“Citizens plug gaps left by markets and government”

News item -

If you want to see where the government and business community are failing society, look no further than social enterprises and citizen collectives. These ‘third way’ organisations are helping to restore a certain balance right across society.

On 1 September, Tine de Moor was appointed professor at the Erasmus University in Rotterdam, where she will hold the chair of Social Enterprise and Institutions for Collective Action. ABN AMRO is sponsoring the new chair, as it ties in with social engagement ambitions. We recently sat down with Tine to discuss the advent of social enterprises and citizen collectives and the value they add to society today.

Putting society before finance

Now a familiar feature of the economic landscape, social enterprises are commercial businesses that place social value above financial performance. They aim to make an impact on society which can range from sustainability initiatives to helping those with difficulties entering the job market. Often the goal is to establish an ethical supply chain in which each supplier has embraced sustainability, one example being the Dutch chocolate maker Tony’s Chocolonely.

But other, differently structured organisations are also making a positive social impact. Fewer may be familiar with citizen collectives (also known as initiatives for collective action) which are starting to pop up here and there in the community. These collectives bring together citizens to create new collective goods and services, thus providing an alternative offering which benefits the local community. There are plenty of examples, including everything from new energy cooperatives for sustainable, renewable energy to initiatives focusing on elderly care and communal gardens.

Adding value to the community

“Citizen collectives are very much a product of our time,” says Tine. “These are citizens who have chosen a model in which they’re operating as owners, but are also helping the local community at the same time. In other words, they want to be both stakeholder and shareholder. They’re often motivated because the government and the market have failed in areas like care for the elderly, which in some parts of the Netherlands is substandard. But opportunities can also arise as a result of improved access to new technologies. With a relatively small investment, it’s now possible to generate energy locally, for example. If you work together with others, you, as a citizen, suddenly have the chance to invest in something which not only adds value to your own community, but also serves a higher purpose.

“What’s interesting about citizen collectives is that they often transfer their local role to new social aims – by investing their profits in other local facilities, rather than paying out dividends to investors. Examples might be a financial injection from an energy cooperative to ensure that the local swimming pool can stay open or one that invests in an emergency shelter. We’re seeing that more and more people are looking at the collective interest first – and from a range of social angles.”

Getting back in touch with your environment

So what’s behind the current surge in collectives? Tine says it’s about a need among citizens to get back in touch with, and exert more influence on, their immediate environment, all while contributing to a better society. She says, “Consumers no longer have a direct connection with their environment. Just look at our opaque food production model. Who really knows where their food comes from these days? De Herenboeren [The Gentlemen Farmers] is one particularly interesting collective which is responding to this issue. They let you buy products from your very own farmer, on your own farm. And since you’re buying directly from the farmer, you actually pay less than you would at an organic supermarket. This is important because price has long been a major barrier to sustainable food. Plus only in-season products are available, which forces you to deal with scarcity. That can teach us a lot, too.”

Social enterprises and their life cycle

In her new chair, Tine will be studying how social enterprises evolve and function over the long term, and whether citizen collectives can play a role in their life cycle. She explains, “I’m interested in evolution. How does a social initiative come into being? Who’s involved? How does it get off the ground? What are the obstacles? At the beginning of the life cycle of a social enterprise, there’s usually a lot of enthusiasm and a high level of commitment. These enterprises are often crowdfunded, meaning that funders have both a financial and an emotional investment in them and remain involved as customers – through a discount programme, for example. But after that initial phase, the goodwill slowly starts to wane. At this point, it’s all about continuing to believe in your business concept and telling your story over and over again. Tony’s Chocolonely, for instance, does that very effectively with clever marketing. But lots of other businesses out there are on the right path, too – it’s just that they’re not necessarily looking to raise their profile, since growth is not their main priority. After all, they’re producing primarily for their own members.”

The role of banks

Tine will also be looking at the roles played by government and the banks. She says, “Social entrepreneurs in general and citizen collectives in particular struggle to meet subsidy and financing requirements. The authorities turn them away because no regulations exist. And banks don’t want to invest because they don’t think they’re profitable enough. The problem is that there’s just no recognition of the social value these initiatives represent, even though they add value to society and citizens themselves are willing to invest in them. All this should actually inspire even greater confidence among investors. Unfortunately, that line of reasoning hasn’t sunk in yet, as citizen involvement continues to be associated with a lack of professionalism – and undeservedly so. On the contrary, their involvement represents a real opportunity to embed the social impact of a particular enterprise.

“There’s been talk in Dutch political circles for some time about creating a separate legal entity for businesses and organisations which have a social impact. That would be an important step. The result would be a social variant of a private limited company which would benefit from additional exemptions. It would also help bring about greater recognition of the value of these organisations. Another possibility is the creation of a recognised status for cooperatives with a social objective, which already exists in a number of other European countries.”

Historical context

As a historian, Tine has a natural interest in the historical context of her research. “Group self-care dates back to the late Middle Ages,” she says. “The guilds would often make provisions for incapacity for work, medical expenses and pensions for their members. People cared for one another within their own collectives. After the Industrial Revolution, that care was provided in part by industry and commerce in the form of group insurance and pensions. Later there was the emergence of the social safety net courtesy of the welfare state. In recent years, though, privatisation and a belief in market forces have led to a growing number of people and businesses being excluded. It’s precisely in these areas that we’re seeing citizen collectives offering alternatives. A good example is what we Dutch have termed broodfondsen [bread funds], small collectives providing disability insurance to independent entrepreneurs after legislation governing sick pay for the self-employed was abolished.”

The canary in the coal mine

“In general terms, you could say that collectives are increasingly filling the gaps left by government and markets. Indeed, we’re seeing continuous interaction between these three forms of governance. Collectives are often the canary in the coal mine – they show where the market is failing or where supply does not meet demand. Local citizen initiatives involving care for the elderly, for instance, show how care is failing at a national level, particularly outside the major cities. The government would do well to heed this signal to improve its services. Conversely, the government wouldn’t be wrong to rely more heavily on these cooperatives because they provide more balance in, and better access to, social services. In the long term, some citizen collectives may eventually be overtaken by other solutions when the market adapts or the government takes back control. We need to move towards well-balanced institutional diversity when it comes to solutions reflecting the needs and circumstances of citizens.”

The importance of solidarity and mutual care

Tine says the coronavirus crisis is clearly making itself felt in the social playing field: “Today there’s much more awareness than there used to be of the importance of solidarity and social care – on a large and small scale. The relationship between our own behaviour – social distancing, handwashing and so on – and the well-being of society has never been as direct or palpable as it is right now. At the same time, we’re seeing that people appreciate that mutuality and feel compelled to play an active role in their communities.”

For Tine, academia is not an ivory tower, and she hopes her research will contribute to the success of social initiatives across the board. She says, “My aim is that my work will provide practical tips and recommendations for social entrepreneurs and collectives. I’m also looking forward to entering into a dialogue with lenders and the government so that together we can look at how they, too, can contribute to the long-term development of socially engaged citizen initiatives. In fact, fostering this dynamic brings researchers like me that much closer to society and facilitates setting up evidence-based studies. It’s important to view developments from a certain distance, since that’s how the best research-based insights are gained. If I can accomplish that in the next five years, I think the new chair will be a real success.”

Photo credit: Ed van Rijswijk


Join the discussion

ABN AMRO would like to know your opinion, so below this article you can react to this article via Disqus. By doing so, you agree to the conditions for reacting to articles on our website.

Related news items

More news about ABN AMRO