Building a social enterprise sector

Inclusive Economy26 May 2014Nina Koopman

The number of jobs in Dutch social enterprises has grown by 25% in the past two years. Together with the academic and financial sectors and the Dutch government, social entrepreneurs are building an environment in which they can flourish.

Social enterprises – impact-driven businesses that do not prioritize profit – are fast becoming popular in the Netherlands and Europe. They could emerge as an influential sector with the potential to become a driver for growth. A recent publication by Dutch network Social Enterprise NL and McKinsey & Company, the ‘Dutch Social Enterprise Monitor 2013’, underlines this potential.

One of the key findings of the Monitor is the tremendous increase in employment at social enterprises. In the past two years, the number of jobs at social enterprises has grown by 25%. In addition, more than 90% of the Dutch social enterprises that participated in the survey are very optimistic about their future and believe their growth will be sustained in the coming period. These findings are particularly striking when compared to prognoses for SMEs, which expect a further decrease in employment of up to 15,000 jobs in 2014.

It is not entirely surprising that we are now starting to see the emergence of social enterprises. There is a growing need for – and opportunities for – innovative business solutions that address complex social issues like youth unemployment, poverty, climate change and a growing elderly population, which are putting strain on the healthcare system. However, compared to other European countries, including the United Kingdom, the Netherlands is still in the early stages of creating an effective ecosystem to support social enterprises.

Social Enterprise NL is taking the lead in building this ecosystem, focusing its efforts on getting a range of different stakeholders to support the sector. We need more role models, social enterprises that are successful and can inspire a new generation of entrepreneurs to prioritize social impact when starting up their businesses. Social entrepreneurs need a network of professional business support organizations to help them build and prove their models. In the past year a range of different incubators, peer-to -peer learning groups and accelerator programmes have been launched. This is a positive development.

In addition, several Dutch universities are developing curricula and programmes on the subject. Utrecht University is at the forefront and recently started the Social Entrepreneur Initiative, a centre which brings together the knowledge on social entrepreneurship at the University.

To boost the social enterprise sector there is also a need to attract more patient growth capital to facilitate growing organizations to scale. Several funds have started to make early stage growth capital available to social enterprises. With the help of Social Enterprise NL, a new social investment organization will be launched this fall. This will be the first Dutch investment organization that helps promising social enterprises to achieve their ambitions by providing growth capital and intensive ‘venture assistance’. Meanwhile, ABN AMRO bank has also started an impact-investing fund aimed at helping social enterprises with a proven scalable concept.

Although the initiative has to come from entrepreneurs, the government is an important player in providing a fertile context for starting and growing social enterprises. The Dutch government is slowly warming to the idea. Social Enterprise NL and the Ministry of Economic Affairs are currently exploring which policy measures are most suitable to encourage a more conducive ecosystem for social enterprises. The exact measures to be deployed have been investigated by examining the experiences of countries with a history of encouraging growth in the social enterprise sector, like the UK, France and Belgium. . As mentioned, the British are leading the field. They have developed a special trademark and even a separate legal entity, the Community Interest Company (CIC). In 2012 the UK launched Big Society Capital, a fund aimed at financing social enterprises. Earlier this year the Social Value Act, which prioritizes social impact in procurement rules, came into force. The Dutch government can be inspired by these examples, but they should start by recognizing the tremendous value of social enterprises to society at large. Only then can they can begin to explore other measures, such as social procurement, extended fiscal benefits, or a separate legal entity for SEs.

These are interesting times for Dutch social enterprises. Building a strong and independent social enterprise sector requires many different stakeholders, from entrepreneurs, academics, investors and corporate businesses to consumers and the government. By sharing experiences and best practices, creating curricula on social business, and doing business together, more and more entrepreneurs can become inspired by ‘doing business by doing good’.