European Standards, Serbian Reality: Social Entrepreneurship Under Scrutiny

What is Social Entrepreneurship and Why is it Important?

Social entrepreneurship in Serbia is not a new concept, but it has gained increasing significance within public policy, especially following the adoption of the Law on Social Entrepreneurship in February 2022. This law formalised the practice of social enterprises, which, by definition, engage in activities of general interest, creating innovative opportunities to address social issues, social exclusion, and strengthen social cohesion. The law reflects the hybrid nature of social enterprises, combining market operations with social impact. Profits generated are reinvested into the community after covering operational costs and salaries, rather than serving the personal interests of owners. European practice defines social enterprises as "not-for-profit" organisations that generate profit but reinvest it into projects contributing to social welfare.

Practical examples of social enterprises in Serbia, such as "Naša Kuća," "Kafe Bar 16," "Bagel Bejgl," "Women on the Way," "Chrono," "Liceulice," "Etno Rasina," "New Pen," "White Lemur," and "Avlija održivog razvoja – Bogatić," among others, illuminate the hybrid character of social enterprises in practice. For instance, "Naša Kuća" engages in environmentally responsible business through recycled paper production, horticulture, and providing services for the elderly and people with reduced mobility, employing young people with disabilities. "Kafe Bar 16" offers work and educational support to youth from socially vulnerable groups, providing hospitality training and employment opportunities after the age of 16. "Bagel Bejgl" employs victims of human trafficking, offering them a chance to acquire work skills and reintegrate into society, while "Women on the Way" engages refugee women and asylum seekers in Serbia, offering them work in fashion item production with intercultural inclusion. "Chrono" promotes healthy lifestyles using local, high-quality raw materials, engaging people from vulnerable groups and promoting the circular economy. "Liceulice" publishes a magazine through which vendors with limited market access earn income, focusing on self-employment and support for marginalised groups. "Etno Rasina" promotes traditional crafts and handicrafts, engaging marginalised groups and helping preserve tradition and develop local communities. "New Pen" produces eco-friendly pencils and crayons from recycled newspapers, contributing to environmental protection and promoting recycling. "White Lemur" develops biodegradable materials as a substitute for styrofoam, using agricultural and industrial waste, encouraging ecological sustainability and health. Lastly, "Avlija održivog razvoja – Bogatić" combines hospitality, agriculture, and ethno-tourism, engaging people with disabilities and promoting sustainable development through the use of local resources. All these enterprises not only operate in accordance with market principles but primarily aim to create social impact, which is a key determinant of social entrepreneurship.

Law on Social Entrepreneurship: A Key Step Forward in Legislation

The quality of the law is evidenced by its alignment with European Union trends, where candidate countries since 2015 have been adopting Laws on Social Economy alongside Laws on Social Entrepreneurship, to recognise and encompass a wide range of social enterprises that create various forms of positive social change, beyond employing marginalised groups, which represents the first regulated form. Lawmakers in Serbia have defined the social role of social entrepreneurship more broadly, stating in Article 5 that "social entrepreneurship is a business in which the realised profit is invested in the integration of socially sensitive groups, environmental protection, rural development, education, culture, social innovations, and other areas of broader social impact."

This approach in the Law on Social Entrepreneurship truly integrates the historical development of this practice in Serbia and the region, as it encompasses social enterprises that engage in work integration and employment of marginalised and vulnerable groups, as well as those that aid the development of rural and underdeveloped areas through social cooperatives or support education and nurture democratic practices and values among youth. The law regulates the manner of achieving social entrepreneurship in our sector as follows: "production of goods and provision of services (social, educational, health, etc.) in accordance with the Law; work integration in accordance with the Law; business that contributes to the sustainable development of underdeveloped areas and local communities; business that addresses problems in other areas of general interest." Under such conditions, the law has indeed paved the way for affirming the practice of social entrepreneurship, allowing successful examples of social enterprises to finally ground their practice within a legislative framework, which should, besides recognition, provide additional support measures from both the state and the community. Simultaneously, by affirming social impact and positive social changes as one of the outcomes of the operation and functioning of social enterprises, the law should provide a stimulating framework for contributing to the work of civil society as a whole, considering that the majority of social enterprise initiatives originate from the work of citizen associations, which is the most standard form of social enterprises in Serbia. When we say that this can be an incentive for other civil society organisations considering independent ways of financing work and functioning to ensure long-term operation and multiply social results, we refer to those citizen associations that develop programs in line with the practice of social entrepreneurship, where, in addition to project implementation, they also provide specific services in the community through which profits are invested in further development of programs and projects that achieve their social impact. Such regulatory practice truly allows for listening to the needs of social enterprises and, in connection with that, the needs of local communities for sustainable development.

Social Entrepreneurship Development Program: The Need for Concrete Support That is Lacking

Although the law provides a solid framework, the key step towards further development of social entrepreneurship in Serbia is the adoption of the Social Entrepreneurship Development Program, which should provide concrete support measures to strengthen existing enterprises and open new ones. Unfortunately, although this program has been discussed multiple times, by the conclusion of this text, there were no indications that it would be adopted. Comparative EU practice and the Social Economy Action Plan of 2021 represent guidelines for the strategy of developing social enterprises in Serbia, including access to funds, markets, improvement of the regulatory framework, and international cooperation.

The EU's Social Economy Action Plan includes concrete support measures aimed at 2.8 million social entrepreneurs in the EU, who employ 13.6 million people and account for 8% of the EU's GDP (as of 2021). Employees in the social economy sector constitute between 0.6% and 9.9% of all jobs in EU member states. The action plan contains analyses showing the advantages of the social economy, especially in times of crisis, such as the COVID-19 pandemic and the current situation in Ukraine, when social enterprises play a key role in providing social services, preserving jobs, and offering various types of support and assistance, particularly to people most affected by the crisis. In parallel, the Social Entrepreneurship Development Program in Serbia should support the development of at least 1,196 social entrepreneurship entities (including all forms of social entrepreneurship, including cooperatives), which employ 10,326 people, according to data from the 2012 Republic Statistical Office, accounting for 0.6% of total employment and 0.2% of GDP in 2011.

The Social Entrepreneurship Development Program recognises several key strategic directions of EU support for social enterprises. Among them are access to funds, market access, improvement of the regulatory framework, development of business models, as well as international cooperation and development of new technologies. The action plan focuses on three main goals: creating favourable regulatory conditions, ensuring financial incentives for social enterprises, and promoting the social economy. Creating favourable conditions includes fairer tax policies, programming state aid, and easier market access through social public procurement. Ensuring financial incentives encompasses significant funds, such as €2.9 billion allocated for the period 2021–2027, as well as the launch of platforms and financial instruments that will help social enterprises in financial and business development.

In the context of promoting the social economy, the EU's action plan includes the implementation of communication campaigns such as "Buy Social!" which aims to familiarise citizens with the practice of social entrepreneurship and its social significance. Additionally, the development of partnerships between social entrepreneurs and other local actors, such as commercial enterprises, schools, and media, is promoted, which can jointly contribute to strengthening the social economy. Moreover, the EU promotes data collection and training for public officials to better understand social entrepreneurship and its benefits at the regional and local levels, and possible ways through which the state can support the development of this practice, aiming to contribute to the general interest – social and economic priority.

One of the biggest challenges in Serbia, as in many other countries, is access to financing. The EU offers a wide range of financial instruments such as national development banks, ethical banks, impact funds, and microfunds. For example, the Financing Agency for Social Entrepreneurship (FASE) offers hybrid financing tailored to the needs of this sector, while microfunds like Mikrofonden from Sweden provide advisory services and financial support through credit guarantees. These instruments enable social entrepreneurs to start or develop their enterprises, creating new job opportunities and encouraging positive social changes.

European Opportunities: How European Integration Can Contribute to the Development of Social Entrepreneurship in Serbia

In the context of European integration, social entrepreneurship in Serbia still lacks a clear and permanent position, even though it is strategically assigned to the Ministry of Labour, Employment, Veteran and Social Affairs. Within the negotiation process, social entrepreneurship has for several years been addressed under Chapter 19 – Social Policy and Employment. In the past two years (2023 and 2024), the European Commission's Progress Reports on Serbia[8] assessed progress in this chapter as "a moderate level of preparedness (score 3)." However, social entrepreneurship has not been specifically addressed in the last two Progress Reports on Serbia's European integration, nor in the Recommendation Book of the National Convention on the EU[9], indicating a lack of relevant information on how decision-makers in Serbia approach this issue.

Practitioners often point to a problematic understanding of the support required for the development of social entrepreneurship and a mismatch with the advanced legal framework. Due to its broad social impact, social entrepreneurship should be included horizontally in an intersectoral process involving various ministries responsible for social policy, education, culture, market economy, entrepreneurship, agriculture, etc. European integration provides an opportunity to enhance this process through experience-sharing and the application of European standards. Additionally, initiatives under the UN 2030 Agenda for Sustainable Development highlight the importance of social enterprises as local actors contributing to the achievement of various SDGs in local communities.

In response, civil society experts in Serbia developed a methodology in 2022 for measuring the social impact of social enterprises[10], integrating European standards and practices, as well as SDGs as indicators of social impact. This tool was created to facilitate the understanding of the role of social enterprises in local communities, particularly for decision-makers, to help them recognize the specific support needs of the sector. European integration can significantly contribute to the dissemination and application of such methodologies through alignment with European norms and by facilitating cross-sectoral cooperation among various ministries.

Furthermore, European policies and instruments such as public procurement (Chapter 5), competition policy (Chapter 8), agriculture and rural development (Chapter 11), and industrial policy (Chapter 19) can provide concrete mechanisms to foster social entrepreneurship. For instance, socially responsible public procurement can be key to providing financial support to social enterprises, while competition policy should be adapted to ensure an optimal balance between state aid and the promotion of social entrepreneurship. Also, in the field of environmental protection (Chapter 27), social enterprises often play a significant role. In addition to their direct social impact, they frequently integrate and promote environmental protection initiatives and sustainable production and consumption, through practices such as recycling, circular economy, and more efficient waste management.

Finally, the Program of Economic Reforms (ERP) of the Government of the Republic of Serbia plays an important role in the effective development of social entrepreneurship within the European integration process. In the latest edition of this ERP document (2024–2026)[11], social entrepreneurship is identified as a priority within the field of social protection and inclusion, which contradicts the broader definition of social entrepreneurship outlined in the Law. The document emphasizes the importance of encouraging socially responsible business, ensuring social and labour inclusion of vulnerable groups through social entrepreneurship. In this context, it mentions 13 social enterprises that registered their status with the Business Registers Agency under the Law between November 2022 and February 2023, as well as the establishment of the Social Entrepreneurship Council[12], whose task is to develop guidelines and submit proposals for the adoption of the Social Entrepreneurship Development Program. However, the ERP document provides no further details on the Government of Serbia's priorities in this area, highlighting the need for continued efforts to recognize and support social entrepreneurship through strategic documents.

Conclusion

The development of social entrepreneurship in Serbia faces significant challenges despite the adoption of the Law on Social Entrepreneurship. While the law marks progress, there is a gap between its ambitious goals and its practical implementation. Experts point to the need for social entrepreneurship to be addressed horizontally across sectors such as education, social policy, the labour market, and entrepreneurship, to fully realise its potential. The adoption of a methodology for measuring social impact in line with global standards could be a key tool for evaluating and supporting social enterprises in Serbia.

Achieving sustainable development requires improvement of the legislative framework and more intensive support through European integration. Greater coordination between sectors and increased state engagement in this process could contribute to better conditions for the growth of social enterprises. Recognising the societal role of social entrepreneurs, integrating them into European policies, and developing specific support measures have the potential to not only improve Serbia's economy but also significantly contribute to the country’s social development.

 

"This material was published with the financial support of the European Union. The content is the sole responsibility of the Association for Cooperation and Sustainable Development and does not necessarily reflect the views of the European Union. The project is implemented within the project 'EU Resource Centre for Civil Society in Serbia,' led by the Belgrade Open School in partnership with the civil society organisations: Novi Sad School of Journalism, ENECA, Užice Child Rights Centre, Nova Planning Practice, Safe Paths, Young Farmers of Serbia, and the international partner, Friedrich Ebert Stiftung. The project is supported by the European Union and will run from 2023 to 2026."

[1] Law on Social Entrepreneurship (Official Gazette RS, No. 14/2022) https://www.paragraf.rs/propisi/zakon-o-socijalnom-preduzetnistvu.html, accessed 04.12.2024.

[2] European Commission, Internal Market, Industry, Entrepreneurship and SMEs platform, https://single-market-economy.ec.europa.eu/sectors/proximity-and-social-economy/social-economy-eu/associations_en, accessed 04.12.2024.

[3] Database of social enterprises, Coalition for the Development of Solidarity Economy https://solidarnaekonomija.rs/baza-socijalnih-preduzeca/, accessed 04.12.2024.

[4] Law on Social Entrepreneurship (Official Gazette RS, No. 14/2022) https://www.paragraf.rs/propisi/zakon-o-socijalnom-preduzetnistvu.html, accessed 04.12.2024.

[5] Social Economy Action Plan, European Commission, 2021, https://ec.europa.eu/social/main.jsp?catId=1537&langId=en, accessed 04.12.2024.

[6] Buy Social Europe Initiative, https://buysocialeuropeb2b.eu/en#:~:text=The%20Buy%20Social%20Europe%20B2B,and%20forge%20sustainable%20trade%20partnerships, pristupljeno 4.12.2024.

[7] Financing agency social entrepreneurship, https://www.impacteurope.net/members/fase-financing-agency-social-entrepreneurship, accessed 04.12.2024.

[8] Annual European Commission Progress Reports on Serbia for 2023 and 2024, https://europa.rs/godisnji-izvestaj-o-srbiji/, accessed 04.12.2024.

[9] Recommendation Books of the National Convention on the European Union for 2023 and summary for 2024, https://eukonvent.org/dokumenti/knjiga-preporuka/, accessed 04.12.2024.

[10] Measuring the Social Impact of Social Enterprises in Serbia, KoRSE 2022, https://solidarnaekonomija.rs/publikacije/merenje-drustvenog-uticaja-socijalnih-preduzeca-u-srbiji/, accessed 04.12.2024.

[11] Government of Serbia Economic Reform Program 2024–2026, https://mfin.gov.rs/sr/dokumenti2-1/program-ekonomskih-reformi-erp-1, accessed 04.12.2024.

[12] Decision on the Establishment of the Council for Social Entrepreneurship, Official Gazette RS, Nos. 59 of 20 May 2022, 34 of 28 April 2023, 55 of 7 July 2023, 77 of 20 September 2024, https://pravno-informacioni-sistem.rs/eli/rep/sgrs/vlada/odluka/2022/59/13/reg, accessed 04.12.2024.