Drawing on a recent joint OECD and European Commission report, we will unpack the different types of labels that exist, from those exclusively for social economy entities to broader impact and financial labels, and discuss how they can guide funding, policy decisions and consumer choices.
Host: Shayne MacLachlan, Public Affairs and Communications Manager at the OECD Centre for Entrepreneurship, SMEs, Regions and Cities
Rúben Rebelo is a policy officer currently serving at the Directorate-General for Employment, Social Affairs and Inclusion of the European Commission. He joined the ‘Social and Inclusive Entrepreneurship’ unit in 2021 and is working on the implementation of the Social Economy Action Plan. He was involved in drafting and negotiating the Council recommendation on developing social economy framework conditions, and in publishing the Special Eurobarometer on the social economy in the lives of Europeans.
Sofija Rakcejeva is a policy analyst in the Social Economy and Innovation Unit at the OECD Centre for Entrepreneurship, SMEs, Regions and Cities, where she analyses the contribution of the social economy to policy priorities such as affordable housing and social inclusion, as well as framework conditions that can increase its impact, including labels, taxation and access to finance. Before joining the OECD, Sofija co-authored two technical briefs and contributed to due diligence of microfinance projects at the Council of Europe Development Bank.
Sofija holds an MA in International Economic Policy from Sciences Po and a BA in History, Politics and Economics from University College London.
Transcript
Shayne: Hi, I’m Shayne MacLachlan from the OECD and today, we are talking about the social economy and labelling. I mean a lot of us around the world will head to the shops this Christmas and buy gifts and we’re particularly sensitive to the labels on different products. And I mean, the social economy is an important contributor to the broader economy.
In OECD countries, estimates show that the social economy accounts for between 2 and 10% of national GDP. It employs at least 11 million people across the EU, which represents more than 6% of the employed population. It fosters socio-economic inclusion of vulnerable groups and enhances community resilience. But not many consumers, businesses and indeed policymakers, many listening today, can clearly and easily identify social economy products. So, I am joined today, by Ruben Rebelo, who is a policy officer at the European Commission, and Sofija Rakcejeva, a policy analyst at the OECD, and we’re going to talk about possible solutions to this issue by presenting the latest OECD/European Commission publication on labels for the social economy. This report maps labels available to social economy entities and provides guidance on how to effectively design, implement and evaluate them.
So, let’s go to our first question and thanks so much for being here today with us, Ruben and Sofija, the social economy typically includes entities like associations, non-profit organisations, co-operatives, mutual societies, foundations and social enterprises that are driven by social objectives and putting people over capital, and in most cases, by democratic and participative governance. That sounds like quite a mouthful but let’s just boil it down. Why does it matter?
Sofija: Sure, we often interact with the social economy without really realising it. We can live in a housing association for example, or on a community land trust, eat organic food, buy glasses or receive care from a co-operative, be insured by a mutual society, work and upskill in a work integration social enterprise, get funding from a co-operative bank, volunteer in our local association or donate to a foundation with a cause close to our hearts. So, even if some people are not familiar with the term ‘social economy,’ the reality behind it is very concrete and very close to people.
Shayne: Yeah, I love that idea of doing good and putting people over profit. Thanks, Sofija, for your take. Ruben, from your perspective at the European Commission, what can you add to what Sofija’s already said?
Ruben: We see that the reality that Sofija just described actually really comes through in the numbers. Recently, the Commission published a Special Eurobarometer on the social economy, the first of its kind, and the results show that more than half of Europeans have engaged with social economy organisations in the past five years, for example, as volunteers, donors, customers and members. Three out of four people also say that the social economy is important for the well-being of society in their country. So, citizens see the value of the social economy, the challenge is making these organisations easier to spot and support.
Shayne: Yeah, sounds great. Sofija, what other types of support can we provide to policymakers, I guess, in this challenge?
Sofija: So, yeah. To help with this challenge, policymakers at different levels of government have recognized the importance of the social economy for a number of policy objectives such as social cohesion, employment and resilience, and are implementing policies to support it. The OECD is helping them with this. For example, in 2022, it adopted the Recommendation on the Social and Solidarity Economy and Social Innovation that encourages countries to implement nine building blocks that provide the conditions for the social economy to thrive at international, national and local level.
Shayne: So, yeah, that idea of multi-level governance is certainly important but Ruben, from your perspective at the European Union, and those different relationship partners, what’s your take on that?
Ruben: Yeah, I would say the EU is very close to be aligned with the OECD on this topic. We also see the social economy as a key partner for employment, social inclusion, the green and digital transitions, and the overall competitiveness agenda. And similarly, in 2021, the Commission adopted the Social Economy Action Plan, with 63 concrete actions to be rolled out by 2030. These cover things like legal frameworks for the social economy, state aid rules, taxation, access to markets and finance, etc. And as part of that, as part of the Social Economy Action Plan - in 2023, the Council of the EU adopted a Recommendation on developing social economy framework conditions. It gives Member States guidance on how to adapt their public policies, legal frameworks and institutions to support the social economy, and it also invites them to adopt or update national strategies to do so.
Shayne: Thanks, Ruben. Sounds brilliant. Despite the significant contribution of social economy organisations to our everyday lives and policy objectives, and then consumers, the firms and policymakers, we struggle to spot these products. So, this makes it more difficult for the social economy to access funding, I guess taxation measures, public procurement opportunities or just to attract socially and environmentally conscious consumers. So, labels can obviously help with that. At the same time, there are hundreds of labels out there. How can we cut through the noise to recognise social economy labels, Ruben?
Ruben: Yes, indeed, I’d say we’re seeing a clear shift in what people and investors want. There’s a growing demand for sustainable, inclusive and community-centred goods, services and financial products, and social economy organisations are often the ones that are providing these.
In the Eurobarometer that I mentioned, almost all Europeans said they think businesses should follow social economy-type values. This can be having a social or environmental goal, reinvesting most profits, and involving employees in decision-making.
Labels overall can make those organisations easier to identify for everyone, be it policymakers, consumers, businesses and investors, so that their support can be directed towards social economy organisations. In fact, both the OECD and EU recommendations that have been mentioned highlight how important these labelling systems are.
But in practice, it’s quite a crowded space. There are hundreds of sustainability and impact labels. And just to give an example, the Ecolabel Index alone lists more than 450 ecolabels worldwide. So, it’s no surprise that people feel lost and struggle to know which labels they can trust, and which ones actually relate to the social economy.
Shayne: Thanks, Ruben. I mean, from the OECD perspective, Sofija, we have a guide that we published recently on labels for the social economy, don’t we?
Sofija: Yes, indeed, our joint recent guide on labels for the social economy offers a path, through this labels maze, that Ruben just mentioned. It unpacks four groups of labels that can be useful for the social economy.
The first one are labels that are exclusively available to social economy entities. These are the ones that lead policymakers, consumers, investors and businesses directly to the social economy. They include public labels such as the ESUS accreditation in France and the register for social enterprises in Denmark, and more bottom-up private initiatives, such as Social Enterprise Code in the Netherlands or the People and Planet First verification available globally.
What makes them stand out from other impact labels, is the requirement to reinvest profits into entities’ social and/or environmental mission, which is one of the core principles of the social economy. Even though some of these labels grant access to funding, public procurement opportunities and taxation, many eligible entities do not use them.
Shayne: Great. Thanks, Sofija. And that’s the first category of labels. Ruben, what’s the second group?
Ruben: Yes, well, the second group are broader ‘impact’ labels that social economy organisations can also use, but which are open to many other entities too. These include things like the B Corp certification or the EU Ecolabel.
They can be useful for social economy organisations because they help them reach out to more customers or attract employees who care about impact.
However, it is important to know that these are not designed to identify the social economy as such, they don’t usually require a reinvestment of profits or an asset lock, which are important elements of the social economy. So, they’re helpful for visibility, but they’re not a shortcut for policymakers or consumers who really want to identify, ‘Is this a social economy entity?’
Shayne: Brilliant. Maybe Sofija, you can outline the third and fourth groups of labels that exist.
Sofija: So, yes. The third group of labels that can cut the time spent in the maze, particularly for savers and financial institutions, are financial labels that point to products or entities financing the social economy. They include labels such as Finansol in France and the European Code of Good Conduct for Microcredit Provision available across Europe.
The last labels group briefly touched upon in the report, are the so-called ‘implicit labels’. They are not as such and are not as bright or loud in the label’s world as the others but can quietly signal to stakeholders that entities meet some quality standards. For example, belonging to networks or receiving funding from a well-known investor can identify some social economy entities and put them on the map.
Shayne: So that is great, thanks. I mean, we’re getting a real sense of the importance of labels and how labels can in fact help social economy entities to reach policymakers but not only, they can reach consumers, businesses and financiers. Now, there are rising, growing and continual concerns about the green or impact washing and those elements. How can we tell the good from the greenwashed, Ruben, in your words?
Ruben: Green or impact washing is definitely a risk, but I think we can say that a credible label has three things: First, a clear and measurable standard; second, an independent assessment of whether organisations meet that standard; and third, a public register of who is actually labelled. The more transparent the label is about all this, the better.
But we know that most consumers don’t have the time to dig into the small print of every label they see on a product. Some labels can be vague or even misleading. And that’s why regulation matters.
The EU Directive on empowering consumers for the green transition, for example, requires that any private sustainability label must be based on third-party verification of compliance with publicly available standards. The idea is to protect consumers and make it harder for greenwashing or impact-washing to slip through.
Shayne: And then, I guess on the flip side, there’s all the heavy paperwork, isn’t there? The assessments and reports that come with these labels. Smaller, local social economy entities are often the ones who’d benefit the most from that extra visibility. But they’re also the ones who usually don’t have the time, staff, capacity or know-how to deal with long application forms and assessments and so on. So, Ruben, how can label managers make that process easier for them?
Ruben: Indeed, this is something that comes up a lot in our conversations with social economy organisations. There are three big levers that can make labels more accessible.
The first one is keeping things clear. Standards and application forms should be as straightforward as possible and written in plain language, so that organisations don’t lose hours just trying to understand what’s being asked of them.
Second, building capacities are very important. Label managers can offer training, guidance materials, or even one-to-one support to help organisations through the process. In some cases, they can even fund part of the work needed to meet the standards.
And third, we need to make sure labels bring real benefits. If organisations invest time and resources to get labelled, they should clearly see what they gain, be it access to funding, markets, tax measures or visibility.
A concrete example is the European Code of Good Conduct for Microcredit Provision. This Code sets standards for microfinance providers in Europe. There are clear Provider Guidelines that explain what happens before, during and after the assessment. Microfinance institutions can get technical assistance via the InvestEU Advisory Hub to help them apply the Code. And crucially, complying with the Code is a prerequisite to access EU funding under the InvestEU Social Investment and Skills window and the financial instruments under the ESF+ EaSI strand. So yes, there is an effort, but there is also a strong payoff.
Shayne: It certainly sounds that way. I mean, you mentioned that the uptake of specific labels for the social economy is quite low. I guess the administrative burden associated with them plays an important role, but so does the limited awareness, education, as it were, among stakeholders. So, how can label managers put their label on the map, Sofija?
Sofija: Labels indeed need to reach their users to have a real impact and communication is key. It can be done through networks, communities of labelled entities or information campaigns.
For example, the global People and Planet First verification has an interesting promotion and assessment structure that builds on a network of networks. The label partners are split into three groups. First, promotion partners advertise the verification to their members, but do not participate in the review process. Second, single badge partners review documents from their network members who wish to have the label. Third, double badge partners manage an existing label that meets or surpasses the verification standards and can offer the People and Planet First Badge without requiring a document review.
This model kills two birds with one stone: networks apply the badge’s principles to the local context while verifying compliance with the standards while network members learn about the badge and benefit from global visibility that it brings.
Another example of an interesting communication campaign is the ESUS tour run by the Movement of Ecological, Social and Solidarity Enterprises in France. The campaign organises events across France to promote the ESUS label among around 800 social economy stakeholders, including social economy entities, experts, financial players, entrepreneurs, public institutions and elected officials.
And lastly, as consumers, all of us can probably say that an easily recognisable simple logo makes the labelled product or entity stand out.
Shayne: So, as a comms person, I can really relate to the power of simplicity in visual elements. So, let’s move on to the last question on the OECD podcast today, talking about labels and the social economy, I mean we do you know, whether we like it or not, live in a world where priorities can shift and there’s lots of response to these evolving realities like ageing, climate change, obviously the digital transition and innovation plus more recently pretty big and concerning security issues. But labels for the social economy have to be relevant, don’t they, Sofija?
Sofija: They can remain relevant as long as stakeholders find them useful. Evaluation can help with that through showing if, why and when some aspects of the label should be changed.
The first step of evaluation is deciding on the questions to be asked. It is usually helpful to know four things. First, are the label criteria still aligned with stakeholder requirements? Second, is the verification of compliance with criteria clear, transparent and efficient? Third, do the benefits of the labels make it worth it for the entities to go through the assessment process? And fourth, does the label reach everyone it needs to reach?
The second step is collecting data to answer these questions. Label registers usually have quantitative data that can be analysed such as the number of labelled entities, as well as their sectors and places of activity. And then to complement this stakeholder analysis, stakeholder consultations can explain these quantitative trends. For example, the Danish Business Authority conducted interviews with a number of stakeholders to evaluate the 2014 Act on Registered Social Enterprises. These stakeholders included social enterprises that had chosen to register and interestingly, those that preferred not to do so, researchers, employer and employee organisations and municipalities.
Finally, action needs to be taken if the evaluation results show the need for change. This can include things like changing the standards, the assessment process or the incentives tied to the label.
And then of course, as any change, this kind of change needs to be managed transparently to make the transition smooth. Publicly available and accessible information on what, why and when is changing, for example, through a frequently asked questions page on the label’s website, can bring the stakeholders on board and avoid confusion.
Shayne: Indeed, I mean, we’re just understanding as it were the importance of action in this space. Ruben, I mean in terms of the right environment and conditions, do you want to talk about that? I mean the recent OECD European Commission report shows that labels work best when they’re backed up by the right environment, don’t they?
Ruben: When we talk about the right environment, we’re talking about strong incentives and complementary measures. This means clear legal frameworks, social and green public procurement, business support, dedicated funding and tax measures. So, these are just some examples on how we can build such an environment.
When these pieces are in place, labels become a gateway to real opportunities for social economy organisations.
In the end, we’re talking about the kind of economy people want. In the Eurobarometer, that I mentioned in the beginning, 88% of Europeans say public authorities should develop strategies and legislation to support social economy organisations, and 80% support direct public funding through the social economy. This proves that there is a clear mandate from citizens. And labels, if they’re well designed and well implemented, can be one of the main tools that help turn that mandate into our everyday reality.
Shayne: Thanks, Ruben and thanks, Sofija, of course. Today’s been really educational and informative, I hope you’ve learnt heaps from this, as have I. If you want to dig deeper, and learn more about labelling and social economy, you can go to the OECD website and search for that. Stay in touch for future OECD podcasts, and hope to see you really soon.