Promoting Social Considerations into Public Procurement Procedures for Social Economy Enterprises

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Promoting Social Considerations into Public

Procurement Procedures for Social Economy

Enterprises

Mapping the ecosystem in which social economy

enterprises operate, including access to public

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Author: Teo Petricevic. Ivan Serdarušić March 2019

LEGAL NOTICE:

This document has been prepared for the European Commission, however it reflects the views only of the authors, and the Commission cannot be held responsible for any use which may be made of the information contained therein.

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Contents

1. List of Acronyms & Abbreviations ... 2

2. The state of play of Public Procurement ... 3

2.1 Public procurement structure at national, regional and local level ... 3

2.2 Competencies and responsibilities of the authorities involved in public procurement 4 2.3 Use of public procurement ... 4

2.4 Application of articles of the Directive ... 5

2.5 Cross-border dimension of socially responsible public procurement ... 5

2.6 Guidance and training material on the new Directive ... 5

3. The Social Economy ecosystem ... 6

3.1 Main definitions and concepts used: social economy, social enterprise ... 6

3.2 Data and figures ... 7

3.3 Legal framework and legal forms of social economy enterprises ... 9

3.4 National policies supporting social economy enterprises ...10

3.5 Support structures for social enterprises ...12

4. Access to markets ...13

4.1 Fields of activities of social economy enterprises ...13

4.2 Fields of interest to social economy enterprises and not subject to public procurement ...14

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1. List of Acronyms & Abbreviations

AED Academy for Educational Development

CEDRA HR Cluster for Eco-Social Innovation and Development CSO Civil Society organisation

ESF European Social Fund

HAMAG-BICRO Croatian Agency for SMEs, Innovations and Investments HBOR The Croatian Bank of Reconstruction and Development

PP Public Procurement

PWD Person with disability

SE Social Enterprise

SME Small and Medium Enterprise

SRPP Socially Responsible Public Procurement WISE Work integration social enterprise

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2. The state of play of Public Procurement

2.1 Public procurement structure at national, regional and local level

The Public Procurement Act is valid for the entire Republic of Croatia. It transposed two public procurement directives: the Public Sector Procurement Directive (24/2014/EU) and the Utilities Directive (25/2014/EU). The current Public Procurement Act has been in force since 1 January 2017 (NN 120/2016). Public procurement legislation also includes Concessions Act (NN 143/2012) and Act on Public Private Partnerships (NN 78/2012, 152/2014), as well as Act on the State Commission for Supervision over Public Procurement Procedure (NN 18/2013, 127/2013, 74/2014).

Subordinate legislation on Public Procurement Act includes:

- Regulation on the tender documentation and offers in public procurement procedures (NN 65/2017)

- Regulation on procurement plan, contract register, preliminary market consultations and market analysis in public procurement (NN 101/2017)

- Regulation on e-appeal in public procurement (NN 101/2017)

- Regulation on supervision of implementation of public procurement act (NN 65/2017) - Regulation on public procurement for defence and security purposes (NN 19/2018) - Ordinance on training in the field of public procurement (NN 65/2017)

- Ordinance on the public procurement in diplomatic missions and consular offices of the Republic of Croatia abroad (NN 69/2017).

Public Procurement Act is applicable to the Contracting Authorities as defined in Articles 5-7 – state bodies of the Republic of Croatia, local and regional authorities, public bodies and entities established by mentioned types of bodies. Act is also applicable to “sectoral” public authorities, i.e. bodies covered by the Utilities Directive.

Each of the mentioned bodies is considered a Contracting Authority (being either public contracting authority or sectoral contracting authority) and bears responsibilities for conducting procurement procedures. Any procurement procedure may be implemented by another entity or there may be cases of joint procurement, however, in any case, the Public Procurement Act must be respected with no exception.

Public procurement procedures are implemented following published procurement plan (and procurement plans must be published in official journal web page).

Any procurement procedure must be published in the official electronic public procurement journal, freely accessible for any natural person or economic entity in its entirety.

The Public Procurement Act is applicable above values of HRK 200 000 for procurement of services and supplies (around EUR 26 500) and HRK 500 000 (around EUR 66 500) for works. Procurement above stated value is considered “low-value” procurement, and procurement procedures above Directives thresholds are considered “high-value” procurement. Publication levels are the same, the difference for low-value procurement being shorter deadlines for submitting tenders (20 days in open procedures) and tenders not being published in the official journal of the EU (being published only in the national official journal – however, being freely accessible to any economic operator regardless of the country of establishment).

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On the supervision, designated national authority (Ministry of Economy and Entrepreneurship) is responsible for law supervision. In the sense of public procurement process, this is additionally monitored by the State Commission for Supervision over Public Procurement Procedure. The State Commission oversees the appeals in the public procurement process. Appeals can be lodged in different phases of the procurement process (e.g. after tender publication, public opening or publication of award decision) and procurement procedure is suspended until State Commission decides on the appeal. Court appeals are allowed only after the initial appeal and decision brought by the State Commission.

2.2 Competencies and responsibilities of the authorities involved in public procurement

As described under point 1, each public procurement contracting authority is responsible for implementation of its public procurement procedures. Within each public procurement procedure, there has to be a nominated committee for the implementation of specific procedure (where members do not have to be employees of the contracting authority), and within the committee, at least one member has to have a certificate in public procurement. Certificates in public procurement are issued by the body in charge of supervision of the Public Procurement Act, after successfully passing individual exam in public procurement. Exam can be taken following 50-hour education in public procurement provided by the authorised entities / trainers (authorised by the body in charge of supervision of the Public Procurement Act). Certificate is valid for three years after it is obtained, and can be renewed by obtaining 32 hours of additional education (which, again, can be obtained by attending education provided by the authorised entities/trainers. A basic 50-hour education programme is prescribed by the body in charge of supervision of the Public Procurement Act, and topics for the additional education programmes are ex-ante approved by the body in charge of supervision of the Public Procurement Act.

A high number of people have obtained certificates in public procurement, as well as a high number of people taking regular additional education.

2.3 Use of public procurement

As described under point 1, all contracting authorities defined under Articles 5-7 of the Public Procurement Act are obliged to follow public procurement act for all purchases both above the thresholds of the directive and below the thresholds of the directive, but above values of HRK 200 000 for procurement of services and supplies (around EUR 26 500) and HRK 500 000 (around EUR 66 500) for works. Procurement above stated value is considered “low-value” procurement, and procurement procedures above Directives thresholds are considered “high-value” procurement. Publication levels are the same, the difference for low-value procurement being shorter deadlines for submitting tenders (20 days in open procedures) and tenders not being published in the official journal of the EU (being published only in the national official journal – however, being freely accessible to any economic operator regardless of the country of establishment).

Below application thresholds of the Public Procurement Act – HRK 200 000 for procurement of services and supplies (around EUR 26 500) and HRK 500 000 (around EUR 66 500) for works – contracting authorities have to apply internal ordinance (which they adopt by themselves), where this ordinance adopted by each contracting authority must be made public (at the electronic official journal web page).

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2.4 Application of articles of the Directive

In respect of reserved contracts, special regimes for social services, splitting of contracts (where social clauses have been used to facilitate the participation of social economic enterprises as sub-contractors), the Directive has been transposed directly, both in mandatory and optional directive clauses.

Number of contracts for social and other special services, from the annual statistical report on public procurement made by the Ministry of Economy and Entrepreneurship shows that there were 601 such contracts in 2018 (3,32 %; compared to 344 such contracts in 2017, which was 3.01 %) to the value of HRK 847.5 million (2,32 %; compared to HRK 173.2 million or 0.56 % in 2017), 823 such contracts in 2016 (5.95 %) to the value of HRK 277.6 million (0.80 %), 673 such contracts in 2015 (4.35 %) to the value of HRK 231,1 million (0.74 %), 690 such contracts in 2015 (4.62 %) to the value of HRK 260.8 million (0.79 %), and so on.

2.5 Cross-border dimension of socially responsible public procurement

There is no specific formal statistics or reports on the cross-border dimension of socially responsible public procurement. Generally, there is no data on cross-border public procurement, with the exception of EU-funded Interreg initiatives; however, also within such projects in general procurement procedures are not common but are implemented by each cross-border partner by itself.

2.6 Guidance and training material on the new Directive

Legislation on public procurement as well as training documents are published in the official web page of the Ministry of Economy and Entrepreneurship (http://javnanabava.hr/). Web page also contains:

- Opinions issued by the Ministry of Economy and Entrepreneurship related to the

implementation of the Public Procurement Act

(http://www.javnanabava.hr/default.aspx?id=3423)

- Most economically advantageous tender – guidelines with examples (http://www.javnanabava.hr/userdocsimages/ENP%20prirucnik_MGPO_final.pdf) - Guidelines for preparation of most economically advantageous tender criteria

(http://www.javnanabava.hr/userdocsimages/Smjernice_01-ENP.pdf).

Ministry of Environment and Energy, as a national coordinator for green public procurement also published set of recommendations for implementation of green public procurement, available at: http://www.zelenanabava.hr/.

Additionally, source of legal practice in public procurement represent decisions in appeals in public procurement procedures brought by the State Commission, and published and freely publicly available at the web page of the State Commission (http://www.dkom.hr/).

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3. The Social Economy ecosystem

3.1 Main definitions and concepts used: social economy, social enterprise

The civil society in Croatia has had a long and dynamic development path. It started developing in the 18th century, through the strengthening of the activities of associations. The beginnings of today's civil society can be seen in various forms of social organisations established after the Second World War. The dynamic development of civil society started with the establishment of the independent Republic of Croatia in 1991, when the legislative framework changed.

The start of pre-accession negotiations between the Republic of Croatia and the European Union and the acquisition of the status of a full member of the EU in 2013 has posed new challenges for civil society in Croatia, as organisational and operational barriers, but it has also opened up numerous opportunities for improvement of existing forms of actions and expansion of the area of activity, developing new activities and forms of networking, both with national and international organisations. The social economy, which in Croatia includes CSOs, social enterprises and cooperatives is seen as a potential model to solve many social and economic problems and needs in the country.

Today, social entrepreneurship is still in a phase of infancy in Croatia. There are no legal or generally used definitions of third sector and social economy.

The Strategy for Creating an Enabling Environment for Civil Society Development for the period 2006-2011 and for the period 2012-2016, was the first strategic document which mentioned social entrepreneurship as a model suitable for socio-economic development of civil society.

However, the Strategy for the Development of Social Entrepreneurship in the Republic of Croatia for the period from 2015 to 2020, adopted in 2015 by the Croatian government for the first time, brought the definition of a social enterprise: “Social enterprise is a business based on the principles of social, environmental and
economic sustainability, in which profit generated is entirely or largely reinvested for the benefit of the community”.

The social enterprise definition contains nine criteria that must all be met for an organisation to be considered a social enterprise:

1) it achieves a balanced social, environmental and economic goal of business; 


2) it’s engaged in the production and delivery of goods or services that generate revenues on the market, and has a favourable impact on the environment, contributes to the development of the local community and society at large; 


3) it creates new value and ensures financial sustainability in a way that three years after the establishment of business at least 25 % of the income is planned to be or is realised by its entrepreneurial activities; 


4) it uses at least 75 % of the profit to invest in the development of its activities and the achievement of its primary objectives; 


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6) it is characterised by a participatory decision-making process (involvement of stakeholders in transparent and accountable management), the decision making is not exclusively related to the ownership or membership structure and includes other stakeholders: employees, members, consumers, and other relevant organisations; 


7) the Republic of Croatia, local and regional self-government or a public authority may not be the sole founder of the social enterprise; 


8) it monitors and evaluates its social, economic and environmental impact; results of the impact measurement are used in the planning to maximise the impact of the business; 


9) in the case where social enterprise ceases to perform its activity the assets must be transferred to the ownership of another social enterprise with same or similar goals. 


Some researchers like Vidović & Baturina (2016) and Šimleša et al. (2016) consider that there could be some difficulties to evaluate and monitor criteria, particularly as regards the requirements related to measuring impact (due to low level of management and impact measurement capacities of social entrepreneurs).

And they could be right. The present state of the development of the social entrepreneurship in Croatia is reflected in the passive approach towards meeting the National Strategy for Social Entrepreneurship Development objectives (by passive we mean that out of 27 measures none was implemented since 2015, when Strategy was adopted by Croatian Government), the lack of institutional infrastructure and legal framework, and the lack of long-term business and financial support that would ensure stability and planned development of social/impact enterprises. The visibility of present social enterprise practice is also really low. 3.2 Data and figures

The development of the social enterprise sector in Croatia is being achieved mostly through the work and activities of civil society organisations (CSOs), although they are facing a serious lack of entrepreneurial knowhow and experience. Other key stakeholders/actors such as companies, social cooperatives, foundations and philanthropic institutions are minority of Croatian social enterprise (SE) sector. However, in the last 3 years we are witnessing new SE actors - SE start-ups, cooperatives, hybrid social enterprise models that are developing more sustainable business models and are initiated by more entrepreneurially experienced individuals and collectives.

According to the official records and registry data on the social economy, at the end of 2016, 52 231 associations, 232 foundations, 11 foundations, over 500 trade unions and employers' associations, 52 religious communities, 2 050 legal entities of the Catholic Church, 430 organisational forms of the Orthodox Church, and more than 600 private institutions operated in Croatia.

There are over 1 200 cooperatives operating in Croatia at this moment. The most common are cooperatives in the agricultural sector (40 %), which is understandable because of the Croatian tradition and production, but also similar to other European countries. However, in the area of organisation of industrial and service sector, housing and financial sector on the principles of cooperatives, Croatia significantly lags behind European trends and practices. Due to systematic government disregard, the number of cooperatives, cooperative members and employees of cooperatives continued to fall last few year (from 1 428 in 2010 to 1 281 in 2016).

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One of the first mapping exercises of social enterprises in Croatia was carried out by Association Slap and its partner organisation Cluster for Eco-Social Innovation and Development (CEDRA HR). Their research in 2012 mapped 147 social entrepreneurs. A broader research repeated in 2014 did not confirm the existence of all 147 entities as social enterprises, as only 56 of them responded to the survey. Data collected by the Institute of Social Sciences’ Ivo Pilar in the research “Mapping New Horizons – report on the state of social entrepreneurship in Croatia 2015“ shows yet another picture: 95 social entrepreneurs in 2013 and 90 in the year 2014. Consulted stakeholders (in a project of mapping social enterprises in Croatia for the European Commission conducted in 2014) assume that there are approximately from 40 to 210 social enterprises in the Republic of Croatia. In 2017, the ACT Group implemented a mapping exercise according to the SE criteria defined in the Strategy – 105 social entrepreneurs were mapped as active.

The latest research, an Update of the Mapping of Social Enterprises and their Eco-systems in Europe: Country Report – Croatia, carried out by Davorka Vidovic in 2018 (on behalf of EURICSE and EMES research networks) mapped maybe the most precise “universe of social enterprises in Croatia”:

2018

Associations pursuing relevant general interest activities (social welfare, upbringing and education, social entrepreneurship, sustainable development, environmental protection, health protection) that registered for economic activities

441

Social cooperatives

(including 87 war veterans social-working cooperatives)

112

Cooperatives pursuing social aims 25

Foundations privately owned, carrying economic activities and pursuing relevant general interest activities

5

Companies founded by associations pursuing relevant general interest activities

65

Other companies pursuing social aims and operating as not-for-profits

4

Institutions founded by associations pursuing relevant general interest activities

12

Sheltered workshops 7

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3.3 Legal framework and legal forms of social economy enterprises

In Croatia, there is currently no specific law defining or regulating social enterprise. However, we distinguish a number of legal forms of organisation in the sector of social economy - cooperatives, associations and foundations, social enterprises (registered as companies) and private social welfare institutions (the Croatian legal system allows the development of social entrepreneurship through various legal forms, which are easy to register).

According to the latest research, 75 % of social enterprises in Croatia operate as associations - whether by establishing a separate legal person, most often a cooperative or a company, which returns its profit to the association which founded it; or by organising a business activity within the organisation.

Social cooperatives are the most suitable legal form of social enterprise as they may carry out activities to meet the needs of their members without the intention of making a profit. Other forms of cooperatives may gain profit but must meet specific requirements regarding the sharing of profit among members. The work and values of social cooperatives are in line with the Croatian strategic definition of social enterprise.

Social enterprises are directly or indirectly referenced in many legal acts. For instance, acts covering social enterprise are:

 Accounting act for non-profit organisations, OG 10/2008, 7/2009, 121/2014

 Act on Institutions, OG 76/1993, 29/1997, 47/1999, 35/2008

 Act on Vocational Rehabilitation and Employment of Disabled Persons, OG 157/2013

 Act on Associations, OG 70/1997, 106/1997, 88/2001, 11/2002, 74/2014

 Act on Companies, OG 111/1993, 34/1999, 121/1999, 52/2000, 118/2003, 107/2007, 146/2008, 137/2009, 152/2011, 111/2012, 144/2012, 68/2013, 76/2014

 Act on Cooperatives, OG 36/1995, 67/2001, 12/2002, 34/2011, 125/2013, 76/2014

 Act on Credit Institutions, OG 159/2013

 Act on Credit Unions, OG 141/2006, 25/2009, 90/2011

 Directive on the criteria, standards and procedures of financing and contracting programs and projects of interest to the public good (general interest) implemented by associations, OG 26/2015

 Act on Trusts and Foundations OG 36/1995, 64/2001

 Act on Profit Tax, OG 177/2004, 90/2005, 57/2006, 146/2008, 80/2010, 22/2012

 Act Personal Income Tax, OG 177/2004, 73/2008, 80/2010, 114/2011, 22/2012, 144/2012, 43/2013, 120/2013, 125/2013, 148/2013

 Act on Public Procurement, OG 120/2016

 Regulation on reporting in non-profit accountancy and Register of non-profit organizations, OG 31/2015

 Regulation on non-profit accounting and account plan, OG 1/2015

 Regulation on the system of financing management and control and financial plan drafting and reporting of non-profit organisations, OG 119/2015

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 Ordinance on setting quotas for employment of persons with disabilities, OG 44/2014, 2/2015

The new Act on Public Procurement (OG 120/2016) came into force in 2017. This legislation adopted all key elements prescribed in the EC Directive on Public Procurement (Directive 2014/24/EU). The Article 51 regulates ‘reserved contracts’ for companies and organisations wishing to give a priority to particular types of entities, namely work integration social enterprises (WISEs), not only for sheltered workshops (as it was practice before the transposition of Directive into national legislation). Apart from these ‘reserved contracts’ the law prescribes specific regulations for contracting ‘social and other special services’ (Article 323 to 331, Act on Public Procurement, OG 120/2016). Among others these services include social welfare, health care, education, culture, or other services of general interest. This regulation may serve many social enterprises, however there are few cases known that have been practicing it until now. The reasons for that may be the difficulties and unclear procedures of how to apply other criteria (such as social and sustainable value) over the price (low level of information, knowledge and experience of contracting authorities, lack of guidelines and support system for socially responsible procurement), high level of corruption in public procurement, fear of State Commission for Supervision of Public Procurement Procedures, etc.

3.4 National policies supporting social economy enterprises

The large expectation for development of institutional support for social enterprise was put on the Strategy for Social Entrepreneurship Development for the period 2015-2020, that was adopted in 2015, after few years of preparation and consultations.

Prior to adopting the above-mentioned Strategy, National Strategy for the Creation of an Enabling Environment for Civil Society Development (2012-2016) and Strategy for Combating Poverty and Social Exclusion in the Republic Croatia (2014 to 2020) were two national strategic documents that considered social entrepreneurship in a context of strategic development. The first one prescribed measures intended for: a) encouraging social entrepreneurship development in civil society organisations; b) ensuring the sustainability of social entrepreneurship initiatives of civil society; c) raising public awareness about the role of CSOs in social and economic development; the second one defined social entrepreneurship as a key solution for combating poverty and social exclusion.

The Strategy for Social Entrepreneurship Development for the period 2015-2020 sets four objectives:

1. To establish and improve the legislative and institutional framework for the development of social entrepreneurship;

2. To establish a financial framework for social entrepreneurship;

3. To promote the importance of and the role of social entrepreneurship through formal and informal forms of education;

4. To ensure the visibility of the role and possibilities of social entrepreneurship in Croatia and provide information to the general public.

Each of the objectives is followed by a set of specific action items with clearly defined stakeholders, deadlines, indicators of success and financial implications. The measures and activities of the strategy are included in the Operational Programme for Effective Human Potential 2014 - 2020 of the European Social Fund (ESF). The amount of money available

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for the implementation of the strategy is about EUR 37.6 million including ESF money and government co-financing. Unfortunately, as we already stated, until today, none of the activities started nor any is implemented.

Once a business is launched using these forms, there are no benefits that would differentiate traditional entrepreneurs from social entrepreneurs, nor is there a mechanism for social entrepreneurs to benefit from tax exemptions or reduced rates of VAT and income tax, as is the practice in many other EU countries. In the latest research, an Update of the Mapping of Social Enterprises and their Eco-systems in Europe: Country Report – Croatia, Vidovic (2018) mapped following tax/benefits social enterprise ecosystem:

Reduced social security contributions/costs

 Tax exemptions and lower rates

 Tax reductions to private and /or institutional donors

 Employers can receive subsidised wages for employing PWDs

 Employers can receive subsidised costs for adopting a workplace to PWD and other cost related to employment of PWDs

 Non-profit organisations are exempt from the Value Added Tax if their annual revenue (i.e. income from economic activities) does not exceed HRK 300 000 (around EUR 40 000)

 Non-profit organisations not carrying economic activities are not obliged to pay profit tax Individuals and companies may receive a reduced tax base for donations to non-profits in the amount up to 2 % of their annual income.

Lack of access to finance is still perceived as one of the most significant barriers to the start-up, sustainability and growth of social enterprises in Croatia. Among the key challenges on the demand and supply sides of the impact finance market, social enterprises especially emphasise that conventional financiers and investors do not typically understand their mission and business models. There also seems to be a mismatch between the supply side (large-scale funding from investors) and the demand side (enterprises seeking small-scale funding), which impacts the implementation of several initiatives. Although there are some general debt instruments available now that could be suitable for bankable social enterprises, specialist investors, financial intermediaries and instruments tailored to social enterprises’ needs are currently non-existent in Croatia. Consequently, social and impact enterprises find it difficult to access finance from external sources.

Currently, the majority of funding for social enterprises comes from the government or donors, but these sources of financing are neither guaranteed nor sustainable (e.g. European Structural and Investment Funds). The Croatian Bank of Reconstruction and Development (HBOR) and the Croatian Agency for SMEs, Innovations and Investments (HAMAG-BICRO) are the key national institutions providing development finance, but these institutions do not offer financial products addressed specifically to social enterprises. Specialised financial institutions supporting social enterprises are currently not present in Croatia. Commercial banks are usually reluctant to extend loans to social enterprises due to their unfamiliar business models, cash flows that may not match traditional debt repayment schedules, lack of collateral and other social enterprises’ specifics hard to assess under the banks’ conventional internal risk rating systems. However, Erste Bank in Croatia is currently

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developing a specialised programme for social organisations within the Erste Group Step-by-Step Programme. Regarding the private investing, existing private equity and venture capital funds in Croatia do not have social and impact enterprises in their investment portfolio and strategy.

3.5 Support structures for social enterprises

The first support programme for development of social entrepreneurship in Croatia was provided by a donor organisation - Academy for educational development (AED) in 2006. In 2007 NESsT (an international organisation that works to develop sustainable social enterprises across the world) opened the first call for funding start-ups/social businesses. Unfortunately, neither AED nor NESsT still provide support to the development of social entrepreneurship in Croatia.

Since 2010, a small number of varied private organisations have developed and provided support to social enterprises – the most important ones include CEDRA HR, ACT Group, Impact Hub Zagreb and Cooperative for Ethical Financing. All these organisations provide the free-of-charge services to social enterprises – the funding is secured either from EU/government sources or from the income earned on the market. Services include information, education, incubation & acceleration programmes, basic finance programmes (seed, grants, micro-loans etc.), and promotion and advocacy activities.

In his latest report “Social Investment Leveraging Index - Investing for Impact in Central and Eastern Europe”, published in November 2018, Deloitte as one of the key actors in Balkan region and the only support organisation from Croatia recognised ACT Group.

ACT Group is currently running several systematic national/regional social business support programmes: Start something on your own (grants support to impact start-ups), Social Impact Award (student/youth social business development program, small grants, mentorship support), The Inkubator and AG Incubator for social enterprises (small grants, mentorship support), AG Accelerator for social enterprises (scaling, funding, investment support), Support for NGOs (trainings, mentor support), Business Skills Academy, Erasmus for young (social) entrepreneurs, etc. It provides also tailor-made educations to non-profits and social enterprises in organisational development (strategic planning and management, result based management, financial management, process optimization; empowerment of managers and leaders, internal communication, planning and management of objectives (OKR method), transformation into adaptive organisation and lean techniques, quality management, business development (lean start-up method, product development, customer development, innovative accounting, financing, networking); project management and social impact measurement (SROI, SAA, EFCG, etc.).

Just recently, in April 2018, a first non-formal Croatian Social Enterprise Network was established. It was immediately recognised by relevant stakeholders (e.g. Ministry of Labour and Pension System), but it should be clear in 2019 in which direction the development will go and what position will be taken in social enterprise support ecosystem.

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4. Access to markets

4.1 Fields of activities of social economy enterprises

According to data from the studies carried by ACT Group (2017), Vidović and Baturina (2016) and Šimleša et al. (2015), social enterprises in Croatia are active in following economic areas (in alphabetical order):

- accounting and other administrative services - agriculture (mainly community-based) - architecture, urbanism and construction - art, entertainment and recreation - cosmetic production

- education and consulting - engineering

- forestry and fisheries

- health and social work activities

- hospitality (accommodation, restaurants, catering, etc.)

- IT industry (graphic design, printing, hi-tech assistive technology for disabled people), - media

- metal industry - renewable energy - social & care services - sustainable tourism

- sustainable waste management - wholesale and retail trade.

In 2017, Central Finance and Contracting Agency and Ministry of Economy, Entrepreneurship and Crafts, with technical assistance of four business organisation, within a project called "Strengthening of Administrative Capacity in the Public Procurement System of the Republic of Croatia with emphasis on the criterion of the most economically advantageous tender", conducted a research on the most frequently acquired procurement items. They mapped, in alphabetical order:

- architecture and engineering services - computer equipment and supplies - construction

- IT services: consulting services, software development, internet and support - maintenance and repair services

- medical equipment, pharmaceuticals and personal care products - motor fuels

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- office machines, equipment and supplies other than computers, printers and furniture - petroleum products, fuel, electricity and other energy sources

- postal and telecommunication services - printed matter and related products - transport services.

One of the most frequently procured items in 2016 and 2017 were computer equipment and supplies.

Since there is not a practice of socially responsible public procurement (SRPP) in Croatia (beside one isolated example of a reserved contract for textile products from City in Zagreb), it is impossible to tell what the current fields of activities practiced are in PP by public purchasers. However, from rare research on social enterprises and interviews conducted with relevant stakeholders, the following fields of activities (in alphabetical order) can be outlined:

- cleaning services

- clothing & textile, footwear - furniture

- maintenance of green areas - office supplies & stationery

- social & care services (elderly care) - sustainable waste management.

4.2 Fields of interest to social economy enterprises and not subject to public procurement

In the Croatian PP system, we are facing a lot of challenges, as interviewed key stakeholders agree:

- National public (administration) system is not working; - We have bad PP planning methodology and practice;

- There is low understanding of key elements in SRPP described in PP act - reserved contracts, social criteria, list of disadvantaged persons, special regime for social and other specific services, award criteria, etc. - both by contracting authorities and social entrepreneurs;

- Procurement officers have a lack of information and education, a low capacity to develop sustainable SRPP systems, and still fear appeals and punishments, etc. The first two are state-level strategic problems and it is really hard to believe that there will be government in the near future that will strategically and systematically deal with them. Anyway, having in mind that social enterprise sector is still in early stage of development and that we are having maximum twenty market active and PP-ready social enterprises, in line with the sector development, it makes sense to make some further steps to help those public purchasers who want and have capacity to practice SRPP. Those small steps should include:

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- Development of compendium of good but also bad/failed practices in SRPP (EU, region and national level);

- Development of guidelines or toolkits to encourage contracting authorities to apply SRPP, including a list/database of potential social, green, quality criteria that already proved to work;

- Mapping exercise and evidence/database/register of SE actors that can be employed in SRPP.

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5. Bibliography

Year Topic and source info

2018 European Commission, Update of the Mapping of Social Enterprises and their Eco-systems in Europe. Country Report – Croatia (draft). Directorate- General for

Employment, Social Affairs and Inclusion - Report submitted by EURICSE & EMES, 2018 Deloitte, Social Investment Leveraging Index - Investing for Impact in Central and

Eastern Europe

2017 Varga, E., Social Enterprise Ecosystems in Croatia and the Western Balkans. A Mapping Study of Albania, Bosnia & Herzegovina, Croatia, Kosovo, FYR Macedonia, Montenegro and Serbia, NESsT

2016 Vidović, D., Baturina, D., “Social Enterprise in Croatia: Charting New Territories”, ICSEM Working Paper

2016 OECD, Boosting social entrepreneurship and social enterprise creation. Unlocking the potential of social enterprises in Croatia

2015 Social Platform, Javna nabava za drustveni razvoj - Vodic kroz Direktivu Europske unije o javnoj nabavi

2015 Rakin, D., Vidovic, D., Bobic, M., Cvejic, S. (Eds.), Strategic Study on Social Economy Development in the Context of the South East Europe 2020 Strategy. European Movement in Serbia, Belgrade

2015 Government of the Republic of Croatia, The National Strategy for the Development of Social Entrepreneurship 2015-2020

2015 Šimleša, D., Puđak, J., Majetić, F., Bušljeta - Tonković, A. , Mapping New Horizons – report on the state of social entrepreneurship in Croatia 2015, Institute of Social Sciences Ivo Pilar, Zagreb.

2014 MSPY, Strategija borbe protiv siromastva i socijalne iskljucenosti u Republici Hrvatskoj (2014.–2020.)

2014 European Commission, A map of social enterprises and their eco-systems in Europe. Executive Summary. Directorate-Generale for Employment, Social Affairs and Inclusion – Report submitted by ICF Consulting Services

2014 European Commission, A map of social enterprises and their eco-systems in Europe. Country Report: Croatia. Directorate-Generale for Employment, Social Affairs and Inclusion – Report submitted by ICF Consulting Services

2013 European Commission, Peer Review in Croatia: Social entrepreneurship and other models to secure employment for those most in need

2012 Vidović, D., Social Entrepreneurship in Croatia, PhD thesis, Faculty of Humanities and Social Sciences, University of Zagreb

2012 Government of the Republic of Croatia, National Strategy for the Creation of an Enabling Environment for Civil Society Development (2012–2016)

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2011 European Commission. Buying Social - A Guide to Taking Account of Social Considerations in Public Procurement. Directorate-General for Employment, Social Affairs and Equal Opportunities

2007 UNDP - Procura+ Prirucnik – Vodic za isplativu odzivu javnu nabavu, Program Ujedinjenih naroda za razvoj u Hrvatskoj (UNDP), Zagreb

2006 Government of the Republic of Croatia, National Strategy for the Creation of an Enabling Environment for Civil Society Development (2006–2011).

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