Labels for the Social Economy

The guide maps a wide range of labels specific or available to social economy entities. The mapping analyses the purpose, benefits and challenges of 17 public and 9 private specific labels for the social economy, 11 broader impact labels, 4 solidarity and impact finance labels, 3 ESG finance labels and 6 implicit labels. Labels relevant to the social economy can be classified into three broad categories:

Specific labels for the social economy are only available to social economy organisations. They can be managed by public or private entities, each offering different types of benefits. The main purpose of public social economy labels is to identify social economy entities, in particular social enterprises as they can adopt a wide range of legal forms, to channel policy measures. They may include, for example, a legal status for social enterprises (e.g. ESUS accreditation in France, Social Co-operative Enterprise mark in Greece, or the WISE status in Bulgaria and Spain). A public benefit status is also available in most EU Member States to channel preferential tax measures, such as the charity status in Ireland. In some countries, such as the Netherlands and Finland, private social economy labels have emerged from well-organised grassroots movements or networks, usually in the absence of a public sector alternative. Unlike public social economy labels, they do not have tax measures tied to them, can be based on principles rather than rules, tend to be verified by third parties and are more likely to be used across countries.

Specific labels for the social economy ensure that labelled entities, in particular social enterprises, prioritise impact by reinvesting their surplus into their mission through restrictions on surplus or profit distribution. Some social enterprise labels, such as those for co-operatives in Belgium or social enterprises in Italy, also have an asset lock requirement that prevents entities, in the event of liquidation, from distributing their surpluses to shareholders.

Broader impact labels typically identify organisations or products seeking to have positive social and/or environmental impact. They are used by a wide range of organisations and therefore cannot be used to distinguish social economy entities but are open for them to use. For example, some impact labels aimed at companies, such as the Società Benefit (Benefit corporation) status in Italy, the Société à Mission designation in France or the private B Corp certification available globally, are not social economy labels and do not require labelled organisations to have a profit or asset lock in place. Ecological and ethical product labels, such as the EU Ecolabel and Fairtrade can be used by a wide range of organisations, including social economy entities.

Social and solidarity finance labels help to channel finance towards social economy entities. They include labels that identify financial products funding the activities of social economy organisations (e.g. Finansol in France, Financité’s Finance Solidaire in Belgium) and European Union labels for funds (European Social Entrepreneurship Funds) or organisations (European Code of Good Conduct for Microcredit Provision) financing the social economy among other entities.

Implicit labels are not labels per se. They signal adherence to some standards without being explicitly defined as a label. For instance, being a member of a network or an association such as the National Union of Credit Unions for Employees in Romania, CEPES in Spain, ESS France or the Third Sector Association in Italy, can act as a quality label. Moreover, receiving funding from a reputable organisation can signal adherence to investor standards. Local currencies, such as the Sol Violette currency in Toulouse, France, can also act as labels as they only circulate among eligible organisations.

Labels can provide many benefits if they are aligned with the evolving needs of stakeholders, include transparent verification processes and are widely recognised. These include:

• Signalling that an entity operates in alignment with social economy principles and values, differentiating it from other types of organisations;

• Raising visibility and serving as an identification tool for stakeholders to channel their actions towards the social economy, such as (i) donations, (ii) consumption choices, (iii) preferential tax measures, (iv) funding and (v) procurement decisions;

• Facilitating the identification and operation of social economy entities across borders;

• Improving trust in the social economy by serving as markers of credibility, transparency and accountability.

The uptake of specific labels for the social economy can be improved if a range of challenges are addressed. They include:

• Low awareness of the label;

• Limited incentives, such as preferential taxation, social procurement clauses or other policy measures, associated with the label;

• High administrative burden and costs associated with obtaining and maintaining the label;

• Proliferation of labels, which may lead to confusion and loss of trust in the labels and the social economy more broadly.

The guide provides a practical checklist of questions that is aimed at policy makers but can also be used by private labels managers to design, implement and evaluate labels for the social economy. The actions outlined in the guidance do not necessarily follow a chronological order.

When designing labels, label managers can (i) define the label’s purpose and (ii) develop standards that align with this purpose. Defining the label’s purpose involves assessing the needs of label stakeholders such as social economy entities, policy makers, consumers, other businesses and investors, to set the label’s goals This helps to determine the appropriate/relevant policy measures or incentives associated with the label that are balanced against efforts to avoid unnecessarily onerous reporting burdens that could create significant, potentially insurmountable, costs, especially for smaller entities. This balanced design approach enhances labels’ credibility and effectiveness while promoting a broader adoption of their goals. Developing standards requires a thorough review of existing labels to ensure that new ones either complement or supersede them. It is also important to consult stakeholders to evaluate their ability to comply with and adopt these labels. This consultation helps identify and minimise risks, such as high administrative burdens and/or a lack of incentives for adoption. Additionally, when designing the scope of the standards, it is important to allow for adjustments that may be necessary during implementation to address challenges or comply with regulations.

Label implementation involves (i) considering relevant legal frameworks, (ii) identifying and mitigating risks, (iv) assessing and (v) monitoring compliance with standards, and (vi) scaling the label. Policy makers or social economy entities managing a label need to first align the label with relevant laws, including competition or consumer protection laws. In particular, tax measures and subsidies should align with national and international state aid and competition laws. Labels such as social enterprise or public benefit status can help bridge gaps between organisational and tax law. These labels can also identify entities providing services of general economic interest, which may be exempt from EU State Aid rules under certain conditions. Testing the label through a pilot can help to identify and mitigate potential risks such as high administrative burden and lack of resources among targeted entities to ensure compliance with the label’s requirements. Transparent and thorough assessment and monitoring of compliance with standards through independent assessment mechanisms, expert committees awarding the label and periodic reporting can significantly enhance the label’s credibility. Nevertheless, burdensome reporting requirements can make the label less accessible to smaller entities with fewer resources. Scaling the label through effective communication, a sustainable financial model and possible expansion across borders can increase awareness about the label and maximise the number of eligible entities benefitting from incentives associated with the label. However, label expansion without strong control mechanisms can make the standards too broad or weaken the assessment rigour, undermining the label’s credibility.

Periodic label evaluations can ensure that the label continues to meet stakeholder needs, communicate the label’s impact and act as evidence for any changes to the label. They usually involve (i) assessing the label’s effectiveness and adapting over time, followed by (ii) managing change. Assessing effectiveness includes answering evaluation considerations with relevant data at pre-determined time intervals and, if needed, implementing changes based on the evaluation results. Managing change usually involves setting a clear implementation timeline and communicating about the changes.