Venelin Terziev1, Nelly Bencheva2, Teodora Stoeva3, 4 Ekaterina Arabska STATE OF SOCIAL ENTREPRENEURSHIP IN BULGARIA AND EUROPE Summary: The paper presents the state of social entrepreneur- ship in Bulgaria and Europe as a part of social economy develop- ment. Social enterprises are discussed as a sustainable business model with a clear social impact, a clearly defined target group, and a specific business purpose. The analyses consider economic, so- cial, political and ecological benefits of social entrepreneurship in the context of contemporary strategic priorities in Europe. Recom- mendations are provided regarding needed support for social enter- prises development and sustainability assurance. Keywords: social economy, social entrepreneurship, social enterprise 1 Vasil Levski National Military University, Veliko Tarnovo, Bulgaria, Angel Kanchev University of Ruse, Bulgaria, e-mail: [email protected] 2 Agricultural University, Plovdiv, Bulgaria, e-mail: [email protected] 3 Agricultural University, Plovdiv, Bulgaria, e-mail: [email protected] 4 Vasil Levski National Military University, Veliko Tarnovo, Bulgaria, e-mail: katya_ [email protected] State of social entrepreneurship in bulgaria and europe Globalization, the State and the Individual, No 4(20)/2018 51 1. Introduction The promotion of innovative ideas in public policy is crucial to sup- port the values of an active-oriented problem solving social system. These views underlie the ongoing social reforms in various countries and focus on the development of social entrepreneurship and the role of social entre- preneurs. An understanding is underlined that namely social entrepreneurs have the capability through localization of usable resources - human cap- ital, buildings and equipment, to find flexible approaches to satisfy unmet social needs (Rusanova, 2011). In the last decade the concept of develop- ment and promotion of social economy and social entrepreneurship are part of EU policy to tackle the social exclusion of persons in a vulnerable position. Also, the model of social economy is one of the key instruments for achieving social objectives within the framework of the sustainable and inclusive growth. Social benefits are measured by integration and em- ployment of disadvantaged people, the contribution to the process of so- cial inclusion of other vulnerable people, and the economic indicator is expressed by saved public funds for social welfare, on the one hand, and the additional funds compensating the social costs of long-term unemploy- ment. What is important to happen is to create suitable conditions for the development of social enterprises with the widest possible range - vulner- able groups themselves and their problems are diverse and different, and the “answer” to their needs must be flexible in order to be efficient and effective; “way to solutions” is not important (the path may be different, as are diverse and vast opportunities for economic initiatives) that leads to the result itself, the result is important - better integration and sustainable tackling of social exclusion (Kumanova and Shabani, 2013). Social Enterprise Unit Strategy (July, 2002) accepts the following defi- nition (Brown, 2014): A social enterprise is a business with primarily so- cial objectives, whose surpluses are principally reinvested for that purpose in the business or in the community, rather than being driven by the need to maximise profit for shareholders and owners. Instead of excluding in- vestors as stakeholders in social enterprises, the definition allows for the possibility that there may be investors in social enterprises, who will ex- pect a share of the profits in return for their investment risk. Social Enterprise Alliance suggests the following basic working defi- nition: A social enterprise is an organization or initiative that marries State of social entrepreneurship in bulgaria and europe Globalization, the State and the Individual, No 4(20)/2018 52 the social mission of a non-profit or government program with the mar- ket-driven approach of a business (Social enterprise alliance). In recent years, traditional non-profits have become more entrepreneurial and in- terested in generating earned revenue to supplement charitable contribu- tions, while traditional businesses have begun to integrate greater lev- els of social responsibility and sustainability into their operations. The growth of social enterprise is a reflection of this convergence and helps fill the void between traditional approaches that have focused singularly on creating either social impact or financial returns. Social enterprises stand out as an alternative model of entrepreneur- ship by providing an innovative way of civic engagement and participa- tion, i.e. entering the public sphere and the labour market at the same time. The European Commission defines a social enterprise as „an operator in the social economy, whose main objective is to have a social impact rather than make a profit for their owners or shareholders. It operates by provid- ing goods and services for the market in an entrepreneurial and innovative fashion and profits are used primarily to achieve social objectives. It is managed in an open and responsible manner and, in particular, involves employees, consumers and stakeholders”. The main objective of social businesses is to generate a significant impact on society, the environment and the local community, by providing employment and dealing with so- cial and civic issues. Social enterprises focus on value-creation as opposed to the focus on value appropriation (Get ready for social entrepreneurship). The concept of social enterprises has grown up in Europe from 19th- century roots in the social economy, which is usually defined as the legal forms of co-operatives, mutuals, associations and foundations. In the last 20 years a new strand of social enterprise has grown in stature, based on more conventionally-structured businesses which go beyond corporate social responsibility by entrenching in a company’s constitution three principles: a primary social objective – the purpose of the business is to address social or environmental problems, and it trades in the market to do this; limited distribution of profits – profits are primarily used to further the enterprise’s social objective, and are reinvested rather than being paid out to financial investors; transparent and participative governance, in- cluding involvement of key stakeholders such as users and workers. These three principles have been adopted by the EU’s Social Business Initiative. A large part of the social enterprise sector identifies as the social economy, State of social entrepreneurship in bulgaria and europe Globalization, the State and the Individual, No 4(20)/2018 53 which comprises enterprises which have fully democratic ownership and employ capital to serve the needs of members and the community (Policy meets practice - enabling the growth of social enterprises). Social enterprise is a different way of doing business. A social en- terprise is a business that trades for a social purpose. The social aims of the business are of equal importance to its commercial activities, and this combination is often referred to as the ‘double bottom line’. Like any busi- ness, a social enterprise focuses on generating an income through the sale of goods and services to a market but the added value of a social enterprise comes from the way in which it uses its profits to maximise social, com- munity or environmental benefits (A business planning guide to develop- ing a social enterprise). Social enterprises have three common characteristics (Mapping Lon- don’s Minority Ethnic Social Enterprises): Enterprise Orientation: they are directly involved in the production of goods and the provision of ser- vices to the market. They seek to be viable trading concerns and make a surplus from trading; Social Aims: have explicit social aims such as job creation, training and provision of local services. They have ethical values including a commitment to local capacity building. They are accountable to their members and the wider community for their social, environmental and economic impact; Social Ownership: they are autonomous organisa- tions with a governance and ownership structures based on participation by stakeholder groups (users or clients, local community groups, etc.) or by trustees. Profits are distributed as profit sharing to stakeholders or used for the benefit of the community. Social enterprise is a means by which people come together and use market–based ventures to achieve agreed social ends. It is characterised by creativity, entrepreneurship, and a focus on community rather than in- dividual profit. It is a creative endeavour that results in social, financial, service, educational, employment, or other community benefits (Talbot, Tregilgas, and Harrison, 2002). Social enterprises are diverse. They in- clude local community enterprises, social firms, mutual organisations such as co-operatives, and large-scale organisations operating nationally or in- ternationally. There is no single legal model for social enterprise. What they have in common is a commitment to meeting the social and financial double bottom line, with some adding a third – environmental. While some social enterprises start off as businesses, most are in transition from their State of social entrepreneurship in bulgaria and europe Globalization, the State and the Individual, No 4(20)/2018 54 beginnings as voluntary sector organisations,