Is civil society able to earn money for its activity on its own?

European Center for Not-for-Profit Law (ECNL) prepared a review of legal regulation of economic activities of civil society organizations in Europe.

The question whether non-commercial organizations (NGOs) can be involved in entrepreneurship is principally important for financial sustainability of the civil society. The possibility for NGO’s to earn money independently at the expense of producing goods and services might give them the chance to be financially independent or, at least, diversify their budget and become less dependent on external funding (state, private, or foreign). Of course, organization should remain being non-commercial, i.e. its goal shouldn’t be to earn money. This sphere also encounters problems with taxes and competition with commercial organizations.

Countries tend to use different regulatory approaches when establishing the legal framework for social enterprises. Some of them introduced a distinct legal form of “social enterprise”, others are primarily concerned with the outcome of the organization’s activities rather than the legal form. Furthermore, the legal regulation may be introduced by a comprehensive law on social entrepreneurship, but also introduced through amendments in other already existing laws.

Belarus together with Turkey are the only two countries that are still prohibiting direct engagement of CSOs in economic activities, as the governments around Europe acknowledged that the income from economic activities has potential to resolve the challenge of CSOs’ financial sustainability. The laws in almost all European countries allow CSOs to directly engage in economic activities, thus not requiring them to establish for profit legal entity for this purpose.

The report of the ECNL also considers the aspect of social entrepreneurship. Social enterprises are being widespread in Europe representing 10% of the companies and generating 6% of the total employment. They play critical role in the efforts to reintegrate socially marginalized people into the labor market and provide services of general interest. Governments around Europe acknowledged their specific nature and provide social enterprises with benefits in order to support their operation and enhance the creation of new ones.

In conclusion, basing on the examples given in the review, the authors of the document make conclusions and suggest recommendations of how to use best practices of legal regulation of economic activities of civil society organizations in Europe.

The present paper was prepared by European Center for Not-for-Profit Law (ECNL) on demand of the Legal Transformation Center and Assembly of Pro-Democratic NGOs of Belarus. The European Center for Not-for-Profit Law (ECNL) is a leading European resource and research center in the field of civil society law, based in Budapest. It aims to promote an enabling legal and fiscal environment for civil society in Europe and convey European experiences to other parts of the world. This paper was prepared based on the Survey of the treatment of economic activities of nonprofit organizations in Europe, developed by European Center for Not-for-Profit Law (ECNL) and International Center for Not-for-Profit Law (ICNL) in 2007.

You can download the review “Legal regulation of economic activities of civil society organizations” here.