The Social Economy can be defined as that part of the economy which is neither private nor public, but consists of constituted organisations, with voluntary members and boards of directors or management committees, undertaking activities for local benefit.

It is made up of community organisations and businesses, working for the greater good of local communities and marginalized groups, which are led and managed by people in the locality.

Economies may be considered to have three sectors:

1. The business private sector, which is privately owned and profit motivated;
2. The public sector, which is owned by the state;
3. The social economy, that embraces a wide range of community, voluntary and not-for-profit activities.

The Social Economy is often referred to as ‘the third sector’ and can be broken down into three sub-sectors; the community sector, the voluntary sector and the social enterprise sector:

• The community sector includes those organisations active on a local or community level, usually small, modestly funded and largely dependent on voluntary, rather than paid, effort. Examples include neighbourhood watch, small community associations, civic societies, small support groups, etc.

• The voluntary sector including those organizations that are: formal (they have a constitution); independent of government and self-governing; not-for-profit and operate with a meaningful degree of volunteer involvement. Examples include housing associations, large charities, large community associations, national campaign organisations, etc.

• The social enterprises sector includes organisations which "are businesses with primarily social objectives whose surpluses are principally reinvested for that purpose in the business or in the community, rather than being driven by the need to maximise profit for shareholders and owners". Examples include co-operatives, building societies, development trusts and credit unions.

The Social Economy sector employs over 10m people in the EU. In Northern Ireland it accounts for between 5-8% of economic activity and employs between 30,000-48,000 workers. The sector is comparable to the tourism industry (5.6%) or construction industry (5.1%).

Social economy organisations are different from other organisations because they:

•         Are set up for a social and environmental purposes (not just to make a profit)

• Have unpaid leadership (ie Board members, Directors or Trustees)
• Have a lot of community or user involvement in how they are run
• Reinvest profit rather than paying it out to shareholders

They have many advantages compared to other organisations. They are:

• Close to their customers and clients and therefore know and respond quickly to their needs
• Able to provide services to groups of people that are hard to reach
• Able to attract charitable donations (money, labour and contributions in kind).
• Well placed to make experience based contributions to public debate
• An efficient way of building social capital   

Values and principles of the Social Economy

The Social Economy aims to improve the quality of personal and community life. It helps the capacity of individuals and local communities to identify and meet their own social and economic needs. The Social Economy promotes:

• Economic activities with social goals
• Social and economic benefits for individuals and communities
• Co-operation and solidarity
• Mutuality
• Employee and community ownership and control of local economic resources
• Equal opportunities
• Social and economic inclusion
• Good employment practices
• Sustainable development

The social economy spans economic activity in the community, voluntary and social enterprise sectors. The economic activity, as with any other economic sector, includes: employment; financial transactions; the occupation of property; pensions; trading; etc.

Social Economy Enterprises have 3 common characteristics:

• Social Aims – they have explicit social such as job creation, training and provision of local services. They have ethical values including a commitment to local capacity building. They are accountable to their members and the wider community for their social, environmental and economic impact.
• Enterprises Focused – they are directly involved in the production of goods and the provision of local services to a market. They seek to be viable concerns, making a surplus from trading,
• Local Ownership – they are autonomous organisations with governance and ownership structures based on participation by stakeholder groups (users or clients, local community groups etc) or by trustees. Profits are distributed as profit sharing to stakholders or used for the benefit of the community.

The social economy usually develops because of a need to find new and innovative solutions to issues (whether they be socially, economically or environmentally based) and to satisfy the needs of members and users which have been ignored or inadequately fulfilled by the private or public sectors.

By using solutions to achieve not-for-profit aims, it is generally believed that the social economy has a distinct and valuable role to play in helping create a strong, sustainable, prosperous and inclusive society.

Successful social economy organisations can play an important role in helping deliver many key governmental policy objectives by:

• Helping to drive up productivity and competitiveness;
• Contributing to socially inclusive wealth creation;
• Enabling individuals and communities to work towards regenerating their local neighbourhoods;
• Showing new ways to deliver public services; and
• Helping to develop an inclusive society and active citizenship.