Social Firms 101: six things you need to know

Last week, I had the chance to attend the 29th Annual CEFEC Conference, the leading annual gathering of European social firm practitioners. Over the course of the two-day conference, held in Lodz, Poland, experts from over 20 countries discussed ways social firms are improving the lives of those furthest from the labor market.  

Their reflections also shed light on some of the greatest misconceptions about this sub-category of social enterprises, unearthing key regional differences in definitions, policy support, and potential for growth. 

To help clear things up, I’ve catalogued the top six things you need to know about social firms. 

1. The definition of a social firm is not uniform around the world

At its most widely understood, a social firm is a business that leverages a market orientation to provide training and employment opportunities for people who are in some way job-disadvantaged. 

Some social firms, such as Berlin-based Hotel Grenzfall exist to provide long-term employment for folks in need of ongoing assisted employment. Others, such as Vancouver-based Embers Staffing Solutions exist to provide transitional employment to folks in need of a jump-start on their path to sustained employment. 

While those principles are generally understood, other aspects differ significantly. 

In Germany, law defines social firms as economically and legally independent companies that employ people with disabilities. German social firms must employ at least 25% people with disabilities, up to a maximum of 50%, and all employees of a social firm must be paid at least minimum wage and enjoy the same rights and obligations as all other staff members. 

In Canada, the UK and a variety of other nations, there is no legal definition for social firms; and thus, it’s a bit of a wild west when it comes to definitions. If you ask three different practitioners of social firms what defines them, you’ll get three different answers. If you're going to nerd out about social firms, some critical points to keep in mind:  

  • Target Group: For some nations, including Germany, Italy and Spain, social firms exist primarily to provide employment opportunities for people with disabilities. In other nations, including Canada and the UK, social firms exist to provide employment opportunities (both long-term and transitional) to a wide variety of other job-disadvantaged folks, including: folks with incarceration records, youth facing barriers to employment, refugees, or folks with a history of addiction or mental illness.
     
  • Paid/ Unpaid Employment: For some nations, it’s required that all staff members within a social enterprise, regardless of experience and level of ability, make market-rate wages (or at the very least, the legislated minimum wage). For other nations, there’s a bit more of a gray zone when it comes to wages. In some nations, practitioners will still identify businesses as ‘social firms’ even if members of the target group are making reduced wages (or no wages at all). Within these companies, folks might be considered trainees, volunteers, or long-time interns.  

2. Social firms called by at least 8 different names

If you’re reading this in France, you might know social firms as des enterprise adaptée. If you’re reading this from the Canada, you might know social firms as work integration social enterprises or social purpose businesses. And if you’re from Italy, you might use the term social co-operative

While straightforward in idea, social firms are called by at least eight different names by experts around the world -- the four listed above, plus: inclusive enterprises, affirmative enterprises, alternative business and likely, a slew of others.  

Why all the names? The social firm movement has grown organically in different regions, at different times, and by actors in different sectors. As these micro-movements evolved, practitioners have used terms that best suited the businesses involved, the term that was most politically palatable, and the term that made the most sense in the native language. 

3. Government support for social firms varies tremendously

In Germany and Spain, as well as a host of other nations, social firms are a tool leveraged by government as a means to provide long-term employment opportunities for people with disabilities. As such, entrepreneurs looking to start social firms are eligible to receive a number of supports from the government in order to launch and sustain social firms. 

In Germany, this supports includes: access to start-up capital (a mix of grants and loans), ongoing wage support for the salaries of staff with disabilities, and grants for start-up and ongoing business development consulting services. These programs are funded, in part, by a levy applied to businesses with more than 20 staff that fail to meet a 5% quota for staff with disabilities. 

In nations without this strong focus on using social firms to employ people with disabilities, policy is quite different. In these nations, such as Canada and the UK, social firms are not seen as categorically differently to other businesses, and must thus rely on the traditional government-funded business development or social enterprise development supports, or those available through foundations or other intermediaries.  

4. Social firms have the potential for scale 

In some nations, especially those where governments don’t provide ongoing wage support for social firms, many such enterprises are chronically small and under-resourced. In these nations, many social firms struggle to compete in the open market, owing from the fact that they have higher training and human resources costs – necessary features to achieve their mission of supporting those facing barriers to the labour market. 

In other nations however, social firms are big business. Take Spain’s GrupoSifu as one example. The social firm employs over 4000 people, 86% of whom have a disability of some kind. Their list of clients is impressive, and includes multi-nationals such as IKEA, Renault, Toyota and PWC. For these businesses, GroupoSifu provides services such as grounds keeping, cleaning, consulting and recycling, as well as goods such as cleaning supplies, work wear, and office supplies. 

Another high-profile example is Cap Markt, a German supermarket chain with over 100 stores. The firm employs about 1400 employees, approximately 50% of whom have disabilities. 

Not to be outdone, the UK and US also have their own growing social firms. UK-based Community Wood Recycling, employs over 200 people across 29 franchises, many of whom face barriers to employment of some kind, including a history of addiction or a record of incarceration; and San Francisco-based Juma Ventures, provides transitional employment for over 650 high school students annually to provide concessions at baseball parks across America.  

5. Social firms aren’t new

During this year’s CEFEC conference, sector veteran Lorenzo Toresini detailed the birth of the modern-day social firm in Italy in the 1970s.  

It was in 1973 that ‘worker-patients’ at the Italy’s San Giovanni Psychiatry Hospital refused to continue to provide the institution with cleaning, cooking and other services without pay. Supported by the hospital director, the patients formed Italy’s first worker co-operative – the prototype for the modern day social firm. 

Over the seventies, eighties, nineties, social firms were established around the world, many of which were inspired by the Italian example. 

  Italian Lorenzo Toresini presents on the establishment of the first social firm in Italy. 

Italian Lorenzo Toresini presents on the establishment of the first social firm in Italy. 

6. Social firms do more than catering, cleaning, and recycling

Though many social firms are active in food service, cleaning, grounds keeping and all types of recycling, globally, social firms are evolving to meet the needs of their target groups, as well as their target customers. This has meant an expansion into a wide variety of other fields, including: digital services, energy efficient retrofits, payroll processing, translation services, and much more. 

Keen to continue the conversation? 

If you'd like to share other lessons or swap social firm stories, please leave a comment below or reach out to me on Twitter at @bronwynoatley, or by email at bronwynoatley@gmail.com. I look forward to hearing from you!