Social Economy in Europe Contributing to Competitiveness and Prosperity
Introduction
Social economy in Europe has emerged as a critical driver of sustainable growth, employing approximately 11.5 million people and generating over EUR 912 billion in turnover across the European Union. This comprehensive overview synthesizes findings from the joint OECD and European Commission report, Social Economy in Europe: Contributing to Competitiveness and Prosperity (2025).
The document provides an evidence-based analysis of how entities such as co-operatives, mutual societies, associations, foundations, and social enterprises are reshaping key sectors while addressing structural economic challenges. For researchers, policymakers, and housing professionals, understanding the mechanics of this ecosystem is essential for navigating current policy landscapes and identifying opportunities for inclusive development.Defining the Scope of Social Economy in Europe
To accurately assess impact, one must first understand the operational definition used throughout the report. The social economy in Europe is defined by three core principles: prioritizing collective or social interest over profit, reinvesting surpluses into social missions, and practicing participatory governance. Unlike traditional businesses, these entities operate under legal forms that lock assets and limit profit distribution, ensuring long-term commitment to societal goals.
The sector is remarkably diverse, spanning agriculture, banking, renewable energy, health, education, and construction. However, the 2025 report places special emphasis on two high-priority areas where the social economy in Europe demonstrates unique value propositions: care services and affordable housing.
These sectors face acute demographic and affordability pressures that conventional market mechanisms have struggled to resolve alone. By leveraging local roots and stakeholder engagement, social economy actors fill critical gaps in public service delivery while maintaining financial viability through innovative business models.
Transforming Care Services Through People-Centred Models
Demographic aging and workforce shortages have created a crisis in long-term care across the continent. The report highlights that the social economy in Europe is uniquely positioned to address these challenges through five distinct pathways that differentiate it from for-profit providers.
Promoting Autonomy and Rural Access
While private providers often concentrate in urban centers with higher margins, social economy entities frequently serve rural and remote areas where they hybridize market resources with volunteer networks. They champion "aging with autonomy" through home-based and community-integrated care models rather than institutionalization. Examples include intergenerational co-operatives in Germany and France that combine housing with care, allowing seniors to remain independent while fostering social cohesion.
Integrated Service Delivery
Fragmentation between health and social care systems remains a persistent barrier to quality. Social economy organizations excel at integrating these services due to their collaborative nature and holistic mission.
In Italy and Belgium, mutuals and co-operatives have developed platforms that coordinate medical treatment with social support, reducing hospital readmissions and improving patient satisfaction. This integrated approach is a hallmark of the social economy in Europe, demonstrating how organizational structure directly influences service outcomes.
Improving Working Conditions
The care sector suffers from low wages and high turnover. Social economy entities, particularly worker co-operatives, advocate for better employment standards. Evidence from Ireland and Spain shows that these organizations provide more stable contracts, training opportunities, and participatory management structures compared to commercial competitors. By reinvesting surpluses into workforce development, they help professionalize care work and reduce gender pay gaps, contributing to broader labor market competitiveness.
Addressing Housing Affordability and Sustainability
Housing affordability has become an urgent priority, with over half of urban dwellers identifying it as a critical problem. The social economy in Europe offers scalable solutions through non-profit housing associations, limited-profit entities, and co-operatives that prioritize long-term affordability over asset appreciation.
Innovative Financial and Tenure Models
Social housing providers in countries like Austria, the Netherlands, and Denmark utilize cost-based rent setting and revolving funds to maintain affordability without perpetual state subsidies. Community Land Trusts (CLTs) in Belgium and France decouple land ownership from building ownership, permanently removing land speculation from the housing equation.
These models demonstrate how the social economy in Europe creates resilient financial structures that withstand market volatility while serving low- and middle-income households.
Sustainable Construction and Renovation
Beyond affordability, social economy actors lead in green transition efforts. The report cites examples of circular construction in Denmark and Austria, where co-operatives manage demolition and material reuse. Housing associations in the Netherlands and Sweden achieve higher energy efficiency ratings than the private rental average. By combining social missions with environmental stewardship, the social economy in Europe addresses the dual challenge of housing exclusion and climate change simultaneously.
Social Rental Agencies and Intermediation
In markets with significant vacant stock but persistent homelessness, Social Rental Agencies (SRAs) act as intermediaries between private landlords and vulnerable tenants. Operating in Belgium, France, and increasingly in Central and Eastern Europe, SRAs guarantee rent payments and provide tenant support services.
This model activates dormant private supply for social purposes, illustrating the adaptive capacity of the social economy in Europe to function within existing market frameworks while redirecting outcomes toward inclusion.
Strengthening Framework Conditions for Growth
Despite its contributions, the sector faces systemic barriers. Part II of the report analyzes three fundamental framework conditions necessary for unlocking the full potential of the social economy in Europe.
Institutional Arrangements and Multi-Level Governance
Effective policy requires coordination across national, regional, and municipal levels. While 11 EU Member States have comprehensive legal frameworks and designated institutions, fragmentation persists elsewhere. The report recommends establishing clear mandates and coordination bodies to mainstream social economy considerations across ministries.
Municipalities play a particularly vital role as they are closest to community needs; cities like Barcelona and Paris have developed dedicated strategies and procurement practices that embed the social economy in Europe into local development planning.
Tailored Business Support Ecosystems
Conventional business support often fails to address the hybrid nature of social enterprises. The report identifies a need for specialized incubators, patient capital, and impact measurement guidance. Trends show increasing integration of social economy criteria into mainstream SME programs and the rise of blended finance instruments.
However, gaps remain in rural areas and for early-stage ventures. Strengthening business support for the social economy in Europe requires adapting eligibility criteria and developing financial products that recognize social returns alongside financial sustainability.
Fiscal Policy and Taxation
Tax frameworks significantly influence sector viability. While all Member States offer some preferential treatment, many exclude social enterprises or impose complex administrative burdens. The report urges policymakers to clarify eligibility criteria, create public registers of eligible entities, and fully utilize State aid flexibilities like the General Block Exemption Regulation.
Aligning tax policy with the operational realities of the social economy in Europe can enhance transparency, prevent abuse, and ensure that fiscal incentives effectively reward positive externalities.
Sector-Specific Contributions to Competitiveness
The report emphasizes that the social economy in Europe contributes to competitiveness not merely as a social safety net, but as an innovation engine. In both care and housing, social economy entities pioneer new service delivery methods, digital tools, and governance models that are subsequently adopted by mainstream actors. Their focus on quality and stakeholder trust reduces transaction costs and enhances resilience during crises, as evidenced during the COVID-19 pandemic.
Furthermore, by providing affordable care and housing, the sector enables greater labor market participation, particularly among women and young people. This indirect contribution to productivity underscores why investing in the social economy in Europe should be viewed as economic infrastructure rather than discretionary social spending. The data suggests that regions with robust social economy ecosystems exhibit stronger territorial cohesion and more inclusive growth patterns.
Conclusion
The comprehensive analysis presented in Social Economy in Europe: Contributing to Competitiveness and Prosperity confirms that this sector is indispensable for achieving sustainable and inclusive development goals. From delivering person-centered care to pioneering affordable housing models, the social economy in Europe demonstrates that economic activity can be successfully aligned with social progress. However, realizing its full potential requires intentional policy action to strengthen institutional frameworks, adapt business support, and reform taxation.
For researchers and practitioners, this document serves as both a benchmark and a roadmap. It validates the sector’s economic significance with robust data while providing actionable recommendations for creating enabling environments.
As demographic and environmental pressures intensify, the insights regarding the social economy in Europe will remain increasingly relevant for designing resilient, competitive, and prosperous societies. Continued monitoring and evaluation of these framework conditions will be essential to track progress and refine policies in this evolving landscape.