Germany’s social enterprise movement is emerging from the sidelines

After a sluggish start, social entrepreneurship is now booming in Germany, according to new research by the country's social enterprise network SEND, which has also seen a sharp increase in its own membership. But entrepreneurs and advocates of the movement still face an uphill battle in some areas. Could 2021 – a general election year – be a turning point?

Back in 2013, when Jörg Schüler, Florian Borns and Gregory Grund set out to build Digitale Helden (digital heroes), a social enterprise that trains teachers to help students deal with personal data and bullying on the internet, the German social entrepreneurship ecosystem was lacklustre at best.

Largely ignored by politicians and fairly unknown to the general public, social innovators had to fight an uphill battle. Digitale Helden (pictured above) was happy to be admitted to one of the few incubation programmes specifically designed to cater to social innovations. Seven years later, Digitale Helden can look back on thousands of trained pupils who support their peers to safely use digital media. In 2020 over 3,000 people attended their webinars and 1,700 pupils took part in their mentoring programme.

While Digitale Helden succeeded, many great stories have been lost along the way. And this is unfortunately by design: compared to other large economies, Germany scores only 21st when it comes to how social entrepreneurship support is perceived among practitioners, a Thomson Reuters study found in 2019. In Germany, the country that in the 19th century introduced the first public social welfare system in the world, privately owned social enterprises are nowadays viewed with suspicion and, as a result, have long been relegated to a niche existence.

Privately owned social enterprises are viewed with suspicion and have long been relegated to a niche existence

Interestingly, these unfavourable conditions do not detract from the hype the sector is creating. SEND, the association for social entrepreneurship in Germany, reports a sharp increase in network members. In our annual German Social Entrepreneurship Monitor (DSEM) the data are clear: social entrepreneurship is booming. Not only has the number of participating organisations doubled for the third time in a row(!), more than half have been founded within the last three years. As founding member of SEND and initiator of the DSEM, Michael Wunsch, says: “It is really exciting to see the dynamic development of the sector. We can observe a spike in impact-oriented startups.”

 

Key findings from the German Social Enterprise Monitor 2020/21

Of the 400+ social enterprises surveyed this year, SEND found that: 

  • 74.8% reinvest or donate the majority of their profits to social causes
  • 93% offered at least one market innovation when they were founded
  • 80% see ecological and social responsibility as important criteria in their own supply chains and procurement
  • 52.7% are run by women (compared to 15.7% among mainstream startups)
  • they are on average six years old

 

Especially against the background of the Covid-19 pandemic, hands-on, pragmatic, and solution-oriented approaches have been in high demand. As Germany went into its first lockdown and many public systems saw themselves overwhelmed, civil society stepped in to fill the gaps. One of these endeavours was #WirVsVirus (‘We vs. Virus’), a two-day hackathon, in which more than 28,000 people developed more than 1,500 ideas to tackle public problems related to the coronavirus pandemic. One of the solutions created within the hackathon was Quarano, an app that can be integrated into the existing processes of health authorities to help break infection chains. It is examples like these that have helped social innovators gain increased attention by the public.

But there remains plenty of work to do. Social entrepreneurs in Germany still face structural barriers to developing their full potential. Specifically, when it comes to financing: the DSEM shows that government funding programmes have not adjusted their support for social enterprises yet. Public administrators are hesitant to leave behind the dichotomous world of for-profit startups and non-profit NGOs. Social enterprises end up being stuck in limbo as they strive for sustainable, innovative impact.

Socialbee has helped over 250 refugees successfully find a job, saving the public over €5m in social welfare spending

One great example is Socialbee, an award-winning social enterprise from Munich that helps refugees to get work. In the past three years, Socialbee has helped over 250 refugees successfully find a job, thus saving the public over €5m in social welfare spending. Still, the social enterprise relies on long-term partnerships with foundations as its impact-oriented business model excludes it from most public funding mechanisms. If the organisation exclusively focused on well-educated and job-ready refugees, it could have long been profitable. But that was not the goal, says CEO Zarah Bruhn: “True impact is to especially help those find a job that need it the most.”

Overall things seem to be moving in the right direction. Large companies are starting to integrate social enterprises into their supply chains, with software firm SAP and its 5 & 5 by ’25 initiative – which aims to direct 5% of its procurement spend to social enterprises and diverse suppliers by 2025 – leading the way.

Even politicians seem to be coming to the table. Last year, the German Bundestag (federal parliament) dedicated an entire reading debating the strategic promotion of social entrepreneurship. Additionally, several state and local governments have started to implement support programmes for social innovations in Germany’s federal system. “Against the backdrop of the multiple social and ecological challenges, more and more actors from political and business communities are starting to understand the potential of social entrepreneurship,” says Wunsch.

More and more actors from political and business communities are starting to understand the potential of social entrepreneurship

With a general election coming up in September, SEND hopes that 2021 will be an even bigger year for the sector. We have successfully placed the topic of social entrepreneurship on the agenda of representatives of (almost) all parties of the political spectrum. Alongside the development of financing instruments tailored to the needs of social enterprises, we are calling for the creation of social innovation centres that target innovative social enterprises and social innovations.

The increased attention for the sector raises hopes that social entrepreneurship will stand to gain from the general election. But whatever happens in September, social entrepreneurship in Germany has already stepped out of its niche existence.

  • Pablo Hoffmann works for SEND and is the author of the 3rd German Social Entrepreneurship Monitor 2020/21.

Header image: Digitale Helden, social enterprise that trains teachers to help students deal with personal data and bullying on the internet

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