Message from the CEO, Nina Schindler
The OECD Recommendation on the Social and Solidarity Economy (SSE) and Social Innovation put forward in June 2022 is a milestone of public acknowledgement of the social economy and cooperatives in particular. Though cooperative banks with their unique legal form, democratic and participative governance fall under the definition of the social economy, they are still facing challenges, in particular due to an EU regulatory framework that is not always compatible with their identity and distinctive business model. The social aspect of cooperative banking is a core element of the self-understanding of our members. Cooperative banks play a crucial role in creating employment, strengthening territorial cohesion and enable an inclusive, sustainable local growth. Thus, the social impact measurement, as suggested by the OECD, is of increasing importance in today’s society. For the EACB, the work on respective indicators on the social and cooperative capacity of our banks is a major concern for the time to come. In this landscape, the OECD international recognition of the social economy and cooperatives comes at the right time to promote their business concepts. It has a great potential to improve the attitude of governments, legislators and supervisors to our special business model by alleviating administrative and compliance burdens deriving from an overly generalist regulatory approach and instead setting up a suitable legal framework in the EU.
3 Questions to Antonella Noya, Head of the Unit on Social Economy and Innovation at the Center for Entrepreneurship, SMEs, Regions and Cities
Antonella Noya is the Head of the Unit on Social Economy and Innovation at the Center for Entrepreneurship, SMEs, Regions and Cities. She organises and coordinates the work on social economy, social entrepreneurship, and social innovation inside her Directorate. She leads the cooperation with the European Union (DG EMP, DG GROW, EEAS) in these areas of work. She represents the OECD at the United Nations Taskforce on Social and Solidarity Economy, and at the GECES (Group of Experts on Social Economy and social enterprises) coordinated by the European Commission.
- What are the core elements and main objectives of your Recommendation?
The Recommendation on the Social and Solidarity Economy (SSE) and Social Innovation, adopted on 10 June 2022 by the OECD Council at Ministerial level, provides an internationally agreed framework for policy action to develop the social economy and social innovation. It enhances the visibility and recognition of the social economy globally. Moreover, it aims to support countries to better capitalise on the social economy’s strong potential to pioneer new business models, provide essential services, create jobs (including for vulnerable individuals), contribute to a fairer, green and digital transition, engage youth, and build communities.
The social economy and its development are shaped by various factors, including a country’s historical and cultural background as well as legal tradition. The Recommendation recognises that SSE terminology, definitions, laws and strategies may vary at national, regional and local level. As a result, the principles it contains can be adapted to different country contexts.
The Recommendation is built around nine action-based building blocks: 1) a culture of SSE; 2) institutional frameworks; 3) legal and regulatory frameworks; 4) access to finance; 5) access to markets; 6) support for capacity building and enterprise development; 7) management, measurement and monitoring of impact; 8) data; and 9) social innovation. They provide the conditions for the social economy to thrive and help address challenges that affect, to a greater or lesser extent, social economy ecosystems in any context.
The OECD is developing an online toolkit to support countries in implementing the Recommendation. The toolkit will include valuable information on the size of the social economy in countries. It will also provide inspiring examples to help countries, regions and cities identify concrete policy measures to further support the development of the social economy and benchmark their progress. We continue
to seek out these international examples from the different stakeholders in the SSE ecosystem.
- How do you see the role of governments in encouraging social impact measurement and monitoring for social economy organisations? Do you see any role for the financial sector in this context, and particularly of cooperative banks?
Social and solidarity economy entities are increasingly requested to demonstrate their social impact. This happens for several reasons, including the move from non-repayable grants to the generation of market income and more diversified financing modalities (including concessional loans and private equity), which triggers the need for such entities to conform to a broader range of accountability requests. Social impact measurement can serve to shed visibility on, and promote recognition of, the impact of the SSE. It can also help entities in the pursuit of their socialmission, support scaling strategies, enable ongoing organisational learning and improve collective advocacy efforts. However, lack of data, skills and resources, compounded by methodological challenges inherent to measuring social outcomes, present obstacles for such entities when undertaking social impact measurement.
What can governments do to make the journey towards greater use of social impact measurement easier and more affordable? They can 1) improve the policy framework, 2) deliver methodological guidance, 3) produce impact evidence and/or 4) support capacity development. There are many initiatives along these four areas that OECD has documented in its recent work.
Policy makers may choose to favour bottom-up approaches that stem from the SSE itself, or that are extensively co-constructed with SSE representatives. This is observed in Canada’s Common Approach, which is co-owned by the entire SSE ecosystem, from philanthropic investors to social-purpose organisations.
The financial sector could act as an important facilitator of social impact measurement uptake in the SSE. Cooperative banks, investment cooperatives and credit unions can help build cooperative capacity in this area through several channels. These may include (i) development of social impact measurement frameworks, methodologies, metrics or reporting principles, such as Oikocredit’s ESG Scorecard and forthcoming or (ii)provision of technical assistance and resources to build managerial capacities such as Global Co-operative Impact Fund’s Technical Assistance facility.
- What does the OECD expect from governments when setting up suitable legal frameworks for social economy organisations?
Legal frameworks can boost the recognition and development of the social economy. They also enhance visibility for SSE entities as agents for job creation with impact and inclusive and sustainable growth. Legal clarity helps policy makers, funders, and investors better understand the business models and governance of social economy entities and effectively support them. SSE entities also benefit from legal clarity which can help them expand their reach through better access to markets, finance and targeted support programmes.
Recent OECD work indicates that the adequate design and effective implementation of legal frameworks for the SSE entail three phases: i) a scoping phase; ii) a development phase and iii) an evaluation/assessment phase.
The scoping phase helps policy makers determine why and when it may be beneficial to adopt and/or revise legal frameworks for the social economy. The need to develop legal frameworks depends on the context, legal tradition and social economy culture in a particular place. The development phase requires strong stakeholder involvement to achieve consensus around the appropriate legal options and approaches, as well as other policy measures such as fiscal policy to complement legal frameworks. Finally, the evaluation phase helps policy makers assess whether legal frameworks have reached their objectives and their potential implications (positive and negative) on social economy development. Evaluation also helps to determine the need for updates or revisions of laws to respond to new developments in the field.
Second Opinion from Rainer Borns, Board Member, EACB & Board Member, Volksbank Wien
Rainer Borns has been Board Member at Volksbank Wien since October 2017. Previously, he was CFO and CRO at Volksbank Wien AG from February 2017 to October 2017. From August 2012 to November 2015, Mr Borns was a member of the board and COO at Österreichische Volksbanken AG. From July 2001 to July 2012, he was a member of the board in charge of the market sector at Österreichischer Genossenschaftsverband (Schulze-Delitzsch). Rainer Borns studied law at the University of Vienna, earning the Dr. jur. degree.
From the cooperative banks' perspective the OECD Recommendation on Social and Solidarity Economy and Social Innovation constitutes a crucial political milestone. The OECD shapes global policies and establishes international standards, therefore this Recommendation is a very important step to increase the visibility of social economy entities, and steer regulation in a way that would frame cooperatives and the cooperative banking sector more appropriately.
As we are noticing, in some jurisdictions, an increasingly critical attitude towards cooperative banks on one side, and a demanding business environment on the other side, the recognition by the OECD of the diverse business models and their unique role for customers, communities and society at large is a very welcome development.
Cooperative entities indeed play a decisive role in the economy and contribute significantly to growth and greater affluence all around the world. A tangible part of these effects is attributable to co-operative banks, their particular model and the financing they provide. In this context it is worth reminding the scale of our business in Europe: cooperative banks with about 89 million member, 227 million customers and 720,000 employees stand for one of the strongest cooperative sectors in the EU.
The current political and legal environment is increasingly focused on embedding environmental, social and governance aspects in business. Cooperative banks can seize this opportunity to stand out and present their activities to the public, demonstrating the cooperative difference and its social value. As the recommendation points out, it will become more and more important for cooperative banks to showcase the benefits they provide and thereby raise awareness. At present, we see that our unique profile, business orientation, social purpose, focus on local communities, and models of financial inclusion are not always noticed or properly taken into account by policy-makers and regulators. In particular, it is at the moment crucial to ensure that the ESRS, the new non-financial reporting standards in the EU, will provide the opportunity for cooperative banks to comprehensively report on their activities and their impact on communities. As such, a tailored legal framework can support cooperatives and enhance their beneficial effects, rather than tie them down with compliance requirements of general application.
Members of the EACB also highly welcome the OECD recommendation to engage with social economy organisations to better design legal frameworks for them, including their members. Importantly, under this objective, the OECD recommends that governments should also identify existing legal disadvantages for the social economy sector. For cooperative banks, this point is particularly relevant in view of our continuous efforts to raise awareness among the banking regulators and supervisors, of the specificities of the mutualist model and the possibilities for reducing the administrative burden. By taking heed of the specificities of cooperatives and their objectives, which are deeply rooted in a social approach, regulators can help this model achieve its potential.
With these reflections in mind, the EACB will continue monitoring the effective implementation of the OECD Recommendation, which should contribute to strengthening and developing the cooperative model in the EU and beyond.