Prioritizing social goals over profit has become a crucial part of our economic landscape. In this interview, Ricardo Rio (PT/EPP), Mayor of Braga and rapporteur for the CoR opinion on Creating an enabling environment for the social economy, highlights the significance of the social economy within regions and cities, its relation to the green transition, and the potential challenges faced along with strategies to bolster collaboration. Through funding support, policy alignment, and regulatory simplification, regions and cities can unlock the full potential of the social economy, ensuring a more inclusive and sustainable future for all.
1. What is social economy? Why does it matter to regions and cities?
Social economy refers to a broad category of economic activities and organisations that prioritise social objectives over profit maximization. It encompasses a wide range of entities, including cooperatives, non-profits, social enterprises, mutual societies, and community organisations. These entities operate with the primary goal of addressing social, cultural, or environmental needs and reinvest any profits generated into achieving these objectives, rather than distributing them to individual shareholders. Social economy organisations often engage in activities that promote social inclusion, job creation, environmental sustainability, and community development. They can be found in various sectors, including healthcare, education, housing, agriculture, and more.
Social economy matters to regions and cities for different reasons and we at CoR are working a lot to reinforce this. First, I believe that social economy organisations play a crucial role in fostering community development. They are often deeply rooted in their local areas, providing essential services, creating jobs, and contributing to the overall well-being of communities.
Social economy organisations often focus on marginalized or vulnerable groups, helping to address social inequalities. They provide opportunities for people who may face barriers in the traditional job market, such as individuals with disabilities, ex-convicts, or immigrants. By prioritizing local development and sustainability, social economy organizations can contribute also to the resilience of regions and cities. They often source locally and reinvest in their communities, which helps build a more robust local economy.
I also want to highlight that promoting a diverse economy is crucial for the stability and growth of regions and cities. Social economy organizations contribute to diversification by offering services and products that might not be addressed by the private sector. Finally, I believe that social economy organizations often collaborate with governments, businesses, and other non-profit entities. These partnerships can help address complex issues more effectively and efficiently at local level.
2. In the context of the green transition, how can cooperation between cities/regions and the social economy sector be enhanced?
In the context of the green transition, cooperation between cities/regions and the social economy sector is vital. To enhance this cooperation, we can focus on several key areas that are relevant. For instance, I would tell you that we need to establish strong partnerships and networks that bring together local governments, social economy organizations, and relevant stakeholders. These partnerships can foster information sharing, joint initiatives, and the pooling of resources to drive green projects and policies. I think we need dedicated funding and investment opportunities should be made available for social economy initiatives in the green sector. This can be achieved through grants, subsidies, or preferential financing terms to support eco-friendly projects and the growth of social enterprises. We also should provide training, workshops, and technical assistance to social economy organizations to enhance their knowledge and capabilities in green technologies and sustainable practices. This empowers them to play a more active role in the green transition.
I also stressed in my CoR opinion that local governments should use their purchasing power to support social economy enterprises engaged in green activities. Implementing sustainable procurement policies that favour social economy suppliers can create a market for environmentally friendly products and services. And, of course that the local and regional policies must align with the goals of the green transition and social economy. This involves integrating social and environmental criteria into urban planning, sustainability strategies, and economic development plans. I also should think that cities can establishing incubators or innovation hubs that focus on green and social economy initiatives can foster collaboration, knowledge sharing, and the development of sustainable solutions.
And finally, one important thing: the European Union should work on regulation and administrative procedures to make it easier for social economy enterprises to operate in the green sector. This can involve simplifying permitting processes and offering regulatory incentives.
3. What are the main challenges hindering the social economy from reaching its full potential?
This is an important question, because social economy sector faces several challenges that hinder it from reaching its full potential. First, there is still limited access to capital, because many social economy organizations struggle to secure the necessary funding and investment to grow and expand their impact. Access to affordable capital is often limited, restricting their ability to scale up their operations.
A significant challenge is the lack of awareness and understanding of what social economy organizations do. This can delay their ability to attract support, customers, and investors. I would add also that complex and burdensome regulations can be a significant challenge for social economy organizations. They may face regulatory obstacles that make it difficult to operate or expand their activities.
In some sectors, social economy organizations face strong competition from for-profit businesses. These businesses may have more significant resources and a competitive advantage, making it challenging for social enterprises to thrive. I stress that we should create a more friendly environment for social economy actors to help them to gain access to markets.
Sometimes, ensuring financial sustainability is a challenge. Social enterprises need to generate revenue while pursuing their social mission, which can be a delicate balance. And this is important to ensure its long-term sustainability of social economy organizations. Many rely on grants or donations, which may not be a reliable source of income.
Topics like state aid, taxation, public procurement, reliable data are always mentioned in this context.
But I would say that one major challenge towards social economy reaching its full potential is the need of a stronger political commitment and a better alignment between different levels of government in order to advocate for the SE, to support its growth and to acknowledge its importance in each community.
This interview was done in framework of the CoR Young Elected Politician Programme.