The social economy is a field of economics that concerns economic and entrepreneurial activities with a social purpose. It is an alternative to the traditional market economy model, where the main objective is profit, with the emphasis instead on the social dimension, solidarity and sustainability. This model fits perfectly with the circular approach of re-use, which can offer new opportunities and inclusion to the most vulnerable and marginalised people.
The social economy plays an important role in promoting inclusion, tackling inequalities and providing innovative solutions to address social problems. This category includes a wide variety of organisations and enterprises operating in different sectors, such as cooperatives, associations, foundations and non-governmental organisations (NGOs). There are also companies created to generate profit that put sustainability and the creation of social value at the centre of their business model. In this case, we speak of a social market economy.
What is the social market economy?
The social market economy is an economic model that combines elements of a market economy with social and equity objectives. It is often associated with the economic system adopted in some European countries, such as Germany.
The social market economy is based on the principles of free competition, private property and entrepreneurial freedom, typical of a market economy. However, it also recognises the need for an active role of the state to regulate the economy, promote social equity and ensure the inclusion of all citizens.
One of the main objectives of the social market economy is to reconcile economic freedom with social justice. This means that the market economy should be accompanied by a social safety net that provides protection and assistance to the most vulnerable citizens, ensuring a fair distribution of economic opportunities and benefits.
The social market economy also encourages corporate social responsibility, arguing that companies should act not only in their own interest, but also in the interest of society as a whole. This can include sustainable practices, investment in employee training, employment promotion and contributions to the local community.
What are the differences between social market economy and circular economy?
In a previous article, we spoke at length about the circular economy. The social market economy and the circular economy represent two different visions of the economy, each with specific goals and distinct approaches.
The social market economy focuses on the harmonisation of economic freedom and social justice, seeking to strike a balance between economic efficiency and social welfare. Its main aim is to create a system in which the market economy coexists with policies of social inclusion and social security. It is based on the principles of the market economy, but also provides for an active role of the state in achieving social goals. The social market economy is usually applied at the level of an entire national or regional system.
On the other hand, the circular economy proposes a paradigm shift from the traditional linear economy model. Instead of extracting resources, producing goods and then disposing of waste, the aim of the circular economy is to minimise the exploitation of natural resources and promote the recycling, reuse and recovery of materials and products. This approach aims to create a more sustainable system by reducing waste and optimising the life cycle of products. The circular economy focuses primarily on resource and waste management at the system level, involving businesses, consumers and public authorities.
In essence, while the social market economy seeks to balance economic freedom with social justice, the circular economy focuses on reducing resource exploitation and promoting sustainability through circular management of materials and products. Both concepts aim to create a more sustainable and inclusive economic system, but adopt different approaches and scopes of application.
Sustainability as a competitive advantage
It is now clear that the current traditional production and consumption model is causing climate change, environmental degradation, depletion of natural resources and social inequalities.
Putting sustainability at the heart of production and consumption processes means adopting an approach that takes into account present needs without compromising the ability of future generations to enjoy the same resources while reducing inequalities.
More and more companies are putting collective well-being at the centre of their business model. In this sense, the conscious effort to reduce greenhouse gas emissions, adopt renewable energy and improve energy efficiency is key to mitigating the effects of climate change. Putting sustainability at the heart of production and consumption processes also means considering social aspects. This includes ensuring decent working conditions, promoting social justice, reducing inequalities and involving local communities in economic decisions.
Companies with sustainability as a goal are often more competitive in the global market. The adoption of sustainable production and consumption processes can lead to a reduction in operating costs, e.g. through energy savings and resource efficiency. Furthermore, consumers and investors are increasingly interested in supporting companies that demonstrate a commitment to environmental and social sustainability. Companies that stand out for their sustainable practices can benefit from a better reputation, increasing consumer trust and accessing new markets and business opportunities.