Social Enterprises: Entrepreneurship with a human dimension

Social Entrepreneurship (SE) and the whole ecosystem of the Social Economy at large, are gaining increased momentum as they increasingly contribute to the economic development of many European Union (EU) member states. At the same time, SE contributes, among other things, to the fight against poverty, social exclusion, the provision of jobs, the response to the energy crisis, and the digital transition; it is a fundamental part of the reengineered European Social Fund (ESF) plan (2021 -2027).

In 2011, the European Commission proceeded with the establishment of the Social Business Initiative. Its main purpose was, and remains to this day, ‘to contribute to the creation of a favourable environment for the development of social enterprises and the Social Economy in Europe’.

SE and the Social Economy more broadly, are gaining a growing momentum as they create innovative responses to today's economic, social, and environmental challenges. Concurrently, in aligned combination, both promote the creation of sustainable jobs, social integration, the improvement of local social services, and territorial cohesion.

Recognizing the potential and prospects of the Social Economy during the 2014-2020 programming period, the EU allocated around €2.5 billion through its budget to support it--an amount which will be further increased in the 2021-2027 period.

The bulk of the ESF + EU budget is designed and implemented as a partnership between the European Commission, national and regional authorities, social partners and stakeholders with an approach of "shared management".

In the context of the efforts to build a strengthened sustainable operating model (Sustainability) and business responsibility (Corporate Responsibility), the EU Member States, including Cyprus, have committed to facilitating entrepreneurship. It is a key pillar of the Government's development policy (Sustainable Finance) and is expected to contribute to improving the competitiveness of the economy and the business environment, as well as to the creation of jobs.

SE is characterized as Europe's development vehicle for addressing the crucial social problems of structural unemployment and poverty. At the same time, SE can be added to the toolbox of solutions for strengthening economic activity and local development; dealing with the issues of ecology, education, and health; mitigating inequalities, and supporting vulnerable social groups. SE is a distinct form of entrepreneurship that aims to achieve a social goal, through the creation of social value.

SEs are established by people who hold the vision and perseverance to achieve the goal of social change and the attainment of lasting solutions. These individuals apply basic principles of Entrepreneurship in the operation of their organisations. A critical element that separates ‘social’ from traditional businesses is their main goal. SEs aim at solving specific social problems and not necessarily at achieving a positive economic result--they use the latter as a means for the success of their purpose.

However, we should not ignore the fact that Social Enterprises operate in the same way as conventional enterprises, with the difference that at the centre of their mission we find the social purpose. They have a regular structure, planning, organization, administration, and audit. They mainly reinvest their profits, and create jobs, while helping with social reintegration and inclusion. The mission of these social organisations is to make a profit to sustain their social purpose. Traditional business models actually have to meet and embrace the sustainable social aspects of operations.

In Cyprus, the responsibility for Social Entrepreneurship issues has been transferred to the Service of Cooperative Companies (CSSDA) as of October 2020, by the decision of the Council of Ministers.

In December 2020, the Social Enterprises Law of 2020 (Law 207(I)/2020) was published in the Official Gazette (Cyprus). For the implementation of the Law (primary legislation), the issuance of secondary legislation, with special Regulations, is expected. CSSDA, as the competent Authority for Social Enterprises, has proceeded with the preparation of the draft of the Regulations on Social Enterprises, which have been submitted to the House of Representatives and their discussion has begun in the relevant committee of the House.

The CSSDA aims to create and maintain the Registry of SEs, in a spirit of cooperation and consensus with the House of Representatives and to regulate the issues as defined in the Law.

Specifically, the proposed Regulations regulate issues concerning, among others: The income of Social Enterprises, as well as SEs administration, purposes, annual financial statements and annual reports, compulsory liquidation or deregistration, statute or SEs special regulations, exemptions and grants, examination of complaints against social enterprises, instructions, guidelines from the competent authority and reporting/on-site audits, ongoing obligations, Ultimate Beneficiary Owners (UBO), and the cooperation of the competent authority with other compulsorily involved government agencies.

It is understood that these businesses are still at a very early stage, but they already have a significant social impact in Cyprus, as well as, they are already active and demonstrate very positive results, both at a business and a humanitarian level. In a sustainable modus operandi, the social goals of a business should be pursued and interact with the society with which it coexists and operates.

Lawyer, Banking & Financial Services, Regulatory Corporate Sustainability Governance, LLB. LLM. LPC, CISL, University of Cambridge.