These indicators have long been presented in two subsets: a list of four economic indicators and a list of five social indicators (Defourny 2001, 16-18). For comparative purposes however, it appeared more appropriate to distinguish three subsets rather than two, which allows highlighting forms of governance specific to the EMES type of social enterprise.

Three indicators reflect the economic and entrepreneurial dimensions of social enterprises:

• a) A continuous activity producing goods and/or selling services
• b) A significant level of economic risk
• c) A minimum amount of paid work

Three indicators encapsulate the social dimensions of such enterprises

• d) An explicit aim to benefit the community
• e) An initiative launched by a group of citizens or civil society organizations
• f) A limited profit distribution

Finally, three indicators reflect the participatory governance of such enterprises:

• g) A high degree of autonomy
• h) A decision-making power not based on capital ownership
• i) A participatory nature, which involves various parties affected by the activity

It must be underlined that such indicators were never intended to represent the set of conditions that an organization should meet to qualify as a social enterprise. Rather than constituting prescriptive criteria, they describe an “ideal-type” in Weber’s terms, i.e. an abstract construction that enables researchers to position themselves within the “galaxy” of social enterprises. In other words, they constitute a tool, somewhat analogous to a compass, which helps the researchers describe the position of the observed entities relative to one another and eventually identify subsets of social enterprises they want to study more deeply. Those economic and social indicators allow identifying brand new social enterprises, but they can also lead to designate as social enterprises older organizations being reshaped by new internal dynamics.

Two EMES seminal books

The Emergence of Social Enterprise (Borzaga and Defourny, 2001) traced the most significant developments in social entrepreneurship emerging in Europe.

Social Enterprise. At the crossroads of market, public policies and civil society (Nyssens, 2006) develops a comparative European analysis within a multidisciplinary framework to explore social enterprises.

Comparisons with other definitions

Other definitions of social enterprise and/or social entrepreneurship have been developed by various others researchers. In an attempt to promote dialogue and mutual understanding among approaches and groups of researchers across the world, J. Defourny and M. Nyssens published a comparative analysis of the more influential “schools of thought”, which is available in several languages:

1. The EMES approach of social enterprise in a comparative perspective, EMES WP 12-03
2. L’approche EMES de l’entreprise sociale dans une perspective comparative, SOCENT WP 13-01
3. El enfoque EMES de la empresa social desde una perspectiva comparada, CIRIEC-España. Revista de economía pública, social y cooperativa, no. 75, 7-34. Also as EMES WP 13-01 available here
4. Chinese version available in Kuan, Y.-Y., Chan, K.-T., Lu, W.-P.& Wang, S.-T. (2012), Social Enterprises in Taiwan and Hong Kong: a Comparison, Chu Liu Publ. Taipei, 27-60. You can download it here

In today terms, the social economy gathers enterprises of the co-operative movements, mutual benefit and insurance societies, foundations and all other types of non-profit organizations which all share some principles making them correspond to the “third sector” of modern economies. Indeed, social economy organisations differ from the private for-profit sector as their primary goal is to serve members’ needs or a broader public interest instead of maximizing and distributing profits to shareholders or members. They are also clearly distinct from the public sector although non-profit organisations may receive public subsidies to fulfil their mission: they are self-governed private organisations with the rule “one member, one vote” in their general assembly.

The economic dimension first insists on the prevalence of the reciprocal impulse in the emergence of these practices. The latter are not based on a contractual agreement motivated by profit; they rather aim at an inter-subjective experience. Their consolidation is then sought through mixing resources, with redistributive public resources and market resources relaying reciprocal resources. The challenge consists in mixing resources in a way that preserves the rationale behind the project, without transforming it into a mere tool.

Some organisations are clearly considered as belonging to the third sector, whatever the meaning given to the term. This is the case, for example, of organisations which are limited to political goals and to the social and cultural self-expression of their members – no one would doubt that NGOs, cultural associations wherein people spend their free time and similar forms belong to the third sector. However, things are getting more difficult with respect to those organisations that provide goods and/or services for others.

The inclusion or exclusion of these organisations will depend on the definition used. Definitions as they are often found in the US imply that only those organisations that do not make a surplus and/or do not distribute it among their members belong to the third sector; this first approach is at first glance especially convincing as long as the organisations considered as belonging to this sector are seen as social, cultural and political bodies, where economic aspects play no or just a very limited role (voluntary organisations, charities, foundations).

However, there also exists a broader and somewhat different definition. According to the latter, the main criterion for deciding whether an organisation belongs to the third sector is the fact that the organisation is governed in a way that ensures that the potential surplus is used and reinvested alongside social criteria. This is ensured through having the organisation governed by stakeholders with a multi-goal agenda, or by a set of different stakeholders, who have to agree on a balanced set of material goals or other purposes; such organisations would then not have to be non-profit, but they would have to be not-for-profit. This second definition is mostly linked with a view that acknowledges that many third sector organisations have an important economic dimension and an economic purpose; this is the case of cooperatives and mutual societies, but as well of new and other forms of “social enterprises”; similarly, nowadays, many voluntary and charity organisations can also be seen as different forms of organizing actions with a clear economic dimension – as contributors to a different, “social” or “solidarity-based” economy.

Finally there can be differences in defining the third sector regarding the degree to which sectorial borders are seen as clearly demarcating it. From what point onwards does a tight link of a third sector organisation with the public authorities turn it into a state-related agency? And from what point does the concern with the economic stabilization and growth of a third sector service provider turn this organisation into an enterprise where concerns with making a surplus are as dominating as in for–profit enterprises? These questions do not only indicate that the boundaries between sectors are often hard to draw and that there are “grey zones” of transition between sectors; they also underpin a viewpoint that argues that it is not the total absence of state concerns and profit considerations which defines a third sector organisation, but rather the degree to which these motives are outbalanced by other ones.

By Adalbert Evers.

References:

To read more about the theoretical debates on this question, see the first introductory chapter in the Third Sector in Europe and the article by Borzaga, C. and Mittone, L. “The multi-stakeholder versus the non-profit organisation” (Working paper, 7, Università degli Studi di Trento, 1997).

On such a basis, the non-profit sector consists of organisations with the following characteristics:

• a) they are formal, i.e. they have a certain degree of institutionalisation, which generally presupposes legal personality;
• b) they are private, i.e. distinct from the both state and those organisations issuing directly from the public authorities;
• c) they are independent, in the sense that they must have their own regulations and decision making bodies;
• d) they cannot distribute profits to either their members or their administrators. This “constraint on the distribution of profits” lies at the heart of all the literature on non-profit organisations;
• e) they must involve some level of voluntary participation by volunteers and/or donors, and they must be founded on the free and voluntary affiliation of their members

For more information, visit The Comparative Nonprofit Sector Project by the Johns Hopkins Center for Civil Society Studies.