Draft Council Recommendation on the social economy – one step forward, two steps back?

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(1st August 2023) On 13 Jun 2023 the Commission presented a proposal for a Council Recommendation on developing social economy framework conditions {SWD(2023) 208 final}

The aim of the Recommendation, namely is “to create favourable conditions for social economy organisations to thrive and grow, and raise awareness of their potential, particularly in creating quality jobs, supporting innovation and social inclusion.” Indeed in many Member States the social economy – or third-sector – plays an important role in the delivery of social and welfare services, and is present also in other sectors.

However, if the aim is to ‘support an even development of the social economy across Europe’ we would need a common European definition of what a social economy ‘entity’ is - and what it is not. The Recommendation, rather than providing a definition only gives a loose description of what constitutes the social economy, i.e., that it is made up organisations that are independent of public authorities and who conform to certain principles and features of the social economy as developed in different Member States (see Article 4).

We miss in the Recommendation something about how the social economy relates to the private (profit-making) sector. Indeed, while the Recommendation says that the social economy is independent from public authorities, it does not say that is independent from profit-making companies. For EPSU this would be especially needed for social economy organisations providing social and care services. Also lacking is clear support for more collective bargaining in the social economy and respect for sectoral collective agreements. Too often social economy jobs are poor quality and providers do not have a collective agreement.

Health, social and welfare services are public services and should be available to all people in need. To achieve this we need a human rights-based approach and strong regulation in the general interest. In many Member States, the social economy has traditionally made a significant contribution to welfare systems (acknowledged in the Recommendation’s recitals, points 4, 11). In these countries there are legal frameworks that apply to ensure social economy organisations ‘…do not seek to maximise efficiency gains and profits but to create positive societal outcomes' (point 16).

We miss in the Recommendation any reference to the need to develop and/or strengthen such legal frameworks. While Member States are asked to ‘develop policy and regulatory frameworks that enable and support the social economy’ (Article 9) there is very little about the necessary legal frameworks. Most of the Recommendation deals with access by social economy entities to finance, including EU funding. As well as more direct public and private funding, the Recommendation encourages better access of social economy entities to public contracts (including as part of a profit-company led bid), as well to State Aid and to favourable taxation frameworks.

It is problematic in our view that the Recommendation promotes the social economy as an investment opportunity for private, profit-making investors. Promoting the social economy under these conditions is at odds with (a large part-of) the social economy’s non-profit making tradition. What is the difference between the social economy and profit-making companies if ‘non-profit’ entities can also generate profits for private investors?

While in theory all sectors are covered by the Recommendation, a key focus is on developing the social economy in social and care services (Article 6) and an explicit reference is made to the European Care Strategy and Child Guarantee. This makes the absence in the Recommendation of anything about the need on protect the public interest and solidarity characteristics of non-profit / social economy organisations who deliver welfare and social care services very worrying. Indeed, by encouraging private investment into not-for profit social care providers it is as if the Recommendation seeks to undermine or water-down these characteristics.

In the Single Market it is in principle not possible to favour certain types of private economic operators over others. By way of illustration, the European Commission Handbook on the Services Directive reminds Member States that they have to justify any requirements that might reserve certain activities to non-profit-making entities. In footnote 94 (on page 33) the Commission acknowledges, “Yet, it cannot be excluded that such requirements can be justified in certain cases, in particular in the social field, as shown by the Judgment of 17 June 1997, Sodemare, Case C-70/95.”

In some countries there are attempts to place limits on profit-making in services ‘in the social field’, including to limit the access of profit-making by companies to public contracts in welfare services. Here the Recommendation could have been helpful in developing the CJEU Sodemare ruling and providing guidance to Member States on how they can reinforce in their national legal frameworks the solidarity and public interest characteristics of the social economy that differentiates it from the profit-making economy. Since the Sodemare ruling there have been other cases CJEU cases such as CONACEE C-598/19 and ASADE C-430/20, as well as the ongoing EFTA court Stendl-Norlandia E-4/22 that support the development of such guidance.

Once the Recommendation is approved by the Council, Member States are expected to adopt or update national social economy strategies within 18 months. The Commission will monitor the implementation of the strategies through regular consultations with Member States. Here Member States should clarify – and strengthen - the (national) legal frameworks for social economy non-profit providers of social care services so that there is no room for profit maximisation in these key services that are fundamental for meeting people’s rights. EPSU expects the Member States to discuss the implementation of the Recommendation with social partners and given the stress on health, social services and welfare especially with EPSU affiliates.

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