Social Entrepreneurship In Netherlands Commerce Essay

Published: Last Edited:

This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.

In our essay we wanted to give a comprehensive outlook on Social entrepreneurship, its use and existence in the Netherlands and the importance of the government policy in shaping Social enterprises. Furthermore we have proposed a policy package in the Netherlands that would in our opinion help the development and emergence of proficient Dutch Social Entrepreneurship. The essay is divided in 3 parts, each dealing with a specific topic.

First part focuses on the Social entrepreneurship in general, dealing with topics such as "is there a need for Social entrepreneurship?", what is Social entrepreneurship, providing a short insight of the history and development of the SE, organizational models, briefly touching on Corporate Social Responsibility and finishing with explaining Social enterprises.

The second part concentrates on Social Entrepreneurship in the Netherlands, its current state, government policies and social issues presented in the Dutch society. Here we will review social issues, link them to social entrepreneurship and look for improvement points in the current practices.

Logically in the third part we have applied the knowledge of Social entrepreneurship and its current practices worldwide to the state of Social entrepreneurship in the Netherlands, suggesting and questioning government policies, with a clear goal of proposing a policy package that would help the emergence of a capable and competitive Social entrepreneurship that is ready to face the social problems of the society.

Part I

The need for Social entrepreneurship

Over three hundred years ago with the arrival of modern capitalism a new era dawned, promising economic prosperity and material progress beyond any anticipations. After the fall of the Soviet Union and dominance of free markets throughout the world, the notion of commercial development and wealth was high in the air. Technological innovations, scientific breakthroughs, social and educational progress, are all without a doubt product of those changes. However more than two decades later the demise of the Soviet Union and communism the perception of all-encompassing change and fortune is waning.

It is true that businesses are growing, technological change is gaining momentum, corporations are increasing their hold all over the globe, and even though due to the financial crises the economy isn't booming at the present time, capitalism is doing pretty well. Conversely not everyone is getting to enjoy its remunerations. If we look at the global distribution of wealth, we can observe another story: More than sixty percent of people must survive on less than four percent of world income, while the other forty something percent enjoy on ninety six percent of world proceeds. Some regions of the world are worse than others, namely the southern part of Africa, South America and Southern Asia. The gap between the rich and the poor is getting wider, not only regionally but nationally as well. If we look at the United States, one of the biggest and richest economies in the world, social progress and justice is lacking. For example more than forty million people in the USA don't have medical insurance and have issues receiving the basic medical care (Obama medical care reform, PPACA is a step in right direction but the actual results are to be seen).

These problems have not been overlooked. In 2000, United Nations have created a Millennium Goal, promising to reduce the world poverty by half in 2015. Today in 2012 we can discern that they still have a long way to go and that their promise might not be fulfilled. Indeed some targets have been met, primarily access to safe drinking water and reduction of extreme poverty (population that lives on less than one US dollar per day), but then again the results in venerable unemployment and lack of food (more than 15% of the world population lives in hunger) are worrying. [1] 

In the words of Muhammad Yunus:

"What is wrong? In a world where the ideology of free enterprise has no real challenger, why have free markets failed so many people? As some nations march toward ever greater prosperity, why has so much of the world been left behind?

The reason is simple. Unfettered markets in their current form are not meant to solve social problems and instead may actually exacerbate poverty, disease, pollution, corruption, crime and inequality." [2] (Muhammad Yunus, 2008, p. 5)

So what or who can solve these problems?

Some may argue that the government is the solution. If free markets suffer from inefficiencies and problems, governments can use rules and regulations to make things right. Moreover governments are supposed to represent the interest of the nation and all the people within it, so it's only logical that governments must play a determining role. Furthermore there are social and other issues that can't be tangled by private corporations or individuals and must fall in to the jurisdiction of the government (for example: financial regulation and monitoring through the central bank, the educational and medical system, etc.). Governments have in their power, the authority to make and enforce rules, laws and policies. They can use a wide variety of measures, including taxes to gain significant resources to address various topics of interest. Yet we can observe that problems are present in social, economic and other spheres. In other words, governments alone can't be given all the responsibility to solve underlying problems of our society. As any other big and powerful system, they are slow and inflexible, inefficient and can suffer from bureaucracy and corruption. Politics can also play a role in inhibiting the efficiency and effectiveness of a government.

If the government can't be the universal cure for the society's social problems, could the non-government nonprofit agencies be the answer? Looking at the Bill and Melinda Gates foundation, a charitable organization that has given more than 26 billion US dollars to global development, education, health and other areas we begin to wonder how big the impact of NGOs is. [3] Furthermore charity and giving to the less fortunate has been a part of our society as long as we can remember. We could even say that charity, or aiding one in need is native to our core as humans. However charities, non-government agencies, non-profit social enterprises and philanthropic foundations all suffer from a major flaw. They rely on the continual influx of donations and sponsorships from governments, private corporations or individuals. If for some reason (economic crises, natural disasters, environmental catastrophes, etc.) that influx is interrupted, NGOs fall short (they are usually not sustainable). It is only reasonable to conclude that they can't be held accountable for solving all the social problems due to their naturally set boundaries in efficiency and effectiveness, as well as their limited reach.

One might argue that perhaps multilateral institutions (International institution with governmental membership/funding, spanning several regions) like the World Bank, the IMF or the UN could be the force that will get in the ring with social problems and eliminate poverty, promote economic development and convey the necessary changes. Then again multilateral institutions suffer from similar issues like governments and NGOs: sluggishness, bureaucracy, lack of flexibility and slow adaptation. Moreover the politic influence in these organizations could mean that their goals significantly differ from the social needs of the regions in question (for example World Bank is mostly interested in increase of GDP, no matter the position of poor or people in need).

If we focus more narrowly on the problem and try to reach closer to the communities itself, we can wonder if putting a part of the responsibility for global poverty and other social issues on the shoulders of businesses in the form of Corporate Social Responsibility can provide results. Being more aware of the impact of enterprises on our society and environment while keeping them in line will yield certain benefits. Unfortunately their effect is limited and sometimes even distorted (prime concern for companies is profit and sometimes profit alone), as the companies can use the image of Corporate Social Responsibility for their selfish gains and do more harm than good.

Finally we can look at the individual. It is our belief that an individual or better said enterprising individual, with the support of the government can become a driving force in making social changes and advancing the economy. A social entrepreneur backed by the community and government (in form of government policies and support) can be more efficient, more aware and more dedicated then any government, NGO, multilateral institution, or enterprise by itself. Of course this approach in our opinion would require a dedicated entrepreneur, suitable entrepreneurial setting and responsible government ready to assist as well as a number of other factors.

To summarize we are confident that social entrepreneurship (nurtured and reinforced through government polices) can be a bridge that could link the development of economy and social wellbeing for all, by utilizing entrepreneurial skills and approach for generating not only financial profit but also a much needed social value.

Definition of Social Entrepreneurship

The term "social entrepreneur", was first presented and coined in 1972 by J. Banks, who noticed that social issues could be resolved using managerial skills and practices. Social entrepreneurship gained relevance during the 1970s and 1980s and in the beginning of the 1990s it enticed interest of academics, governments and businesses. One of the people who can be considered responsible for the rise of the term "social entrepreneur" is Bill Drayton (founder of Ashoka: Innovators for the Public, a nonprofit organization dedicated to finding and fostering social entrepreneurs worldwide) [4] .

Even though social entrepreneurship has grown in importance and brought forth the rise of different theories of social entrepreneurship there is no actual agreement on what social entrepreneurship actually is and what it is not. We could say it is a multi-interpretable concept, which is frequently used in a wide variety of things. [5] It is perhaps of importance to mention that there are several schools of social entrepreneurship: the Social Innovation School, EMES, the Enterprise School and the UK approach school.

We could try to define social entrepreneurship as follows:

"Social entrepreneurship can be defined as the development of innovative, mission-supporting, earned income, job creating or licensing, ventures undertaken by individual social entrepreneurs, nonprofit organizations, or nonprofits in association with for profits." [6] (Pomerantz, 2003)

In other words social entrepreneurship could be seen as a recognition of a social problem and the use of entrepreneurial skills to start and govern a social venture with the goal to generate a wanted social change. Traditional entrepreneurship theory measures performance in profit and return on investment while social entrepreneurship adds a positive return to society (it adds creating social value to the mix) to this. Social entrepreneurship is usually connected to the voluntary and non-profit field but social entrepreneurship can be for-profit as well. In other words a business that dedicates a part of its efforts to a social mission and reinvests profits in the cause can be considered social entrepreneurship. [7] 

Furthermore we could say that Social Entrepreneurship stresses social change instead of profit. Traditional businesses adopt a strategy to pursue short-term profit at the high cost in long-term benefits to society; Social entrepreneurship emerges as a counter measure.

History of Social Entrepreneurship:

The terms social entrepreneur and social entrepreneurship although relatively new have appeared in one form or another throughout the history. As mentioned before, the first use in literature was in the 1960s and J. Bank and Bill Drayton are perhaps most responsible for their emergence. Nonetheless we should mention Michael Young (social activist and politician who coined the term "meritocracy") as a leading promoter of social enterprises. [8] If we put aside the term social entrepreneurship, we can actually find that the very concept of social entrepreneurship was present for centuries.

There were several pioneers of social entrepreneurship in the 19th century: Florence Nightingale (famous social entrepreneur that started the world's first nursing school and was a strong influence on contemporary nursing practices), Robert Owen (a mill owner who pioneered better working conditions in factories and founder of infant child care in Britain, know as well as a founder of the cooperative movement), Henry Durant (French businessman that petitioned for national voluntary relief organizations to help nurse wounded soldiers during the war; his determination induced the establishment of international Red Cross) and William Booth (founder of the Salvation Army).

Social entrepreneurship in the early 20th century was a natural continuum. Some of the notable social entrepreneurs: Dr. Maria Montessori (known for the Montessori Method and her Children's House in Rome), John Muir (Naturalist, writer and inventor who founded the Sierra Club) and Franklin Roosevelt (US President, who can be considered a social entrepreneur for the Tennessee Valley Authority during the Great Depression).

More modern and recent examples of social entrepreneurs could be found in: the Oxford Committee for Famine Relief (led by a group of Oxford professors and social activists in 1942), Michael Young (a pioneer of Corporate Social Entrepreneurship and a "father" of schools for social entrepreneurs), Muhammad Yunus (founder of the Grameen Bank in Bangladesh providing micro-financing for the socially endangered) and Jeff Skoll (first president of eBay and philanthropist, known for the Skoll Foundation). [9] 

Seeing these examples and feats of social entrepreneurs throughout the history, it becomes apparent how social entrepreneurship has filled the gaps in society, needs overlooked by the government and how it cooperates with public organizations for mutual good. From their accomplishments we can start to see how business ethics combined with social goals can help deliver substantial social and economic value to a society.

Current Practice

We can observe that in today's world NGOs, nonprofits organizations, philanthropic foundations, governments, and individuals alike play an important role in promoting, funding, and counseling social entrepreneurs. At the same time social as well as sustainable entrepreneurship is becoming a hot topic and a focus of interest to a growing number of parties. On universities and educational institutions worldwide, we can see a number of programs focused on instructing and preparing social entrepreneurs.

Contemporary social entrepreneur and winner of the Nobel Peace Prize in 2006 Muhammad Yunus played an important part in conveying the message of social entrepreneurships importance. Muhammad Yunus is a founder and manager of the Grameen Bank. Grameen Banks humble beginning was in 1976 when Muhammad Yunus, then a head of the Rural Economics Program at the University of Chittagong, initiated a research project to examine the possibility of designing a credit delivery system to provide banking services targeted at the rural poor (as the poor were unable to qualify for the loans of traditional banks, due to lack of collateral, high risks, etc. they were left to fend for themselves and endure the low quality of life). The Grameen Bank Project (in Bangla language - Village Bank) started up with the following objectives: offer banking services to poor women and man, eliminate the abuse of local money lenders, create work opportunities in the form of self-employment for a vast majority of the unemployed, educate the deprived women so they can be able to run their own business and most importantly reverse the circle of "low income, low saving & low investment" into "low income, injection of credit, investment, more income, more savings, more investment, more income". [10] The project was tested in Jobra (a small village next to professor Yunus' University) and several neighboring villages, in the period of 1976 to 1979. The Grameen Bank Project soon received the sponsorship and support from the national bank and extended its reach to a wider area. At the end of the year 1983 the Grameen Bank was converted into an independent bank through government legislation. An extraordinary feat is that today the Bank is owned by the rural poor whom it serves (10% of the shares is owned by the government and 90% by borrowers themselves).

Comparable for-profit projects have also been setup in India. A recent example is billionaire Vikram Akula, the founder of SKS Microfinance, who initiated a micro lending scheme in villages of Andhra Pradesh. Even though SKS Microfinance is for profit, it has initiated a sharp social change amid poor women from the villages. Yet some might argue, since this social venture is for profit, that SKS is trying to capitalize on the large number of poor around the world (as the interest rate is 27% compared to Grameen Banks 20%, 8% and 5% respectively, depending on what the loan is used for).

Taking a turn from microfinance we can take a look at youth social entrepreneurship. Youth social entrepreneurship presents an approach to attract and involve young people all over the world to help solve social problems. Youth organizations and programs around the world stimulate efforts of young people to become involved in the social entrepreneurship. One of those organizations is Young Social Pioneers in Australia. The Young Social Pioneers program presents a one year platform of investment, education, skill development and networking for a small group of motivated young people under 29 years old. The idea behind it is to empower young minds to help and drive the change in the society and help make a difference. [11] 

There are many organizations that play a pivotal role in fostering, promoting and developing social entrepreneurship. For example organizations like Ashoka: Innovators for the Public (an organization that supports the development of social entrepreneurship), the Skoll Foundation, Schwab Foundation for Social Entrepreneurship, Athgo (Alliance Toward Harnessing Global Opportunities), Root Cause (nonprofit research and consulting firm that partners with different nonprofits, philanthropy, government and businesses in order to find solutions for current social issues), Canadian Social Entrepreneurship Foundation, New Profit Inc. (a venture philanthropy fund based in Cambridge), National Social Entrepreneurship Forum (a non-profit organization supporting youth-driven social innovations and entrepreneurship in India) and Echoing Green (a New York City non-profit organization operating in the area of early-stage social sector investing, providing seed capital and advice), etc. [12] 

Internet and social networking sites have proven to be a valuable resources for the success and collaboration of social entrepreneurs. Internet allow ideas to travel faster and further, which made them reach a wide variety of interested parties, help networks and investors to advance to global level and achieve their set objectives with virtually no start-up capital. For example we can look at the USA based nonprofit organization Zidisha that utilizes the internet and mobile technology in developing a specific online micro lending platform where destitute individuals in developing countries can interact directly with potential lenders worldwide and find small business loans at a significantly lower cost than otherwise possible (for example Zidisha has so far financed more than 600 businesses and provided financial aid in forms of low interest loans worth of almost 300 thousand US dollars) [13] . Moreover internet permits for the sharing of design resources using open source ideology (open source can be a catalyst for sustainable development as it enables people to collaborate globally on solving various local problems).

We can notice that there is a wide variety of current practices of social entrepreneurship. Some are actualized in the non-profit area, some in profit and some somewhere in between. What is apparent is the trend and practice of Social Entrepreneurship is on the rise and we can expect further developments in years to come.

To summarize social entrepreneurship is a consequence to numerous factors worldwide as well as individual preferences and beliefs. Its importance has been acknowledged by the governments worldwide who are initiating diverse programs to aid its development. Social entrepreneurship is needed as there is inequality in world wealth distribution, government inefficiency and limited funding, calls for social responsibility, increasing awareness (that something needs to be done to better this world) and the rise of post-materialist values.

Organizational models of Social Entrepreneurship

Social entrepreneurship can take different forms and organizational models. The main concern is if a business can be considered social if it generates a profit. There was a long rooted belief that social entrepreneurship should lay in the field of NFP organizations, since the idea is to find new means -ends relations to generate, deliver and sustain social value. Yet from many examples we can see that social entrepreneurship can simultaneously create social value and generate profits, while the social goals are not being compromised. Some might argue that social entrepreneurship can never reach its true potential without including generation of profit and return on investment, adding that revenue must be incorporated in its core(as this factor is crucial for sustainability). Even so in a recent survey ''social entrepreneurship'' seems to be linked in over 80% of the cases with not for profit sector. [14] 

Based on a Schwab Foundation framework for social entrepreneurship and the utilization of profit in social entrepreneurship we can differ among three different organizational styles: [15] 

Leveraged non-profit ventures

The entrepreneur creates a NFP organization with an ambition (using a social innovation) to solve a market or government shortcoming. In the process the entrepreneur involves a section of society, including private and public organizations, to help drive forward the innovation creating synergetic effect. Leveraged non-profit ventures critically depend on outside funding (usually philanthropic in nature), but the long term sustainability is often enhanced given that the partners have a vast interest in the persistence of the venture.

Hybrid non-profit ventures

The entrepreneur creates a non-profit organization but the model includes some degree of cost-recovery managed through the sale of goods and services to a cross section of institutions (either public or private), as well as to a targeted group in population. Frequently, the entrepreneur forms several legal entities to accommodate the earning of an income and the charitable expenditures in an optimal structure. To be able to sustain the conversion process in full and address the needs of customers, who are often deprived or marginalized in society, a number of different sources of funding are mobilized from the public or philanthropic sectors (funds appear in the form of grants or loans, and sometimes quasi-equity).

Social business ventures

In this case the entrepreneur creates a for-profit legal entity or enterprise to deliver a social or ecological product or service. Although the profit is ideally generated, the main goal is not on maximizing monetary returns for shareholders but on growth of social venture, so that it can reach out to a bigger group of people in need. Capital accumulation does not present a high priority and the profits made are usually reinvested in the enterprise to induce growth. The entrepreneur of a social business venture pursues investors who are interested in creating social value and financial return (in other words combining profits and doing good).

Corporate Social Entrepreneurship

At the end of World War II, with the recovery of post war destruction and the hope of prosperity, joined with the development of the international corporations, many assumed that the corporation would become the new "community", in which individuals who share common interests and goals would undertake social tasks (for example education or health). Unfortunately this idea overlooked the fact that vast majority of social issues are located outside the boundaries of corporation. Nevertheless this notion presents the very core of the concept of Corporate Social Entrepreneurship.

The notion of the CSE was first mentioned in 2002 in a conceptual working paper which was published in the Hull University Business School. The paper claimed that Corporate Social Responsibility can be motivated by an altruistic desire compelled by managers' personal values, in addition to apparent economic and political aims for CSR. We could say that Corporate Social Entrepreneurship (CSE) presents a process aimed at supporting business to progress to more progressive and powerful forms of Corporate Social Responsibility (CSR). CSE presents a combination of three compatible frameworks: entrepreneurship, corporate entrepreneurship and social entrepreneurship. Key elements of CSR are: creating and enabling environment, fostering corporate social intrapreneurs, increasing corporate purpose and values, producing double value and building strategic alliances. [16] In other words it's a phenomenon where a corporation behaves entrepreneurially and socially responsible, keeping in mind the wellbeing of the community in general. There is no clear consensus on what exactly are the boundaries to Corporate Social Entrepreneurship, so consequently it's not easy to say what companies employ CSE. Therefore it would be possible to see a highly profitable companies like Ben & Jerry as a CSE enterprise (as they claim to be committed to profitability and social/environmental responsibility), Starbucks Coffee (that claims to hold CSR in high regards) as well as nonprofit organizations like Charity: water (non-profit organization bringing clean and safe drinking water to people in developing nations. 100% of public donations directly fund water projects) and Greenpeace (a world known independent global campaigning organization that acts to change attitudes and behavior, to protect and conserve the environment and to promote peace). [17] 

Social Enterprise

Taking in consideration everything we have stated above concerning social entrepreneurship, its practices and organizational models we can conclude that social enterprises find their place situated somewhere in between traditional private businesses and public organizations.

European Union definition for social enterprise is as follows: "Social enterprise means an enterprise whose primary objective is to achieve social impact rather than generate profit for owners and stakeholders. It operates in the market through the production of goods and services in an entrepreneurial and innovative way, and uses surpluses mainly to achieve social goals. It is managed in an accountable and transparent way, in particular by involving workers, customers and stakeholders affected by its business activity."

In other words we can see that social enterprises incorporate highly motivated social aims with entrepreneurial drive of private sector. Using that as a starting point we can create a short overview between social and economic dimensions of the social venture. The economic and entrepreneurial dimension encompass the following aspects: continual activity of producing goods or services, high degree of autonomy, economic risk and minimum amount of paid work. The social dimensions include: an active group of citizens, decision making authority not entirely based on capital ownership, participatory nature, limited profit distribution and clear goal to benefit the community.

In the European Union, or better said in its member states social enterprises have their own position. Due to unclear legal models for social enterprises, they are present in numerous forms: private companies, voluntary organizations, charity funds, associations, social cooperatives and even as unincorporated organizations.

Although their legal model might differ they are active primarily in the next three areas: Work Integration (in form of training and reintegration of unemployed persons), Personal services (for example, care of elderly, childcare services, help for disadvantaged people, etc.) and Local development of disadvantaged areas (in form of neighborhood development, social enterprises in remote rural areas and so on). [18] 

Part II

The history of social entrepreneurship in the Netherlands

Just like social entrepreneurship is a relatively new study in the field of management theory it is a relatively new concept in the Netherlands. Although charity has always had its place in the very religious history of the Netherlands a real entrepreneurial environment for social enterprises didn't exist until relatively recently. Databases on Dutch charities date back to 1793 [19] when the 'Zeister Zendingsgenootschap' was founded. This Christian charity is still active worldwide with their missionary work. Another memorable moment in the history of charities is the first public action to support people in need. This occurred in 1953 after the 'Watersnood Ramp' in Zeeland and the South Holland isles. During this disaster the sea dikes broke and big parts of land where flooded during the night. The disaster caught a lot of people off guard. It killed more than 1.800 people and left 100.000 people homeless. The public action 'Beurzen open, dijken dicht' raised over 138 million gulden, an enormous amount for that time. [20] 

The current system of social entrepreneurship finds its basis in the rise of the Dutch 'verzorgingsstaat' or welfare state in English. This is the system in which the government takes a big responsibility in providing for the wellbeing of its citizens. In the Netherlands this meant the government took accountability for an increasing amount of aspect in the peoples life from the early 20th century and onward. The biggest fields being: employment, healthcare, education and social security.

During World War II the expansion of the system got a huge boost as more and more people became in need of help. This expanding trend however didn't stop after things started to look better after the Second World War. They system of social security and the welfare state as a whole kept expanding and expanding until in the 1980's it became unmanageable for the government and almost completely collapsed because of the insane expenditures needed to keep it up. During this time big reorganizations took place within the system to lower the costs. A big part of this was abandoning certain parts of the governmental responsibility and privatizing its efforts in certain fields. This is where the new market for social entrepreneurship emerged, taking over and expanding on government policies looking after the wellbeing of citizens and the community. [21] 

Because there was room for private social initiatives again and there were quite a few social problems to be addressed, regulation for privately run social oriented companies was needed. In November 1994 a trade organization was setup for social enterprises the 'Vereniging Fondswervende instellingen'. This was followed by the establishment of the trademark of the Central Bureau of Fundraising which provides trademarks for social enterprises labeling them as trustworthy to possible donators. The CBF currently has a total of 1452 registered charity organizations. [22] Next to the regulation of fundraising non-profit enterprises a big increase in for-profit social enterprises has been seen and with this also an increase in for-profit social entrepreneurship platforms.

The current state of social entrepreneurship in the Netherlands

Now that we have had an insight in the history of charities within the Netherlands and have seen how most of the markets for social entrepreneurship have come into being this paragraph will focus on the current state of social entrepreneurship in the Netherlands. For this review we will be using a 2011 research by Willemijn Verloop and McKinsey & Company: Opportunities for the Dutch Social Enterprise Sector. In contrast to the previous paragraph, which almost completely focused on non-profit fundraising enterprises, this research focuses completely on the new population of for-profit social entrepreneurs. They define their research subjects as follows: "A Social Enterprise is a company with the primary goal to deliver social value in a financially sustainable and independent way." So what is the current state of social entrepreneurship in the Netherlands and how does this compare to for example the rest of Europe?

At the moment the Netherlands counts anywhere between 4.000 and 5.000 socially oriented companies. These are all fairly small companies that do not offer a lot of employment or generate big revenues. Our biggest social enterprises have on average a 5,5 times smaller turnover than the biggest social companies in the United Kingdom. The current employment realized by the social sector is about 26.000 jobs. Most of these businesses are active in six different sectors: Cleantech, Biosystems, Civic Engagement, Health and Wellbeing and Education. [23] 

There are many different reasons for the fact that there is such a small amount of social enterprises in the Netherlands. We think that one of those is the current stance of the general entrepreneurial spirit in Dutch society. The Netherlands and the European Union as a whole have had trouble with the image of entrepreneurship and especially its risks for a long time now. In the Netherlands a mistake is in general not seen as a learning opportunity but as failure. Even when someone is completely without blame for what happened the public opinion towards that person will still be negative. When making mistakes generates such fear within the society, this could pose a big barrier for new entrepreneurs, especially when they risk their image for a cause that is not necessarily their own. In 2007 the European commission presented an article dedicated to breaking the stigma around bankruptcy that prevents unlucky entrepreneurs from getting a second chance. Their research pointed out that 47% of all people would be reluctant to trade with entrepreneurs that have already been bankrupt before. Next to this 51% would never invest in businesses that are in financial trouble as they probably think that it is the entrepreneurs own fault and that he should deal with it himself, even though this most of the times isn't the case. This all leads to a very small amount of bankrupt entrepreneurs to make a second start, even though that is what they really want. A striking example of an entrepreneur who was wrongfully disadvantaged by the bankruptcy of his company is Job Nijs. When his company On The Road Media went bankrupt in 2005 Job Nijs was, as CEO of the company, blacklisted by almost all banks while fraud or personal mistakes had no part in the bankruptcy. This made it near impossible for him to even get a bank account for his savings at any bank, almost ruining him. [24] This is nowadays forbidden by law but gives a good insight in where the entrepreneurial environment is coming from. [25] 

At the present time, five years after the publication of this report, there is still a long way to go towards a more compassionate environment towards entrepreneurs in the Netherlands. The Director of Entrepreneurship at the Dutch Ministry of Economic Affairs, Agriculture and Innovation, Rinke Zonneveld also pointed this out as one of the continuous problems in Dutch society. Giving us a disadvantages when compared to for example the United States where a mistake is a lesson learnt and bankruptcy isn't something to be ashamed of. [26] 

Going back to the research by Verloop and McKinsey & Company (2011) we will take a look at the financial part of social enterprises in the Netherlands. One of the most outstanding findings is that in all sectors almost half of the social companies does not break-even at this moment and that more than half of the companies have a turnover of less than €80.000,-. One of the main obstacles that was found to hold back the social entrepreneurs from growing and reaching profitability was the covering of all costs. This could be because of multiple reasons such as inefficient management or lack of availability of capital. We will take a look at the financial structure of social enterprises and the availability of funding for social enterprises. Most of the social companies covered by the research are at the moment, one more than the other, reliant on government subsidies and private donations. It seems that they are having trouble getting investments especially from other sources than banks. This is a very difficult position to be in at the moment as both banks have become more critical of their investments and the government is making harsh budget cuts leading to even more loss of capital in these types of markets. In the graph below you can clearly see how the investments in the social enterprise sector are most likely built up. At this moment almost half of the total investments come from traditional bank loans and the other half from donations and subsidies.


Seeing how both these forms of financing have been in decline for some time will most likely continue to decline in the time coming new forms of financing are needed in this sector to realize profitability and sustainable growth over time. Sources of financing in the traditional business world such as seed funding and venture capital, such as the angel clubs mentioned, are really lacking behind in this sector. This could be because of information asymmetry between the capitalist and the social sector which means that more awareness should be the main strive of the sector. Another option for funding mentioned in the report is crowd funding platforms, we think of this as a very promising medium for social entrepreneurs and shall elaborate further on this topic later on.

Currently the government almost solely supports social enterprises through tax benefits and subsidies. The tax authorities acknowledge social enterprises when they meet certain conditions. Two of the most important conditions are that the enterprise should dedicate at least 90% of its activities to the social cause and that any profit made should be used to invest in the social cause. When a company meets these criteria the company no longer has to pay taxes over received or made donations and inheritances. Some social companies are also entitled to restitution of 50% of their energy taxes. The government also stimulates further donations to recognized social enterprises by making gifts to these companies partly deductible from income taxes by the donators.

When looking at subsidies it becomes apparent that most of the subsidies come from European level and are, in the case of social entrepreneurs, almost all project based. This means that the subsidies are no sustainable source of income companies can rely on at the moment.

Social issues in the Netherlands

The focus of social oriented companies is to add value to the society and solve current problems communities are facing. As said in a previous paragraph the research by Verloop and McKinsey & Company (2011) identified the six biggest sectors within social entrepreneurship in the Netherlands. These sectors are: Cleantech, Biosystems, Civic Engagement, Health and Wellbeing and Education. The question is why are they in these sectors and what are the problems they are trying to address in there? Following the Verloop and McKinsey & Company (2001) these are the main issues the sectors are focusing on improving:

Cleantech focuses on the climate. Companies in this sector are all about preservation of natural resources and trying to prevent further global climate changes. Making businesses more aware and sustainable towards the environment and innovating on current practices to reduce their carbon footprint is their mission. An example of such a business is the new technology startup Sunuru [27] . This small venture located in the YesDelft incubator won the international CleanTech Challenge 2012 for sustainable innovation with their new form of solar panels making the panels more accessible and more efficient.

Biosystems is the largest of the social entrepreneurship sectors, it focuses on animal well-being, preservation of nature and the reduction of waste in society. One of the more well known businesses operating in this sector is 'Vereniging Natuurmonumenten'. This organization acquires and preserves pieces of nature in the Netherlands for future generations and in order for plant- and wildlife to flourish once more. In 2011 they managed more than 104.000 hectares of nature in the Netherlands. [28] 

The Civic Engagement sector includes for example organizations that commit themselves to helping certain vulnerable groups get a stronger position on the labor market. Another social issue this sector addresses is the lack of social cohesion in the country. An example of a company that tries to get vulnerable groups out of their social isolation by offering them jobs is the care bakery 'Het Blauwe Hek' in Naaldwijk that we visited during the Westland Experience. They employ only mentally deficient people and give them a way to spend their day and a way to earn a little money for themselves. [29] 

Health and Wellbeing is a very broad sector some of the social issues they are trying to address are the growing presence of obesity and increasing costs of the current Dutch healthcare system. The biggest social issue in this sector the Netherlands are facing over the next couple of years is welfare of the elderly. Because of the so called 'vergrijzing', the aging of a big part of the Dutch society, it will be hard to and very costly to provide all of them with good care and a sufficient allowance. An organization that strives for the wellbeing of the elderly on a local level is 'Stichting Welzijn Ouderen Wassenaar' (SWOW). By providing seniors with food delivery and transportation facilities SWOW tries to make their life easier. [30] 

The last big sector mentioned in the research is Education. This is the smallest of all sectors and focuses on the quality of the education and solving the mismatch between educational programs and the labor market. A Dutch organization that focuses on the quality of education is the 'Stichting van het Onderwijs' or the Foundation of Education in English. They want to improve the quality of Dutch education by, amongst others, improving the teachers study and further professionalizing their trade. They requested an elaborate report on the situation of the Dutch education system at McKinsey & Company this year so they can further develop their strategy. [31] 

These sectors should in theory represent the major social issues that currently play a big role in the Dutch society. We have however identified an issue on which social entrepreneurship could have a very positive impact but that isn't widely covered at the moment. We think that especially during the current financial crisis more attention should be given to the problem of the growth of (structural) unemployment in the Netherlands. In the time period of July 2011 till July 2012 unemployment numbers increased from 413.000 to 510.000 which is an increase of 23,5%. This brings the current total of unemployed people on 6,5% of the total labor force. When this number is corrected for seasonal influences the percentage of the workforce that was structurally unemployed in September 2012 was 5,3%. Compared to the rest of Europe this is a very good position as only Austria has a lower score. The Mediterranean countries are scoring very badly within Europe when it comes to employment, the worst being Spain with an unemployment rate of 25% of the total labor force. [32] 33

Even though the Netherlands do not seem to be in such a bad spot, unemployment growth rates of 23,5% over a year are pretty daunting. We argue that social entrepreneurship can make a difference in this changing environment. When people in the Netherlands become unemployed for reasons beyond their own control they are entitled to unemployment payments (werkloosheidsuitkering in Dutch) by the government. The amount of the payments is determined based on the salary the person earned in the period right before he lost his job. During the time they are eligible for the payments people are obliged to apply for at least one job a week. An exception on this rule are people that are actively starting their own business. This gives people unable to find a fitting job for their knowledge and skills another way out. This structure is also supported by the 'Social Security Agreement for the self-employed' which since the reform of 2004 allows unemployed people to get an interest free loan to support them whilst setting up their own company. This scheme also financially support the entrepreneurs should they fail and return to unemployment within a year making entrepreneurship a viable option for unemployed people. [34] 

Part III

Observation of the current state of affairs in the Netherlands

Entrepreneurship plays a vital role in the Dutch economy. Therefore it is no surprise that the government has developed a number of policies and mechanism to encourage entrepreneurship, help its development and fuel the growth of the Dutch economy as a whole. We can see policies at work in numerous areas designed to address market imperfections, government limitations and help entrepreneurial growth. Policies are there to help address the financial problems (mainly the equity gap), the knowledge and competencies issues (through education), to provide incentives for startups (through subsidies, guarantees and tax reliefs), to give competitive advantages to Dutch companies in forms of technology and innovation, to offer considerable relief in regulatory simplification (administrative procedures in the Netherlands are one of the most efficient in the world), to realize deregulations in the market and so on. To name just a few of the policy packages and mechanisms we can see: the Guarantee Scheme for SMEs (BBMKB), the Growth Facility program, the Techno partner Program (SKE, SEED, Techno Partner Certificate and BAP), the Microfinance Scheme, the Investment Allowance and many more. There is of course room for improvement, especially in the field of entrepreneurial restarts and bankruptcy, but overall the situation is optimistic.

When we think of the Netherlands we can easily associate it with high Social Justice and developed Social programs and policies. Whether we are talking about old age and survivor pensions, disability pensions, old age benefits, high bar for minimum income wage, student financing, unemployment benefits, sickness and maternity benefits, work injuries and family allowance, we can see that the Netherlands is positioned on the top of the list. Furthermore Dutch culture has a long tradition nurturing social integrity. [35] 

So one might think adding the two together, fostering entrepreneurship and long tradition and dedication to Social justice that Social entrepreneurship would be flourishing in the Netherlands. Unfortunately and to our surprise that is not the case. There is however a lot of potential as recognized by the Verloop and McKinsey & Company (2011) research. When they compared the Dutch social enterprises sector to more successful ones in Europe they came to the conclusion that the sector has a need for almost double the amount of companies than there are now. They expect the total job capacity of the sector to be around 100.000 job, 70.000 more than are currently occupied.

In the Netherlands Social entrepreneurship is predominantly linked to including disadvantaged persons into the labor market and producing goods for sale at market prices. In most other countries, the scope of activity for social enterprises is much more encompassing. Furthermore when talking about external barriers to Social Entrepreneurship (in translation mostly legal and taxation frameworks of the country) we can observe that Dutch social enterprises undergo virtually same treatment that was primarily made for commercial enterprises and which does not consider specific features of NFPs or social enterprise. Situation concerning internal barriers is not much better either: little visibility of social enterprises combined with a much more serious issue of competence lacking managers that exhibit shortage of key qualifications or strategy (perhaps because they may receive low or no salary), present a reason for concern. [36] 

If we look at the support measures for few social enterprises in the Netherlands we are faced with the following picture:

Taste the meeting (name of a café) - Government support measure: EQUAL

Master class Social Entrepreneurship - Government support measure: Business support

Work corporations for young person's- Government support measure: EQUAL

EQUAL is a Community Initiative financed by the European Social Fund (ESF) and co-funded by the EU Member States within the 2000-2006 program periods. The initiative focused on supporting innovative, transnational projects aimed at tackling discrimination and disadvantage in the labor market. [37] Since EQUAL was highly present in the Netherlands we can conclude that there were many lessons learned.

Generally in European countries the government has measures designed to support social enterprises based on legal regulations (special legal forms, tax privileges, other regulations), financial support (direct and indirect), business support, measures fostering cooperation and measures from the EQUAL framework.

Legal regulations play an important part in supporting and fostering social enterprises, providing them with the necessary competitive advantage. An important policy measure to highlight the significance of social enterprises and help improve the structure of social organizations is the introduction of special legal forms or laws on social enterprises that can combine privileged regulations concerning tax, and so on.

Financial regulations characterize the type of support that is mostly utilized in stimulating social enterprises. Direct financial support can be seen in subsidies, that most of Social enterprises rely on (subsidies reach up to 60% of the total capital needs), or risk capital (venture capital meant for social enterprises) and project grants (to fund specific projects). Indirect financial support usually is carried out in wage subsides.

Business support presents measures that offer supporting structures which advise, help, educate, incubate and guide social entrepreneurs. These measures are important for the startup and emergence of social enterprises. This can also be in overall business support, or example helping educate social entrepreneurs. Projects like the "Master class Social Entrepreneurship", that helps young social entrepreneurs start their careers.

Measures focused on developing cooperation can appear in multiple forms: public authorities seek cooperation with the social enterprise sector, cooperation between social enterprises or in the establishment of umbrella organizations. Promoting cooperation is an important step in helping SE increase their reach, learn, develop trust and achieve their social goals.

Development of a new government policy in the Netherlands

As we have looked through different social enterprise initiatives in the Netherlands, government support structures and policies regarding entrepreneurship in general, we have concluded that the best effect for social entrepreneurship in the Netherlands is the development of a new radical policy package. We see this as a necessary step, to be able to combine and match the high entrepreneurial drive of the Dutch with their long tradition of social policies and justice. To us the choice between changing an existing policy or developing a new policy regarding social entrepreneurship was easy, since we have determined that entrepreneurial policies targeting social sector are few and lacking.

Our choice can be outlined in the following reasoning:

Question: Do policies promote and support the development of Social enterprises? Answer: No, not specifically and very limited (usually the policies are either concerning entrepreneurship in general or the stance of the government is to stay aside -for example Corporate Social Responsibility)

Policy issue derives from: Absence of adequate policies on Social enterprises and Social Entrepreneurship in general

Therefore creating new policies is the logical step to take, if the Social entrepreneurship is to reach its true potential.

Furthermore we will try to answer a series of questions relating directly to our strategy of advocating for a new government policy, but first we will specify what the policy objective is.

Policy objective: Developing Social entrepreneurship (and making it more competitive compared to traditional entrepreneurship), utilizing emerging social enterprises to help in resolving social problems in the Netherlands, especially the problem of long term unemployed.

Where does the entrepreneur need more help and why: Entrepreneurs need help in several important steps for various reasons.

First of all the startup phase requires substantial capital, so financing is of crucial importance. Since there is a limited interest in investing in social enterprises as well as a lack of supporting programs that target social entrepreneurship (as most investors will rather invest in a traditional enterprise, since the ROI is considerably bigger), social entrepreneurs are facing a serious problem.

Secondly social entrepreneurs as we have constituted before require support and advice. They usually lack the necessary entrepreneurial skills and guidance as well as knowledge in the social sector. There are some programs in education that are addressing this issue (for example the Social Entrepreneurship Master Class we discussed before), but their result is inadequate. The direct effect is shortage of social entrepreneurial competencies, while the indirect effect can be traced back to virtually nonexistence of programs in education or government organized platforms that would deal with this issue.

Thirdly, if we take in account, the lack of skills and guidance as well as financing problems, it is only logical that social entrepreneurs are prone to failure and bankruptcy. Considering the entrepreneurial climate in Netherlands, that looks on a bankruptcy critically (unlike USA where entrepreneurs failure is seen as a learning process) and extremely small number or returning entrepreneurs, it comes to no surprise that the negative effects are two folded. First this inhibits the very creation of startups in the social sector and secondly it does not provide entrepreneurs with a second chance.

Related support structures, and the reasons for their ineffectiveness: We would like to state that there are several support structures but we will focus namely on two. The first one is concerning the economic aspect of social entrepreneurship. Government provides a number of mechanisms to help entrepreneurs but unfortunately those mechanisms are unable to differentiate social enterprises from regular enterprises. As social enterprises are suffering from competitive disadvantages (as their nature is on creating social value primarily) and require a specific approach, they are unable to compete on an equal level and are destined to lag behind or fail. Secondly if we focus on social aspects and support structures we can see that there is a long tradition in Netherlands for the government to be a key player in solving and dealing with social issues. Now that the government is making steep budget cuts and is retreating from several social sectors it is important that they don't completely abandon them but rather make a shift to a facilitating role. At the moment this specific support for different important social issues is not in place. This makes the social sector very inefficient, as parts that are covered by the government are slow and bureaucratic and the privatised portions lack knowledge and influence to make sufficient and effective changes.

Medium to provide support to the entrepreneurs: As the traditional financing methods are becoming more and more problematic to attain for entrepreneurs because of the economic crisis, social entrepreneurs are hit the hardest because of their lack of competitive nature. This means they should resort to different kinds of financing that have not yet been explored in the Netherlands. We think that the key to a more sustainable social entrepreneurial climate lies in cooperation between the government and the community itself. Instead of SE relying on government subsidies and charitable donations we want to propose a different approach. This approach would combine the two above mentioned ingredients and add a third ingredient to the mix: crowd financing. This way instead of small loose donations, social entrepreneurs can apply for a significant (seed) investment consisting of small participations by number of different people that would act as interested parties (and sponsors). The government would in this mix use its subsidy scheme not to directly support social enterprises but to guarantee the crowd funders, provide monitoring and advice, as well as to help provide the platform on which all of this would be possible.

Different parties affected: We would have on one side the government, which would act as a facilitator and would later on have a more monitoring roll, entrepreneurs with the roll of providing social services and products and the community at large. As additional players, there would be different NGOs and educational institutions that would provide support in different forms, whether we are talking about advice, promotion or more active involvement. As it can be noticed our approach would involve a large group of organizations and individuals, but as we are attempting to make a radical and thorough change this is necessary.

Design of the policy:

Our policy package would represent a specific program, mechanisms and supporting policies. The aim of the policy is to encourage the emergence of social entrepreneurship on a national level, help the economy (by actually stimulating for profit and hybrid models of social enterprises), allow interested parties to get involved actively in solving social problems or acquiring social products and services, as well emphasize the reduction of long term unemployment.

Outline of our policy:

An online crowd funding platform (aiming for sustainability through 5% fee on all investments made; government in charge of setting up this platform but would later on take a more of a supporting, monitoring roll)