But too much focus on obligations instead of perks

By Athina Kasini

Following multiple delays, modifications and debates, the parliament approved last December the proposed legislation for social enterprises, finally giving them legal substance and a registry.

The new law was applauded by the press and praised for offering innovative answers to the social, financial and environmental challenges of the particularly difficult times we are going through as a nation and as a global community.

Social enterprises are by no means a new creation. In Europe alone, there are over two million social economy enterprises, which make up 10 per cent of all businesses in the EU. The legal context varies from country to country; the EU supports social entrepreneurship through various investment programmes but doesn’t interfere much with the administrative aspect. However, the primary objective of social economy seems to be universal: to serve some social, cultural or environmental purpose and help underprivileged communities through its work.

The new law appears to reflect those principles. There’s a requirement for a specific percentage of the income of the company to go into achieving said social, cultural or environmental goals, and/or a specific percentage of its staff must be disabled and/or a member of a vulnerable group.

Despite the anticipation and praise, concerns have been raised over the lack of concrete motives in the act to make it worth it for investors and companies to get involved. The law lists the obligations of a social enterprise, the consequences for false claims, non-compliance with the orders of the Registrar of Cooperative Societies and sets a maximum wage for the highest awarded employee or board member. These are all fundamental, but not enough. Apart from the optimism among MPs who voted in favour, neither the new law nor any amendments seem to show any reason why anyone would go the trouble of registering its company as a social enterprise. All we see so far are obligations, no perks.

While there have been proposed incentive measures such as exemption from the annual company fee, tax exemptions for natural persons who wish to invest and plans for grants specifically for social enterprises, none have been realised at the time of writing. In Greece, Italy, and Lithuania, for example, social enterprises are entitled to various tax breaks.

In Poland, Portugal and Slovakia, social cooperatives are exempt from paying social security contributions for their members during the first two years of operation. In South Korea, social enterprises are discharged from paying half of the corporate or income tax during the first three years of existence. In Estonia, foundations and platforms for crowdfunding were created, which many social enterprises rely on for funds.

Social entrepreneurship can definitely contribute to a more sustainable way of living, decrease unemployment, especially among youth and vulnerable groups and serve the common interest. But, for them to do so, the appropriate support system must be in place and access to resources must be given. There’s no magic button, it’s a challenge and a process that requires a lot of moving parts for a functioning mechanism to be in place.

There seems to be an urgent need to create a positive culture around social entrepreneurship, encouragement through education, and creating motives for people with capital. The EU funded project ‘GoSocial’ www.gosocialcy.eu implemented by three Cypriot NGOs – MASDER, AKTI Project and Research Centre and MAKAMER – promotes social entrepreneurship across the island as a new and alternative way of employment, targeting young unemployed people, women and vulnerable groups. The GoSocial’s awareness raising campaign on the opportunities deriving from the social economy, capacity building and networking activities aim to influence a lot of individuals, NGOs, companies and competent authorities in investing or pushing for a more favourable environment for social enterprises to develop and flourish. We hope there’ll be an equal effort by lawmakers and public bodies to create grants, tax benefits and other incentives to encourage participation by a broad spectrum of the population.

This is the first time social enterprises are becoming a recognised entity under Cypriot law, so this early stage is fundamental for any future prospects. So, even though the new legislation is definitely a step in the right direction, there’s still a long way to go.

Athina Kasini is a member of ‘GoSocial’ In-serving Training Programme for Youth