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On the Development of Germany's Social Enterprises - Background and Characteristics
With the "social economy system" that formed in Germany following the end of World War II and with the influence of the basic philosophy and spirit of the EU's Third System and Employment Programme (TSEP), social enterprises began to appear in West Germany in the 1970s.
1. Development of Germany's social enterprises
With the "social economy system" that formed in Germany following the end of World War II and with the influence of the basic philosophy and spirit of the EU's Third System and Employment Programme (TSEP), social enterprises began to appear in West Germany in the 1970s. Subsequently, the reunification of East and West Germany led to serious unemployment issues, and, coupled with healthcare budget cuts by the government, social enterprises were given formal legal status in 2000 and began to flourish as an important force in the solving of social problems.
Under the auspices of a welfare state, the concept of social enterprises has long been an integral part of German government and business enterprise operation. The importance of social innovation to social progress is even more self-evident. Chancellor Angela Merkel has also begun to advocate social investment as Germany has a different investment model from that of the UK, due to the nature of Germany's welfare state system. Also due to the participation of citizens in community affairs and the advocacy of fair trade, Germany's spirit of social economic practice can be readily seen from the grassroots level up to the government.
2. Development characteristics of social enterprises: Social welfare markets, franchising network systems and internationalization
(1) Mechanisms of long-term social enterprise viability - social welfare markets
Germany is a developed social welfare state with social sector quasi-markets as a basis of operations. It is also one of the few European nations that survived the recent financial crisis relatively unscathed. KfW pointed out in 2013 that this type of quasi-market is the key to long-term and stable operations of social enterprises[1]. Thomas Scheuerle and Wolfgang Spiess-Knafl (2013) also found in their survey of more than 200 social enterprises in Germany that social enterprises in the domain of social services connect more frequently with government agencies and social security and welfare markets. In addition, gaining access to these markets is a key factor in the inception, growth and long-term viability of social enterprises[2].
(2) Franchising service network system
One characteristic of Germany's social enterprises is their franchising network system. Through this they have succeeded in expanding their social enterprise service networks nationally and even globally. For example, Hamburg's Dialogue in the Dark is an international social enterprise with branches in Singapore, Hong Kong and Taiwan. Providing in-home care services for newborns up to one year of age, Wellcome (Die wellcome gGmbH) has 127 teams in 12 German states. Other chain organizations include Joblinge, Youth-to-Youth, dieSTART-Stiftung, Aflatoun, Knirpsenparadies, Hauptschul-Power, MUNTERwegs, Fairplay Franchising and Stiftung Burgermut.
(3) Development of social enterprises with global character
Compared with the majority of social enterprises in Taiwan, which for the most part focus on local development, 53.3% of Germany's social enterprises are local or regional in scope, whereas 8.6% operate at the state level. In addition, 20.5% endeavor to become national in scope; and 15% of all social enterprises operate internationally. In other words, these international-class social enterprises are capable of operating under different systems and in different contexts[3].
Therefore, if it is possible to visit German social enterprises that operate at the international or national level, their development trajectory and experience in international operations will be quite valuable in helping Taiwanese social enterprises to progress to a higher level or to develop internationally.
3. Promoting the growth of social enterprises via social investment
To solve the problems social enterprises have in obtaining financing, and to recognize that investing in social enterprises is a concrete form of social investment[4], Germany has in recent years begun to promote social investment. The purpose of this is to support the development of innovative concepts in the solution of social problems. In addition, Germany is making more funds available to social enterprises as working capital.
(1) Providing operating capital to social enterprises
In 2012 Germany's KfW ("Reconstruction Credit Institute") launched a new financial instrument to promote the growth of social enterprises, which is supported by the Federal Ministry of Family Affairs, Senior Citizens, Women and Youth). Through the "social enterprise fund program," KfW provides €200,000 to social enterprises to match investment from other financial partners, thereby achieving public service goals of expanding social enterprise services and advocacy with this social innovation[5].
If it is possible to visit the German Federal Ministry of Family Affairs, Senior Citizens, Women and Youth, and also KfW, we will be able to understand how cooperation between the government and banks can be achieved, which may serve as a model upon which a Taiwan labor force public benefit trust can be implemented in the future.
(2) Strengthening the social enterprise system and solving social problems with venture capital
Social innovation is an organizational objective that is very important to Germany's social enterprises. Over 40% of all social enterprises indicate that they were the first organization to solve local social issues[6]. Established in 2010, the Munich-based Social Venture Fund strengthens Germany's social enterprise system and promotes the practice of addressing rapidly changing social issues through creativity and enterprise action. The Fund's scope of service now covers the whole of Europe.
Therefore it is desirable to visit the Social Venture Fund in order to explore how its modes of operation affect Germany's social enterprises and how social innovation can be facilitated.
4. Social enterprise research institutions that focus on a combination of experience and theory, and networking
Germany's research institutions place emphasis on the combining of experience and theory as well as the development of linked networks. The Maecenata Institute for Philanthropy and Civil Society, a renowned social enterprise research organization, is committed to the empirical research of civil society activities, NPOs and public awareness. The Centre for Social Investment at the University of Heidelberg, on the other hand, conducts research on the economy, social economic systems, social investment policy development, management and incubation, teaching, networking and consulting.
In addition, Germany also has an EU research branch with social enterprises as its core endeavor, the EMES network, which connects with research centers of universities in other European Union member states to explore how the EU's social enterprises, social entrepreneurship and social economy can be constructed. The organization's research target for 2013 covers the entire globe.
With the "social economy system" that formed in Germany following the end of World War II and with the influence of the basic philosophy and spirit of the EU's Third System and Employment Programme (TSEP), social enterprises began to appear in West Germany in the 1970s. Subsequently, the reunification of East and West Germany led to serious unemployment issues, and, coupled with healthcare budget cuts by the government, social enterprises were given formal legal status in 2000 and began to flourish as an important force in the solving of social problems.
Under the auspices of a welfare state, the concept of social enterprises has long been an integral part of German government and business enterprise operation. The importance of social innovation to social progress is even more self-evident. Chancellor Angela Merkel has also begun to advocate social investment as Germany has a different investment model from that of the UK, due to the nature of Germany's welfare state system. Also due to the participation of citizens in community affairs and the advocacy of fair trade, Germany's spirit of social economic practice can be readily seen from the grassroots level up to the government.
2. Development characteristics of social enterprises: Social welfare markets, franchising network systems and internationalization
(1) Mechanisms of long-term social enterprise viability - social welfare markets
Germany is a developed social welfare state with social sector quasi-markets as a basis of operations. It is also one of the few European nations that survived the recent financial crisis relatively unscathed. KfW pointed out in 2013 that this type of quasi-market is the key to long-term and stable operations of social enterprises[1]. Thomas Scheuerle and Wolfgang Spiess-Knafl (2013) also found in their survey of more than 200 social enterprises in Germany that social enterprises in the domain of social services connect more frequently with government agencies and social security and welfare markets. In addition, gaining access to these markets is a key factor in the inception, growth and long-term viability of social enterprises[2].
(2) Franchising service network system
One characteristic of Germany's social enterprises is their franchising network system. Through this they have succeeded in expanding their social enterprise service networks nationally and even globally. For example, Hamburg's Dialogue in the Dark is an international social enterprise with branches in Singapore, Hong Kong and Taiwan. Providing in-home care services for newborns up to one year of age, Wellcome (Die wellcome gGmbH) has 127 teams in 12 German states. Other chain organizations include Joblinge, Youth-to-Youth, dieSTART-Stiftung, Aflatoun, Knirpsenparadies, Hauptschul-Power, MUNTERwegs, Fairplay Franchising and Stiftung Burgermut.
(3) Development of social enterprises with global character
Compared with the majority of social enterprises in Taiwan, which for the most part focus on local development, 53.3% of Germany's social enterprises are local or regional in scope, whereas 8.6% operate at the state level. In addition, 20.5% endeavor to become national in scope; and 15% of all social enterprises operate internationally. In other words, these international-class social enterprises are capable of operating under different systems and in different contexts[3].
Therefore, if it is possible to visit German social enterprises that operate at the international or national level, their development trajectory and experience in international operations will be quite valuable in helping Taiwanese social enterprises to progress to a higher level or to develop internationally.
3. Promoting the growth of social enterprises via social investment
To solve the problems social enterprises have in obtaining financing, and to recognize that investing in social enterprises is a concrete form of social investment[4], Germany has in recent years begun to promote social investment. The purpose of this is to support the development of innovative concepts in the solution of social problems. In addition, Germany is making more funds available to social enterprises as working capital.
(1) Providing operating capital to social enterprises
In 2012 Germany's KfW ("Reconstruction Credit Institute") launched a new financial instrument to promote the growth of social enterprises, which is supported by the Federal Ministry of Family Affairs, Senior Citizens, Women and Youth). Through the "social enterprise fund program," KfW provides €200,000 to social enterprises to match investment from other financial partners, thereby achieving public service goals of expanding social enterprise services and advocacy with this social innovation[5].
If it is possible to visit the German Federal Ministry of Family Affairs, Senior Citizens, Women and Youth, and also KfW, we will be able to understand how cooperation between the government and banks can be achieved, which may serve as a model upon which a Taiwan labor force public benefit trust can be implemented in the future.
(2) Strengthening the social enterprise system and solving social problems with venture capital
Social innovation is an organizational objective that is very important to Germany's social enterprises. Over 40% of all social enterprises indicate that they were the first organization to solve local social issues[6]. Established in 2010, the Munich-based Social Venture Fund strengthens Germany's social enterprise system and promotes the practice of addressing rapidly changing social issues through creativity and enterprise action. The Fund's scope of service now covers the whole of Europe.
Therefore it is desirable to visit the Social Venture Fund in order to explore how its modes of operation affect Germany's social enterprises and how social innovation can be facilitated.
4. Social enterprise research institutions that focus on a combination of experience and theory, and networking
Germany's research institutions place emphasis on the combining of experience and theory as well as the development of linked networks. The Maecenata Institute for Philanthropy and Civil Society, a renowned social enterprise research organization, is committed to the empirical research of civil society activities, NPOs and public awareness. The Centre for Social Investment at the University of Heidelberg, on the other hand, conducts research on the economy, social economic systems, social investment policy development, management and incubation, teaching, networking and consulting.
In addition, Germany also has an EU research branch with social enterprises as its core endeavor, the EMES network, which connects with research centers of universities in other European Union member states to explore how the EU's social enterprises, social entrepreneurship and social economy can be constructed. The organization's research target for 2013 covers the entire globe.
[1]The financial structure survey conducted by KfW in 2013 on more than 200 social enterprises in Germany reveals that as an organization matures, the proportion of its income from government service procurement also increases. For example, the percentage is about 10% in the first 4 years, 15% between Year 5 and Year 19, and about 35% if the organization's age is above 30 years.
[2]Thomas Scheuerle and Wolfgang Spiess-Knafl, Mapping Social Entrepreneurship in Germany - A Quantitative Analysis, Working Paper August 2013, pp 22-23.
[3]See Note 2, p. 19.
[4]Volker Then, Investment in Social Enterprises: A German Perspective, May 30th, 2013.
[5]By interviewing social enterprises, KfW has come to appreciate the main challenges associated with social and economic objectives, including goals that have both social and economic implications, social impact assessment, self-motivation and demand of social entrepreneurs, and the lack of financial capability. Thomas Scheuerle, Social Enterprises as an Investment Economics in Brief, KFW Economic Research, No. 24, 17 September 2013.
[6]See Note 2, p. 23.