Social entrepreneurship is a form of entrepreneurship that responds to problems in society and creates social benefit through its products and services. Social enterprises thus contribute to innovative solutions to social, economic, environmental and other societal problems, providing jobs and social inclusion for vulnerable groups.
The main difference between traditional and social enterprises lies in the purpose of setting up a social enterprise. A social enterprise is not established to make a profit, but to carry out a sustainable activity that has a positive social impact, in line with the principles of social entrepreneurship. These principles are non-profitability, equality of membership and volunteering.
- The principle of non-profitability stipulates that the social enterprise invests its assets and surplus income over expenditure back into its own activity.
- The principle of equality of membership stipulates that an individual founder or owner does not have a dominant influence in decision-making and that decisions are taken by all stakeholders of the enterprise on the basis of the principle of one member, one vote.
- The principle of volunteering stipulates that all stakeholders, i.e. members, employees, volunteers and others, are involved in the operation of the social enterprise on a voluntary basis.
The Organisation for Economic Co-operation and Development (OECD), in cooperation with the Ministry of the Economy, Tourism and Sport and a number of relevant stakeholders from the social economy, has conducted an in-depth policy review on Promoting Social Entrepreneurship and the Development of Social Enterprises in Slovenia, which has been translated into Slovenian. The review also includes an action plan for the development of the social enterprise ecosystem in Slovenia.
The social economy is composed of social enterprises, cooperatives, enterprises for people with disabilities, employment centres and non-governmental organisations (associations, institutions, foundations). They work for the benefit of their members, users or the wider community and produce market or non-market products and services that address a variety of societal challenges.
Benefits of the status of social enterprise
There are certain advantages in obtaining social enterprise status.
Free rent to carry out social enterprise activities
A social enterprise or a non-profit legal entity intending to operate as a social enterprise has the option, under the Physical Assets of the State and Local Government Act, to rent or acquire real estate for use free of charge for a fixed period of time for the purpose of carrying out the activity for which it is established. A free use agreement may be concluded with a non-profit legal entity for the duration of the registration of the social enterprise, up to a maximum period of six months, and with a social enterprise for a maximum period of three years.
Reserved public procurement
The Public Procurement Act allows the contracting authority to invite only disabled people's enterprises and employment centres and social enterprises to participate in the procurement process. Social enterprises can therefore have the exclusive option to participate in the public procurement in the case of reserved public procurements.
Access to donation
Social enterprises with the status of a non-governmental organisation in the public interest are entitled to receive donations from the allocation of part of the income tax for each year. A resident may request that up to 1 per cent of the income tax assessed be earmarked to fund the beneficiaries of the donations. The conditions for obtaining the status of a non-governmental organisation in the public interest are laid down in the Non-Governmental Organisations Act.
Access to financial resources
The Slovenian Export and Development Bank (SID banka), through its financial intermediaries (Primorska hranilnica Vipava and the Slovenian Enterprise Fund), enables social enterprises to obtain micro-loans ranging from EUR 5,000 to EUR 25,000 to cover eligible costs for payments for the purchase of materials, merchandise, payments for services, labour costs and investments in tangible and intangible fixed assets. The loan may be used by the social enterprise to cover eligible costs incurred up to 6 months before the funding application is submitted and up to 18 months after the funding is approved.
SID banka and its financial intermediaries (Sberbank and Gorenjska banka) also allow social enterprises to obtain loans to finance investments in development, research and innovation in amounts ranging from EUR 10,000 to EUR 10,000,000.
Acquiring the status of a non-governmental organisation in the public interest in the field of social entrepreneurship development
Non-governmental organisations are granted the status of a non-governmental organisation in the public interest in the field of social entrepreneurship development by the Ministry of the Economy, Tourism and Sport. A non-governmental organisation shall be granted the status of a non-governmental organisation operating in the public interest in a certain field if its operations in this field exceed the interests of its founders or members and if it is of overall benefit.
The definition and conditions for obtaining the status of a non-governmental organisation in the public interest are laid down in the Non-Governmental Organisations Act. The Rules on the criteria determining the significant achievements of an NGO in the field of social entrepreneurship development in order to be granted the status of an NGO operating in the public interest establishes the criteria for demonstrating the most significant achievements of non-governmental organisations in the field of social entrepreneurship development.
Measuring the social impact of social enterprises
The Institute for Economic Research has developed a Proposed Model for Measuring the Social Impact of Social Enterprises, which aims to demonstrate the importance of social enterprises and to distinguish social enterprises from "traditional" enterprises by demonstrating their positive impact on the wider society or their social impact. The development of the model was funded by the Ministry of the Economy, Tourism and Sport and the Slovenian Research Agency.
The model is a tool for identifying the social impacts that social enterprises create as a result of their activities and enables social enterprises to measure their social impacts and to produce a report on their achievement, which they can use for reporting, presenting to potential investors and decision-makers. It also allows them to plan the development of their business models, systematically plan their activities and assess the achievement of their short and long-term objectives.
Social enterprise reporting based on the model will enable policy makers to design appropriate measures and incentives to support the development of social enterprises and to carry out qualitative and quantitative assessments of the contribution of social enterprises to social welfare.
Reporting on the social impact of social enterprises is expected to become mandatory in 2024, as we aim to provide social enterprises with the opportunity to prepare all the necessary data for reporting in 2023 and to train a support environment to help social enterprises to use the model.
Reporting by social enterprises on the start of social enterprise activities
A social enterprise shall report to the Ministry of the Economy, Tourism and Sport on the start of its activities within one year of obtaining the status.
The social enterprise shall send a letter with proof of commencement of activity (e.g. service contract, accounts or other documents) by post to the following address:
Annual Reporting of Social Enterprises
The social enterprise shall submit its annual report to the Agency of the Republic of Slovenia for Public Legal Records and Related Services (AJPES) within the prescribed deadlines for each type of legal entity. In addition to the mandatory components for each type of legal entity, the annual report shall also be accompanied by a part of the report that relates exclusively to the operations of the social enterprise.
Annual report of a social enterprise
The annual report of a social enterprise must also contain the following:
- a statement of the delimitation of the income from social enterprise activities from income from other activities and other sources, specifying the percentage in relation to the amount of the assets;
- an indication of the income and expenditure from incentives, reliefs and exemptions;
- a breakdown of the number of workers employed for at least nine months of the year and the number of volunteers;
- the method of allocating surplus revenue over expenditure by purpose;
- an explanation of the achievement of the objectives of social entrepreneurship and the purpose of the social enterprise.
In addition, the annual report shall be accompanied by an assessment by the social enterprise's supervisory body of the accuracy and completeness of the information in the annual report. Therefore, before the adoption of the annual report, the supervisory body must carry out an audit of the correctness and legality of the financial and material operations of the social enterprise and the correctness of the keeping of the accounts and the fulfilment of the objectives of social entrepreneurship.
Withdrawal of the status of social enterprise
A non-profit legal entity may renounce its social enterprise status if it considers that it no longer wishes to operate as a social enterprise. The notice or letter of renouncement of the social enterprise status shall be sent by post to the following address:
Economic and Social Council
The policy for the development of social entrepreneurship is formulated by the Economic and Social Council established by the Government of the Republic of Slovenia.
In addition to formulating policies for the development of social entrepreneurship, the Economic and Social Council analyses the needs for the development of social entrepreneurship, prepares development documents, analyses, evaluates and monitors the implementation of measures and policies in the field of social entrepreneurship, and promotes the involvement of municipalities in the definition and implementation of these policies at the local and regional levels. The Council ensures coordination of social economy policies with ministries, government departments, municipalities, social partners and civil society organisations.
Register of social enterprises
The register of social enterprises is maintained by the Ministry of Economy, Tourism and Sport, Social Entrepreneurship, Cooperatives and Economic Democracy Division, in order to collect, process, communicate and make publicly available data on social enterprises. Entry in the register is made when a non-profit legal entity is granted the status of a social enterprise, and deletion is made on the date on which this status is withdrawn.