The Contribution of Community-Led Social Economy Initiatives to Local Development in Rural Areas

This report scrutinises the yet-to-be-harnessed potential of the social economy (e.g. the broad spectrum of organisations that are neither publicly nor investor-owned)[1] in tackling the key challenges that plague rural areas. These challenges include the ageing of society, severe gaps in the provision of general interest services and goods, a lack of job opportunities, significant social exclusion, and climate change. With the aim of raising awareness amongst policy makers, researchers and practitioners on the added value of not-for-profit organisations vis-à-vis other institutional arrangements (i.e. public agencies and conventional enterprises), ESIRA has attempted to bridge two streams of literature that are rarely connected: rural development, on the one hand, and the social economy on the other, including a focus on social enterprises as well as social innovation. In this complex endeavour, the social economy and social innovation frameworks are closely interrelated, although analytically distinct. In this analysis, we primarily adopt the social economy analytical lens to investigate the capacity of local communities to self-organize and self-rely to collectively address multiple social and economic challenges in rural areas. Thanks to their peculiar features, social economy organisations – and even more social enterprises – are well positioned to foster social innovation, conceived as the development of new products, services or organizational arrangements that simultaneously meet social needs (more effectively than alternatives) and create new social relationships or collaborations (Murray et al., 2010). Within this perspective, the social economy can be understood as the structural and operational framework wherein the social enterprise has emerged as an innovative and cross-cutting organizational form, aimed at tackling social exclusion. Before digging into the social economy, this report reviews the main schools of thought that have analysed local development in rural areas over the past decades, and highlights the need to shift away from using exogenous and endogenous approaches, towards a more appropriate neo-endogenous strategy for rural development. This neo-endogenous approach values the contribution of both exogenous and endogenous resources, including bottom-up forces that are the expression of civil society’s institutional creativity. The literature on the social economy sheds light on the inclination of local communities to self-organise to collectively design solutions to unmet needs arising in local territories. This activity has paved the way for a variety of organisational forms. As indicated in the chapters that follow, thanks to the active engagement of civil society, innovative forms of organisation and civic engagement continue to take form in response to multiple transformations, crises and challenges. The failure to adopt a perspective that recognises organisational and entrepreneurial diversity when dealing with local development dynamics explains the tendency of policies to ignore the potential of not-for-profit organisations that have emerged bottom-up to address unmet local needs. Paradoxically, mainstream local development policies have so far overlooked the importance of sustaining a large set of diversified organisations. Even when seeking to promote the active participation of local communities (e.g. Community-led Local Development [CLLD]), policy actions have notably overlooked the capacity of locally based organisations to tackle social and economic concerns. Policy schemes are normally sectoral and top-down driven, thus preventing the proper appraisal of resources that are available at the local level, including the capabilities of local inhabitants to collectively experiment with viable solutions to multiple challenges. Research shows, however, that social economy organisations have a long history preceding the development of contemporary welfare state institutions. Such organisations exist in all European Union (EU) Member States and neighbouring countries. They operate in all economic sectors and have often emerged with few resources at their disposal, thanks to the ability of civil society to self-organise and be self-reliant. All in all, the tradition of collective and community-owned initiatives has contributed to shaping the four main components of the social economy, namely: cooperatives; mutual benefit societies; foundations and associations; and social enterprises. Social economy organisations are structural trends involving countries and regions characterised by varying levels of economic development and diverse welfare systems (European Commission – EISMEA, 2024). However, in this context, social economy organisations can nonetheless also be conceived of as change agents. Their transformative power leads not only to the generation of social and economic value (Partzsch and Ziegler, 2011), but also to the redistribution of this value to the advantage of the community or concerned stakeholders. When compared to conventional enterprises, these institutions presuppose a radical change in the process of value capture; they provide local communities or stakeholders other than investors with the institutional tools required to harness their assets and deploy them for their own interest. As described in this report, social economy organisations are endowed with participatory and democratic ownership and governance structures. These structures ensure, on the one hand, the full engagement of the community or of concerned parties in their governing bodies and, on the other, the survival of the goals pursued over time, beyond the engagement of their founders. Against this backdrop, social economy organisations adopt appropriate devices: they limit the distribution of profits (often complying by law with a total or partial distribution constraint) and have their assets locked (preventing the distribution of their residual assets to members). In addition to the social economy’s important contribution to welfare, social innovation, employment and development, it is in essence a social laboratory whose potential has yet to be fully harnessed. Indeed, research shows that – in addition to welfare system transformations – numerous pressing crises and challenges plaguing rural areas could be successfully tackled by better exploiting the contribution of the social economy. This report illustrates the development dynamics of the social economy, paying particular attention to ESIRA target countries and to selected inspiring local practices. The report is structured as follows: Chapter 2 explains the research methodology adopted in this study. Chapter 3 examines the issues faced by rural areas and the different policy approaches that have been developed to support rural development. Chapter 4 explores the origins and evolution of the social economy, including the characteristics of the four traditional social economy organisations (i.e. associations, foundations, mutual benefit societies and cooperatives), and social enterprises as a recent cross-cutting dynamic within the social economy. It also examines the concept and practice of the social economy in the target countries, and the degree of recognition of the organisations belonging to the social economy at both EU and national levels. This chapter also discusses the added value of the social economy. Chapter 5 focuses on the role and contribution of the social economy in rural areas and in fostering social innovation. Lastly, while drawing conclusions, Chapter 6 also sheds some light on the key conditions that are needed for the social economy to thrive in rural areas, with specific reference to the ESIRA pilot areas. The report incorporates 12 boxes with concrete examples of selected social economy organisations. These boxes play a crucial role in illustrating the theoretical and analytical discussions presented in the main text. By showcasing real-life cases, they highlight how social economy initiatives operate in practice, their specific contributions to rural development, and the challenges they face. [1] The term ‘not-for-profit organisations’ is often used to highlight organisations that are neither public, nor profit oriented.