Definition of the Social Economy


The time is certainly ripe for an entrepreneurial approach to social problems. Many governmental and philanthropic efforts have failed, far below our expectations. The main institutions in the public sector are often seen as inefficient, ineffective and inadequate. Social entrepreneurs are needed to develop new models for the new century. (Dees J. Gregory, The Meaning of “Social Entrepreneurship”, Duke University, 1998.)

Unlike the concept of socialist self-management which is familiar to us from our history, the concept of social economy is entirely based on the market, with an important role of the state in creating of an institutional framework and support for development of this concept.

In essence, the social economy concerns about a large number of companies and organizations which aim to subordinate their profit from economic activities to maximization of social benefits for the society. The economic crisis, which hit almost all of the world economies, has shown that companies that operate on the principles of social economy were extremely flexible to the impact of the crisis, and then they have become a generator for the economic recovery. The social economy has shifted from the economic periphery and it took an important place, thereby providing a significant contribution to employment, education, social inclusion and poverty reduction, by creating a balance between economic, social and environmental protection.

The social economy implies that social goals are more important than economic – and that these social objectives are achieved in an economically viable way.

“It includes a number of organizations that operate with the aim to direct its profit towards fulfillment of certain social mission. The mission may relate to health care and cultural needs of the people in the community, education, environmental protection or inclusion of different social groups through job creation”. (SENS)

Whenever a society “stucks” or has a chance to take advantage of new opportunities, it needs entrepreneurs to realize the opportunity, to transform their vision into a realistic idea, then into reality and a new pattern in the society … We need such entrepreneurial leadership … this is a work of social entrepreneurs. (Bill Drayton)

Social entrepreneurship is part of the social economy and it occurs when social problems are solved by using entrepreneurial principles. It is an innovative way for people to solve various economic, educational, health and environmental problems in their community through their business – by joining and using sustainable business models. (SENS)

Social entrepreneurs are not content just to give a fish or teach how to fish. They will not rest until they have revolutionized the fishing industry. (Bill Drayton)

Expansion of social entrepreneurship has arise due to increase of social inequalities and poverty, which resulted from rapid development of globalization. An enormous potential for solving global problems such as poverty, unemployment, environmental pollution, etc. has been recognized in social entrepreneurship.

Social entrepreneurship is unique since it deals with identifying and solving of social problems such as social exclusion, poverty, unemployment, etc.

Unlike traditional entrepreneurship, whose primary objective is the achievement and profit maximization, social entrepreneurship focuses on meeting the needs of society. Therefore, social entrepreneurship is an important driving force for social and economic development.

The key carriers of socially entrepreneurial activities are social entrepreneurs – people who recognize social problems and find innovative ways to address them. Social entrepreneurs see opportunities and potential where others do not see. Due to the strong motivation to improve the quality of life in their communities or the world, it is considered that social entrepreneurs have the capacity required for transformation of the whole society.

The social entrepreneur is an individual, a group, a network, an organization or an alliance of organizations seeking sustainable change through a high level of ideas developed into frameworks in which governments, non-profit and business sector do not invest significant efforts in order to sddress significant social problems. (Dees, J. Gregory, 2004)

Social entrepreneurs simultaneously perform functions of public and private sector. On one hand, they work with people whose needs the state was unable to meet effectively through basic public goods and services. On the other hand, it deals with the shortcomings of the market by creating access to private goods and services on the markets which do not exist due to a to high risk or a small financial gain. With a small market gain or assistance, social entrepreneurs are creating new ways for building sustainable and peaceful societies.

The difference between commercial entrepreneurs and social entrepreneurs is that social entrepreneurs develop business in order to produce a social benefit and impact. Solving of social challenges is their goal and the whole business project is built on this basis. For social entrepreneurs, the social impact is not only a result of their entrepreneurial activities, as in the case of commercial entrepreneurs, but the main objective. (Dees, J. Gregory, 2004)

Social entrepreneurs are people who are aware of the possibilities of how to meet the essential needs which the state budget will not and can not meet; they find the necessary resources (people, volunteers, money and space) and used them for achieving the change. (Thompson, Alvy, & Lees, 2000)

Skoll Foundation defines social entrepreneurs as “agents of social change which use the opportunities that others have missed for improvement of the system, the introduction of new approaches and creation of sustainable solutions for changing of the society.”

Social enterprise is a business created to archive a social purpose in a financially sustainable way. It operates with idea to invest its profit in achieving a clear social mission. This means that the acquired funds do not serve for maximizing the assets of individuals – they are invested in social purposes such as employment of vulnerable, social and medical services, education, environmental protection or cultural activities in the community.

Social enterprise is an enterprise established in order to achieve a social objective. It is different from traditional companies (aimed at maximizing profits) by its purpose and the use of realized profits. Unlike traditional enterprise, a social enterprise pays the investors no profit in the form of dividends, but it re-invests it in expansion and development of its capacity or for the public interest.

Social enterprises are mostly focused on fulfillment of social and / or economic goals of its members or in service provision to socially vulnerable groups in the community.

* Source: “Social entrepreneurship as one of the pillars for development of Montenegro”, CEPS 2017.