Ways governments can unlock a more social economy

The Covid-19 pandemic has been no ordinary crisis. The worst health emergency in more than a century has been compounded by growing inequality and rapidly rising food and energy prices this year. This causes structural damage to economies and people’s lives on a scale that can hardly be addressed by means of traditional approaches of fiscal and monetary stimulus.

In many countries, job losses and other hardships have been disproportionately concentrated amongst the poor, youth, and women. As a result, Oxfam reports that the total number of people in extreme poverty could rise to 860 million this year. This emphasizes the need for inclusive models of economic development that build social cohesion and address social inequalities.

Over decades, social enterprises, cooperatives, inclusive businesses, and innovative non-profits have prioritized social and environmental value. They made a difference where it matters: on the ground, among local communities and natural ecosystems facing damage and loss. These organizations have explicit social objectives and inclusive governance models, working with groups who face barriers because of gender, race, ability and economic class.

“Thanks to its strong local roots, the social economy can offer innovative bottom-up solutions to many of the global challenges of today, such as climate change, digitization and social exclusion. The social economy works with and for local communities and has a huge job creating potential,” said Nicolas Schmit, European Commissioner for Jobs and Social Rights. A United Nations report estimates that the social economy accounts for around 7 per cent of global GDP and contributes to increased employment in economies. In times of multiple and interrelated challenges, social economy organizations strengthen resilient communities and help manage major transitions. In addition, employment in the social economy grew by 12-20 per cent during the 2008 financial crisis, in contrast to the sharp job losses in the private and public sectors.

Spectrum of social economy actors

More and more governments recognize the potential of the social economy to address global challenges. This year the European Commission launched its Social Economy Action Plan; the International Labour Organization has for the first time ever tabled a discussion on it during their conference and the Organisation for Economic Cooperation and Development is making legal recommendations in this regard to its members.

But despite its potential, social economies around the globe encounter common barriers which keep them from growing: limited visibility; lack of a supportive legal and regulatory frameworks; lack of verification and standards; inadequate supply of financial resources and restricted access to markets.

The Insight Brief, Unlocking the Social Economy, outlines five concrete policy areas that governments can develop to build more inclusive, sustainable and resilient societies.

Key policy areas to unlocking the social economy

1. Recognize and build new

frameworks

The political recognition, development of regulatory environments and regular dialogue with social economy actors has proven vital in countries to grow the sector. In 2007, the Republic of Korea put in place the Social Enterprise Promotion Act to promote, incentivize and regulate social enterprises. The European Commission recently launched its 2021-2027 Social Economy Action Plan, investing over €2.5 billion to enhance social investment, support social economy actors to start up, scale-up, innovate, and create jobs.

2. Create incentives for funding and investment

Governments can grow the social economy by investing public funding and by encouraging investment by mainstream finance providers and social investors. Mechanisms include fiscal incentives, alleviating regulatory barriers, leveraging tax frameworks, de-risking private funding and developing hybrid mechanisms that blend public and private investment. The government of Singapore set up the Singapore Centre for Social Enterprise (raiSE) to offer grants to Singapore-based social enterprises to develop the sector and address human-centred social gaps in the country through the collaboration of public and private actors.

3. Expand education and research

Expanding and enhancing research and education on social innovation, social enterprise and the social economy in schools and universities can develop both the local knowledge and the talent pipeline. For example, Scotland launched the Social Enterprise in Education programme in 2007 to increase the understanding of the social economy and to promote awareness among youth and students.

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