Tourism

Social Welfare and Human Development

Water management

Health Production Energy

Recycling Catering and hospitality

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Some examples 14

Organization LifeGate Job Factory Basel

Belu Water Le Relais

Year Founded 2000 2000 2002 1984

Country Italy Switzerland United Kingdom France

Aims new way of doing business that places the environment at the centre

internships and trainingprogrammes unemployed youth

to use compostable bottles, to promote PVC-free packaging and to donate all profits to clean water projects.

through the collection of second-hand textiles, creates jobs in France and Africa for people that have been excluded

Focus Communications Media, Consumer Awareness, Energy, Environment,

Children and Youth, Labour Conditions and Unemployment

Environment, Water Professional Integration, Environment, Unemployment

Geographic Area Impact

Italy Switzerland Bangladesh, India, Madagascar, Mali & UK

France, Burkina Faso, Senegal, Madagascar

N°Direct Beneficiaries

300 per year 43,429 1,500


Problems15

Problem The lack of consistent performance measurement systems

� Limits the understanding of SEs’ contribution to the socio-economic development� Prevent SEs from proving efficiency, accountability and transparency to internal and external stakeholders � Limits investors’ interest

Objective

To investigate how SE results can be measured: with respect to their social,

environmental and economic impact, considering the characteristics of SEs

The proposed approach aims to provide operational guidance to identify:� SE’s relevant stakeholders and their informative needs, � the dimensions against which SEs performances should be assessed, considering the stakeholders expectations.

. . social enterprises are competing with the private and public sector and the need to stress the wider impacts becomes ever more needed. This underlies the significance of measuring the wider social, economic and environmental impacts of such initiatives (Brennan and Ackers, 2004)


Italy: Exploratory Survey16

Sample: out of 757 SEs (from "Union Camere", “impresasociale.net”, Make a Change and Iris

Network data bases) 90 SEs responded (12% response rate)

Survey designed to provide a picture of the current state of development of Measure for SEs

Questionnaire construction

1. The first section addressed descriptive characteristics of the SE

2. The second section focused on the motivations to be social enterprise

3. The third section focused on the issue of measuring performances in SEs:

• Which indicators are currently measured by SEs

• Which indicators are considered relevant to measure

• Which are the difficulties SEs have in the measurement

30 items to cover the five performance dimensions identified:

a)Efficiency and financial sustainabilityb)Management efficiencyc)Social effectivenessd)Impacte)Consistency


Exploratory Survey - results17

Some evidence

EVIDENCE 1: SE’s have multi-objectives: in many cases, the same social enterprise operates in different areas

EVIDENCE 2: The same social enterprise works for continuous activities and projects

EVIDENCE 3: The social enterprises born to respond to social needs

EVIDENCE 4: Social enterprises consider the aspect of consistency with the social missions to be most relevant

EVIDENCE 5: The social enterprises consider relevant: economic, social, environmental issues

EVIDENCE 6: The social enterprises are multi-stakeholder systems, this aspect determines the different information needs of the different stakeholders

EVIDENCE 7: Social enterprises have difficulties in measuring, they require a simple measurement systems


Exploratory Survey - results 18

Descriptive characteristics of the SEIntervention area

Frequency %

Job placement 39 43,33

Social Assistance 30 33,33

Health Assistance 23 25,56

Education 19 21,11

Services to social enterprises 12 13,33

Environmental protection 9 10,00

Sociale turism 9 10,00

Learning 7 7,78

Other 6 6,67

Extracurricular training 4 4,44

University education 1 1,11

Cultural Heritage protection 1 1,11

Legal form

Frequency %

Cooperative 78 86,7

Not Recognized Association 3 3,3

Recognized Association 3 3,3

Consortium 3 3,3

Fondation 1 1,1

Limited company 1 1,1

Corporation 1 1,1

Tot 90 100,0

Funding sources%

Grants 23,80Donations 20,78Other 16,87Pubblic 13,86Project funded 13,55Business activity 11,14



Motivations

Motivations

Average

For the affinity with the goal of being socially useful 4,44

Because it's a sustainable way to create social benefit 4,19

For the adequacy of the organizational structure for your needs 3,31

For regulatory reasons 2,82

To access funding 1,94

To get tax breaks 1,87



EVIDENCE 4: The social enterprises consider as

relevant the consistency with the social mission

It measured? (sum of affirmative answers) %

1. Revenues and operating costs 95,56

30. Consistency results - strategy 68,89

9. % projects that achieve objectives 65,56

29. Consistency products - objectives 56,67

14. Employee satisfaction 55,56

12. Beneficiaries satisfaction 48,89

13. Complaints of stakeholders 48,89

27. Consistency investments - mission 44,44

28. Consistency projects - mission 34,44

19. Impact on the community 31,11

What do SEs measure?


Exploratory Survey - Results 21

What SEs consider important to measure?

EVIDENCE 5: The social enterprises consider relevant: economic, social environmental issues

What SEs consider important? Min Max Average

1. Revenues and operating costs 1 5 4,71

2. Salaries and wages for staff 1 5 4,61

8. Productivity manufacturing processes 1 5 4,48

3. Receivables, payables and collectability 1 5 4,46

30. Consistency results - strategy 1 5 4,44

6. Duration and amount of contracts 1 5 4,39

11. Customer satisfaction 2 5 4,37

12. Beneficiaries satisfaction 1 5 4,30

10. Index coverage of projects 1 5 4,25

29. Consistency products - objectives 1 5 4,24

13. Complaints of stakeholders 1 5 4,15

9. % projects that achieve objectives 1 5 4,14

14. Employee satisfaction 1 5 4,14

20. Claims and non-compliance 2 5 4,12

16 Professional development of staff 1 5 4,10

What SEs consider important? Min Max Average

28. Consistency projects - mission 1 5 4,10

4. Share profit reinvested 1 5 4,00

19. Impact on the community 1 5 4,00

7. Goods constrained 1 5 3,96

27. Consistency investments - mission 1 5 3,92

24. Communication 1 5 3,85

25. Accessibility of information 1 5 3,84

5. Funds raised 1 5 3,84

15. Staff turnover 1 5 3,82

26. Level of cooperation with the media 1 5 3,79

21. Proportion of actual beneficiaries 1 5 3,48

22. Cost concentrated on local suppliers 1 5 3,35

23. Environmental impact 1 5 3,33

17. Indicators of staff diversity 1 5 3,22

18. Proportion employees - volunteers 1 5 3,16


Exploratory Survey - Results 22

Which difficulties?

EVIDENCE 7: Social enterprises have difficulties in measuring, they require a simple

Measurement systems

Which difficulties? Min Max Average

19. Impact on the community 1 5 3,53

23. Environmental impact 1 5 3,24

8. Productivity manufacturing processes 1 5 3,17

12. Beneficiaries satisfaction 1 5 3,04

26. Level of cooperation with the media 1 5 2,97

30. Consistency results - strategy 1 5 2,89

14. Employee satisfaction 1 5 2,87

29. Consistency products - objectives 1 5 2,83

11. Customer satisfaction 1 5 2,81

21. Proportion of actual beneficiaries 1 5 2,78

25. Accessibility ofinformation 1 5 2,77

10. Index coverage of projects 1 5 2,75

3. Receivables, payables and

collectability

1 5 2,70

16 Professional development of staff 1 5 2,69

1. Revenues and operating costs 1 5 224

Which difficulties? Min Max Average

13. Complaints of stakeholders 1 5 2,62

20. Claims and non-compliance 1 5 2,54

2. Salaries and wages for staff 1 5 2,53

27. Consistency investments - mission 1 5 2,52

9. % projects that achieve objectives 1 5 2,49

4. Share profit reinvested 1 5 2,38

24. Communication 1 5 2,33

6. Duration and amount of contracts 1 5 2,30

28. Consistency projects - mission 1 5 2,30

5. Funds raised 1 5 2,24

7. Goods constrained 1 5 2,18

22. Cost concentrated on local

suppliers

1 5 2,17

17. Indicators of staff diversity 1 5 2,08

15. Staff turnover 1 5 2,00

18. Proportion employees - volunteers 1 5 1,91


Definition dimensions to measure23

The framework proposed



The dimensions proposed



Development the Framework: stakeholder centrality

Preparations

→ identification of SEs specific characteristics: Analysis of publicly available

documents, semi-structured interviews, site visits

→ identification Key stakeholders: Stakeholders Map (Fletcher et al. 2003)

→ clustering of Stakeholders in the categories: Stakeholder Circle methodology

(Bourne and Walker, 2005)

→ definition in details the specific actors for each categories

Link each stakeholder to the performance dimensions:(Fletcher et al. 2003):

Construction of the indicators: → identification of the set of indicators (from standard sets of indicators)

→ choice of the indicators according to the stakeholder’s priorities and the core business

→ collection of the feedback

1. First Interviews: Process facilitation: interviews to firm's BoD (company's strategic objectives)

2. Second Interviews: to BoD (their and internal and external stakeholder information needs)

3. Third Interviews: to internal stakeholder (verify their information needs)

4. Fourth Interviews : where available, interviews to external key stakeholder

5. Association to each stakeholder the performance dimensions


The Framework Implementation- 5 cases26

Preparation:

Identification of specific

characteristics

Interviews:

Definition information needs

Association:

To each stak. The performances dimensions

The construction

of PMS

The collection of feedbacks

Redefinitionthe PMS


Results- PMS Model Implementation- 5 cases27

CediS Cantiere del Sole La fabbrica di Olinda

Sector Production EnergyWater system

Photovoltaic systemsCatering and hospitality

Forms used Coop.Society Social Coop. type B Social Coop. type B

Social Mission Development territory Working Integration

Environmental protectionWorking Integration

N. employees 22 15 17

N. members 2946 18 52

Year Founded 1904 2003 1999

Annual revenue

(2010) €4.034.039,57 4.421.173,00 848.400,21

Geographic Area

ImpactMunicipality of Trento Brescia Milano

Activities

Electricity, production, Telephony & Internet

provision, control water, gas facilities

Design, installation, maintenance of electrical and

hydraulic power-saving

Service bar-restaurant, hostel, theatre management


Results- PMS Model Implementation- 5 cases28

Di Mano in Mano EFrem (Energy Freedom)

Sector Recycling Renewable energy, training

Forms used Coop.Society Association

Social Mission Environmental protectionIncreasing culture on renewable

energy in LDC

N. employees 44 15

N. members 40 30

Year Founded 1999 2007

Annual revenue (2010) € 2.199.593,00 180.000

Geographic Area Impact Milano Burundi, Kenya, Ivory Coast, Ghana,

RDC, Rwanda

ActivitiesClearance , recycling and sale

materials Training of trainers


Cedis case: Winner of award

“Social Entrepreneur of the 2011”

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STAKEHOLDER CATEGORY SPECIFIC STAKEHOLDER

INTERNAL STAKEHOLDERS

ManagersBoard of DirectorDirector

EmployeesDeputy DirectorSectors managers

Member Members

WorkersEmployeesTechnical

EXTERNAL STAKEHOLDERS

FundersMembersBanks

Customers

MembersPrivate companiesPrivate citizensCompanies that produce not clean energy Other distributors

Suppliers

Optical fibreOther raw materialsBM Electronics Spa (solar panels)Telephone operatorsTrentino Network (connection broadband)Trenta spa (gas)

Beneficiaries

Local communityPrivate citizensEnvironmentTerritorial associations

CommunityStoro’s community and other municipalities

Environment Renewable energy

Government - publicRegion Trentinoa2a

CompetitorsE.S.C.O spaOther energy manufacturers

SpecificStakeholder

Dimensions

ManagerBoD, manager, sector referents

Financial sustainability; Efficiency; Management effectiveness; Social effectiveness (involvement, transparency, fairness); Impact; Value of resources; Value of products; Value of results.

MembersMembers, customers, Municipalities

Financial sustainability; Efficiency; Management effectiveness; Value of products; Impact;

FundersBCC, Other Banks, Members

Financial sustainability; Social effectiveness; Impacts

Suppliers

Suppliers of electricity, electrical equipment and plant

Financial sustainability; Value of resources; Value of products

Local Community

Area residents, local associations

Financial sustainability; Value of results; Impact

Environmental Impact; Value of results

Other cooperatives

Aper; Federutility; “Federation trentina cooperatives”

Financial sustainability; Value of results; Impact

The information needs


Results – PMS for cases 30

PMS: set of indicators

1. Financial sustainability 1. Efficiency

1.1 Total Revenue 2.1 Total energy costs/total Kwh sold

1.2 Net Income 2.2 Total cost telecom sector/ users connected

1.3 ROE 2.3 Cost of maintenance facilities

1.4 ROI 2.4 Hydroelectric turbines efficiency

1.5 Leverage 2.5 Solar panels efficiency

1.6 Cost of capital 1. Management effectiveness

1.7 (Turnover 2010 – Turnover 2009) / Turnover 2009 3.1 Total number and employee turnover rate

1.8 EBIT 3.2 N. of complaints

1.9 Current ratio 3.3 Mean time between service request and technical output

1.10 Operating working capital 3.4 N. of interruption services

1.11 Equity / turnover 3.5 N. signaling malfunction

1.12 Social capital increase 3.6 N. Members / N. local families

4. Social effectiveness 3.7 Frequency of new users connections

Involvement 3.8 Estimated operating costs /actual operating costs

4.1 % participation assembly member 3.9 Estimated period costs /actual period costs

4.2 % increase in social base than the previous year 3.10 Variation members number

4.3 N. of board of directors meetings 3.11 % reduction of customer credit

4.4 N. of initiatives for the local community 5. Social impact

4.5 N. of workers meetings 5.1 % Employees / Local Population

Communication Transparency 5.2 C02 saved per year

4.6 N. of requests for bills clarification 5.3 Local suppliers / providers total

4.7 N. of public and immediately available documents 5.4 N. families connected to Internet / N. local families

4.8 N. of reminders for documentation 5.5 Contributions to local associations / Net Income

4.9 N. of information requests 6. Value of resources

Fairness 6.1 Actual cost of raw materials

4.10 Governance composition: gender, age group, minority 6.2 Actual cost of infrastructure

4.11 N. of employees, divided by typology, contract… 6.3 Direct labor costs

4.12 N. of new connections in areas not easily accessible 6.4 % Local workforce

7. Value of products 6.5 Funding composition

7.1 Total kWh produced per year from hydro 6.6 % Investment in social services

7.2 Total kWh produced per year from PV 8. Value of results

7.3 Km LAN 8.1 Spared barrels oil per year

7.4 % Annual increase of adherents ICT services 8.2 % discount of Membership bills

7.5 % satisfied requests of members (ICT sector) 8.3 Increase n. of members connected to LAN

7.6 % satisfied requests of members (energy sector)


31In practice ...

. . social enterprises are competing with the private and public sector and the need to stress the wider impacts becomes ever more needed. This underlies the significance of measuring the wider social, economic and environmental impacts of such initiatives (Brennan and Ackers, 2004)

Increasing understanding that economic activities generate social and

environmental outcomes, whether positive or negative, and that social or

environmental activities can also create economic impacts.

The recent practical and policy interest in the concept of social enterprise illustrates this attention to models of wealth creation that can also be socially inclusive and environmentally sustainable (Aeron-Thomas et al., 2004).

OUR HUBs


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HUB BAGGIO: “Sustainable and Self-managed Web Radio”

Mission: promoting social cohesion and dialogue between generations.

Economic sustainability

Possible sales strategies Customer AnalysisPaying

Promotional sales message consistent with mission

•Public•No-profit•Enterprises profit•Social enterprises

Providing networking services •No-profit•Enterprises profit•Social enterprises•Citizens

Competitions •No-profit•Enterprises profit•Social enterprises•Citizens

Achieving sustainable economic


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HUB GIAMBELLINO: “Sustainable community garden”

Mission: improvements in social cohesion and intergenerational dialogue for the neighborhood and helping in reduction environmental impact.


Possible sales strategies

Customer Analysis Analysis

Courses Private funding•Young paying•Older people paying•Migrants payingPublic funding

• Needs•Benchmarking profit, no profit, public

Laboratories Private funding•Young paying•Older people paying•Migrants payingPublic funding

•Needs•Benchmarking profit, no profit, public



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HUB BARONA: “Reinventing a sustainable public school”




Courses Private funding•Young payingPublic funding


Laboratories Private funding•Young paying•Selling products from laboratories•Selling services from laboratories (repair, cycle-shop..)

Public funding


After school Private funding•Young paying




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HUB GRATTOSOLIO: “Sustainable summer camp”

Mission: optimizes the management and organization in a perspective of social inclusion and intergenerational dialogue.




summer camps Private funding•Young paying•Older people paying•Migrants payingPublic funding


LaboratoriesAt camp

Private funding•Selling products from laboratoriesPublic funding

• Needs



36Achieving sustainable economic

Hubs integrated system

HUB BAGGIO: “Web Radio”

HUB GIAMBELLINO: “community garden”

HUB GRATTOSOLIO: “summer camp”

Promotes activities of

Presents results

Presents resultsHUB BARONA: “public

school”

Presents results


Thanks for your attention

Social enterprise

Documents

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