There is no specific legislation on social entrepreneurship in Germany, not even a formal definition, and there are no plans to introduce such acts in the near future, according to a 2014 European Commission report.
A partially relevant concept is the “public benefit” status that recognises organisations which have a social mission and strict limits on profit distribution (although no governance criteria). This status can be awarded to organisations running under various legal forms, which then do not have to pay corporate tax on their profits, but have to face – apart from profit and asset locks – inflexibilities in their accounting policy, such as difficulties in accumulating retained earnings.
Due to traditions and its exceptional significance, a large part of the policy discourse and legal framework concerns the traditional ‘third sector’: the delivery of social services as enshrined in the German Social Code, other social services and various forms of civic engagement dominated by a strong biotope of foundations and associations.
The federal government is keen on preserving the recently established competition in the ‘social economy’ (possibly opening up smaller additional segments of the market) and welcomes the entrance of new, innovative actors. But generally only for-profit providers catering for a wealthier clientele (usually financed through private insurance) have appeared in larger numbers following the liberalisation of the social services sector. Regarding the delivery of social services, small organisations – new-style social enterprises – are only a fringe phenomenon so far and it is widely thought that their market share will remain small in the foreseeable future. They are visible in municipalities where the traditional approach to supplying social services is not financeable or where professional staff is not available (e.g. care for children and the elderly in depopulated rural areas) (Göler von Ravensburg 2013). These markets – unlike in other Member States – have always been dominated by non-public actors: the more or less entrepreneurial welfare organisations or fully entrepreneurial for-profit suppliers.
Nevertheless, the further development of new-style social entrepreneurs is within the focus of the federal government. As part of the National Engagement Strategy of 2010 which covers a very broad spectrum of civic engagement: associations, foundations, volunteering, charities, welfare federations, hospice activities, neighbourhood initiatives, cultural projects, self-help groups – and ‘new’ social enterprises promoting social innovation. The strategy promised:
- To improve (in collaboration with the welfare federations) the framework conditions for social enterprises, including: a better involvement of social enterprises and other actors of the relevant ecosystem (venture philanthropy funds, international donor organisations) in the policy dialogue about social innovation and engagement; a review of the conditions for risk capital investments into public benefit companies; explore possibilities for specific competitions and awards for social enterprises to raise awareness; and include social enterprises as separate target group categories in public support schemes.
- To make public bodies/organisations more aware of, and responsive to, social innovation by creating the necessary forums for exchange; setting up BMFSFJ as the main contact point for social innovators; supporting initiatives aimed at establishing common standards to measuring and reporting impact; promoting cooperation between social enterprises, other businesses, chambers, associations, social institutions, and public actors at different regional levels (Bundesregierung 2010).
Financial support for the starting up and operation of traditional and new-style social enterprises at federal level is channelled through the national development bank KfW, and funds are also available from the EU’s Structural Funds.
The federal government is also committed towards promoting different forms of volunteering – which may be well connected to social entrepreneurship. BMFSFJ carries out since 1999 a large-scale survey of volunteering (Freiwilligensurvey) every five years to collect detailed statistics about the civic engagement of the population.
Although policy emphasis is geared towards ‘classical’ social entrepreneurship topics – work integration, social integration, supply of social services not provided by traditional actors – initiatives in culture or ecology are also promoted. For instance, the Ministry for Environment in Nordrhein-Westfalen supports civic engagement in the protection of the environment, which may include social entrepreneurial approaches. Successful examples of social entrepreneurship in Germany include:
Tengelmann Social Ventures GmbH is a social impact investor which focuses on financing social businesses and supporting social entrepreneurs. Their emphasis is on Internet start-ups and e-commerce, and some of their current companies are Dot.Hiv and Coffee Circle.
Tengelmann Social Ventures GmbH has made it its goal to finance social businesses – profit-oriented models that pursue social goals – and to provide advisory support to social entrepreneurs. The focus of this involvement is on young companies that generate a ‘social impact’, i.e. a positive impact on society. The central theme will be: ‘Social Impact First – Financial Impact Second’.
Ruby Cup is a social business based in Berlin and Kenya. It produces and sells the menstrual Ruby Cup, made from 100% medical grade silicone. Ruby Cup is reusable for up to 10 years, which saves approximately 12 000 tampons per woman. The company works on the “buy one, give one” concept. Every Ruby Cup purchased in industrial countries subsidises the price of a Ruby Cup for a girl in Africa. In 2014, a Ruby Cup was distributed to 5 000 girls in Kenya.
BonVenture finances social enterprises in German-speaking social venture capitals. BonVenture itself is structured as a social business.
In German-speaking countries BonVenture was the first investment company to have taken this approach, offering investors the opportunity to support such activities since 2003. It also contributes to capital with both know-how and contacts, provides guidance in the establishment and growth of their organisation, and thus promotes the development and dissemination of innovative ideas. Investments start at 300,000 EUR.
A map of social enterprises and their eco-systems in Europe: Germany (2014) Available from: www.ec.europa.eu/social/BlobServlet?docId=14214&langId=en
This project has received funding from the European Union’s Erasmus + programme under Grant Agreement No 2016-2-RO01-KA205-024839.
This communication platform reflects the views only of the author and the European Commission cannot be held responsible for any use which may be made of the information contained therein.