European Parliament calls for social enterprise label to help with financing

European social label would act as an identifier for social enterprises

The European Parliament plans to call on the European Commission to introduce a ‘European social label’ to act as an identifier for social enterprises in the Eurozone.

The European Parliament Committee on Legal Affairs and the Committee on Employment and Social Affairs are working together on proposals for a label that will be presented to the European Commission next year.

The rapporteur leading the process is Jiří Maštálka, an MEP from the Czech Republic. He part of the far-left Confederal Group of the European United Left – Nordic Green Left (GUE/NGL) grouping in the Parliament.

Speaking to Responsible Investor, Maštálka’s aide Klara Starostova said the drive was part of a desire to highlight and help social enterprises. “They were resistant during the economic crisis,” she said. “And often give employment to minorities such as the disabled, unemployed or Roma community.”

Originally the plan was to call for a legal definition of social enterprise, but Starostova said: “Legislation is different in every member state and to ask the Commission for a united European framework was not possible. Instead we will ask the Commission to come up with a label to help social enterprises identify themselves. So for example, when they are applying for European funding they will be easily identifiable.”

A draft report on the proposals calls on the European Commission to create a ‘European social label’ for social enterprises to give more visibility and better access to financing, private and public.

It says the Commission should come up with criteria and features for the European social label and that the label should be independent of any social enterprise status in member countries.The draft report also proposes that the Commission should work with member states to develop protection for the European social label to prevent ‘false’ social enterprise, including regular monitoring of compliance.

It also calls for a study of the European social enterprise sector, including legal frameworks and size, and the possibility of Commission financing for innovative social enterprises.

The draft report will be presented to the Committee on Legal Affairs and the Committee on Employment and Social Affairs this month. The final report is set to be delivered to the European Commission in 2018.

It comes as the European Union’s High Level Expert Group on Sustainable Finance is expected to recommend the development of sustainability labels in its final report.

Meanwhile, changes have been made to regulation for European Social Entrepreneurship Funds (EuSEF) to increase the use of the label that identifies funds investing in social businesses. Only seven funds have taken up the EuSEF label since it was introduced in 2014.

The changes widens the range of managers eligible to set up and manage EuSEF funds to include large managers with assets of more than €500m. Also the definition of enterprises that EuSEFs can invest in has been broadened to include “services and goods generating a social return.”

The amended regulation was adopted by the EU Council last month, following the European Parliament’s adoption in September.

Separately, the European Commission is proposing to amend EuSEF regulation to transfer oversight to the European financial regulator ESMA, according to law firm McCann FitzGerald.