The challenges for social enterprises in Italy

How are social enterprises in Italy gearing up to face new challenges and what can start-ups learn from history? A new report sets out the picture.

The role and impact of social enterprise can be evaluated in many ways. We can look at the sectors in which these enterprises traditionally work - social and educational services, employment inclusion for disadvantaged people - but that is not enough.

The social enterprise field is expanding fast. Despite the risk of dissolving into a multiplicity of experiences and approaches, it deserves to be analysed in a way that takes into account recent and 'borderline' expressions. After all, innovation is often fuelled by paths and ways of thinking which diverge from the mainstream.

For example, the contribution of social enterprise can be measured within the wider ecosystem of start-ups which are not only technology related but also have a 'social mission'. This was endorsed in a recent 'Restart, Italia!' report produced by an Italian government task force. This point of view is important in understanding the trends of a sector in which the driving force is represented by generating explicit and reportable social impact, benefitting people and local communities which are going through a phase of profound change.

Iris Network's second edition of the report on social enterprise in Italy is a useful source for updating the numbers, legal and organisational models, activities and, not least, business models. The sector's core is made up of around 12,500 units: a few, 365, are social enterprises formed in accordance with a 2006 law which introduced a legal definition. A larger block is made up of social cooperatives, which is the historical social enterprise model that set the trend at a European level. In a peripheral position, but gradually moving towards the mainstream, two reservoirs of potential social entrepreneurship are emerging. The first is the non-profit sphere: around 22,000 associations, volunteer organisations and foundations are registered with chambers of commerce across Italy, meaning that they have a productive aspect. The second is made up of more than 88,000 for-profit businesses that operate in certain sectors with a high social impact, such as social services, cultural production, education, the environment and others. In fact Italian law recognises a social enterprise because it is active in specific fields. Naturally, this does not mean that these are social enterprises in every respect, but it is a useful measure for defining the new frontline for production with social value between for-profit and non-profit. In other words, the frontier along which "shared value" is being created, as elaborated upon by Michael Porter and Mark Kramer in Creating Shared Value.

How can social enterprises be equipped to withstand this challenge? And what teachings can today's start-ups draw from several decades of history?

The first lesson concerns the emphasis on the community as both an objective and a productive factor for the social enterprise. The involvement of a multiplicity of actors, who are the principal beneficiaries, represents a mission for old and new social enterprises, with the former struggling because of an excessive dependence on public administration. From this point of view, the innovation of new-generation social start-ups lies in their capacity to connect together digital and physical communities, for example through the use of proximity apps able to structure localised social networks.

A second factor concerns the formation and functionality of networks: the most innovative social enterprise experiences work to construct true cooperative districts where the means and aims of the entrepreneurial action are shared with the stakeholders. In this sense, social start-ups can contribute to encouraging the collective aspect of production and consumption in several ways. For example, through applying 'wiki' methods to planning and strategy and also by building leadership of democratic and participatory enterprises through a kind of 'e-governance' of the enterprise and the local area.

The third element concerns the sustainability of the enterprise, in regard to which the more established social enterprises have finally started to act. Some are integrating self-generated resources - and 68% of social enterprises claim to be self-financing - with dedicated financial products that allow investments able to scale innovation up to big numbers. It is no coincidence that a few weeks ago saw the launch of the first national social bond, which collects capital at market rates and then distributes it under favourable conditions to social enterprise development projects.

Finally, human capital. Compared to other business forms, social enterprises have real biodiversity here as models of shared entrepreneurship; 68% of social enterprises are developed by a group of people who share a common interest. Therefore it is important to focus on management practices which can respond to complex motivation, where the economic incentive is substantially integrated with sophisticated non-economic incentives.

Drawing this together, it should be possible to construct a policy agenda which is able to combine data from past experience and the innovative contributions made by the various generations of Italian social entrepreneurs. Putting social impact was at the centre was recently exemplified in a seemingly unlikely place. At the architecture Biennale in Venice, the United States pavilion was hung with dozens of banners describing social innovation projects. As a banner was pulled down to read more about the project, it triggered the lifting of a counterweight, revealing the problem the project was intended to solve.

Paolo Venturi is director - AICCON Research Institute on Co-operation and Social Economy at University of Bologna. Flaviano Zandonai is content co-ordinator at the Iris Network and works for the communications team at Euricse - the European research institute on co-operatives and social enterprise.