Social Cooperative Model Choices in the Socially Unsustainable Environment: Evidence from Lithuania

Abstract

This research analyses the establishment and development of social cooperatives exposed to adverse factors in socially unsustainable contexts. The study focuses on a Lithuanian case study, with participants having limited experience creating a socially resilient enterprise ecosystem. The study employed a qualitative approach using case study and comparative analysis methods. The study found that Lithuania’s opportunities to leverage the benefits of social cooperatives are held back by a weak cooperative movement, a socially unsustainable environment, and limited understanding among professionals. The involvement of public policy actors in debates on legalising social business models is also limited. The study participants had mixed opinions about the social cooperative model for business development. Some favoured its cooperative principles and profit-sharing advantages, while others preferred non-profit organisations or smaller communities. The study also found a contradiction in the concepts of social business. The researchers suggest that the conditions for establishing social cooperatives could be more favourable in Lithuania, but social business founders require help understanding cooperative companies’ organisation and finances, for which the current public and private resources available are insufficient. Lithuania’s current policy of support and regulation for social business prioritises several social business models, which complicates the decision-making process for prospective social cooperative founders.

1. Introduction

The discussion of social business and its different forms (including social cooperatives as a socially resilient business model) is currently prominent in the discourse of practitioners, academics, and policymakers [1,2,3,4]. Scientific and expert-created discourses cover varying topics, including the regulation of social cooperatives and supervision activities. Initially, scholars and public policy analysts seek to define the concepts of social entrepreneurship and link them to business models (legal forms, organisational models) and business practices [5]. They also seek to understand why and how cooperative forms of social business organisations have become established and achieved dominance in different countries. Principal research considerations include the interaction of cooperative movements, government policies, cultural traditions, and a range of other factors that have influenced the development of social cooperatives in individual European countries [6].

Contemporaneously, the EC and OECD have stimulated discussion on the social business ecosystem and its development in Lithuania [1,6,7,8,9]. The policy and legislative initiatives of the 17th Lithuanian Government have reinvigorated the discussion of social business concepts and associated support measures have been developed [10,11]. Several public policy studies and scientific articles have been produced in the context of these initiatives to clarify the concepts of social entrepreneurship and differentiate between social entrepreneurship and social enterprises. This research has been focused on broader themes and has not addressed narrower forms of social business, such as social cooperatives. This has resulted in a limited understanding of cooperative activity as a socially resilient business management model. Public policy analysts and academics still need to sufficiently explore impediments to the social cooperative model in Lithuania and how the cooperative movement can be developed further.

Questions relative to the social cooperative model’s adaptation and the creation of the enabling legal framework become increasingly pressing when considering policy implications for building a socially resilient and sustainable business management model. This study addresses the feasibility of setting up social cooperatives in socially disadvantaged environments by analysing the theories and practices of social cooperative models. The research is based on a Lithuanian case study, with subjects having limited experience building a social enterprise ecosystem.

Research methods. This study utilised case study, comparative, and qualitative analysis methods. Qualitative research furthered understanding of the participants’ perspectives on social cooperatives from a practical knowledge perspective. This included a combination of qualitative interviews (using individual and group interview forms) and documentary and case study research. The research focused on the informants’ views and experiences formed by their long-term involvement with social business support policies, social enterprise activities, and advocacy of social services, social care, and employment associations.

Semi-structured interviews were conducted to analyse social businesses and experts’ attitudes, approaches, and performance. Purposive sampling was chosen for the study. The mapping of respondents (informant map) took into account the facts of participation, which have been established based on previous research by experts and academics. The facts about participation were gathered from studies, documents, and web pages. The selection process considered the experience of participation and expert knowledge related to social business.

The selection of the informants, according to the objectives of the study, was determined by several criteria:

• The informants had to be active participants in research on traditional cooperatives, social business development or social services, policy support, and advocacy;
• Social business practitioners (informants developing their businesses, managing NGOs, or social entrepreneurs);
• Researchers (in social economy and NGO research) involved in the policy-making process (conducting custom research, advising policymakers or responsible institutions, etc.).

The selection of the informants was based on their experience and knowledge of participation. The selection of informants was based on complex criteria: experience in the field of social economy and understanding of the policy (content and process) of supporting social business. Based on these criteria, three groups of informants were identified (see

Table 1. Codes of informants who participated in the qualitative study.

Code	The Role
Focus group
INF1	Social Entrepreneur—Expert, Social Business Manager, Developer of Social Business Initiatives, Evaluator of EU-supported social and social business projects.
INF2	Researcher, NGO, and social economy expert.
INF3	NGO representative, representative of the Social Enterprise Association.
INF4	NGO representative, head of the Social Workers’ Association.
INF5	Expert, representative of the state body responsible for supporting social business.
INF6	NGO representative, representative of the Association of Care Workers.
INF7	Expert, representative of the Social Business Association.
Individual interviews
INF8	NGO representative, chairwoman of a rural community in Vilnius district.
INF9	NGO representative, head of the Association of Recruitment Companies.
INF10	Researcher, Social Economy expert.
INF11	Social Entrepreneur—Expert, Social Business Manager, Developer of Social Business Initiatives, Evaluator of EU-supported social and social business projects.

). The study involved five experts in social business support, cooperatives, and social services policy, two social business and NGO practitioners, and three researchers and academics.

Based on the field research and the study objectives, the following conclusions have been formed:

• There are no reinforcing needs and incentives for establishing social cooperatives in the social business ecosystem, resilient socioeconomic system, or cooperative movement;
• The business model of social cooperatives is only acceptable to some actors in the social ecosystem.

The qualitative research involved 11 informants. Six experts participated in the group interviews. Five informants were involved in individual interviews. The interviews were carried out using various methods, including face-to-face meetings, online video chat tools, and the telephone. The data obtained through the interview methods were analysed using a thematic methodology. The opinions of the informants were anonymised during the research to increase openness.

Six main groups of questions were used for the interviews to assess: (1) the tradition of cooperation and its effects; (2) the adoption of social cooperatives as a business model; (3) the involvement of social workers and care professionals in the provision of services; (4) the possible areas of activity of social cooperatives; (5) the advantages of the social cooperative model in terms of combining the interests of the members’ businesses with the social mission; and (6) the supervision of the social business in terms of the delegation of the delivery of public services to the cooperatives or providing them financial support.

At the start of the interview, informants were asked about their connection to social business, the cooperative movement, or social service provision. Questions then moved on to ascertain participants’ awareness of the social cooperative model, its need, and the incentives and constraints to its establishment. This was followed by questions related to model structure alternatives for social cooperatives. The questions were adjusted according to the informants’ experience, understanding of the topics, etc., during the individual interviews. It is important to note that the informants could alter the topics of the interviews depending on their knowledge and understanding of the issues covered.

Researchers for this study adhered to high ethical standards throughout their conduct. Explicit consent and conditions (anonymity and topics) were obtained for the qualitative research. At the beginning of the qualitative research, meaningful information about anonymity and confidentiality was provided, along with the interview rules regarding termination of the interview, follow-up of the interview material, and retention of the results).

2. Literature Review and Conceptual Approach

There is no fundamental conceptual alignment in the scientific and expert discourse on the links between social cooperatives and non-profit organisations, resulting in partial consensus at best. The boundaries and differences between social and other economic cooperatives require additional amplification.

Another issue concerns the hybrid nature of social organisations that combine business, social, and mutual-benefit perspectives. Such organisations must balance the interests of individual members and the broader public (e.g., some agricultural cooperatives represent both members and local communities) [12,13]. In addition to the basic subsistence incentives of profit-driven cooperatives, “green” social cooperatives (providers of environmental services) play an important role in environmental and social governance through the creation and mobilisation of social capital.

Divergent views of social cooperatives among academics and experts are an additional complication. European academics (especially southerners) share more coherently aligned concepts of social cooperatives. For example, Italian, Spanish, and Portuguese experts associate cooperatives with social and local activities, the provision of public services, and the clear representation of social interests [14,15,16]. Meanwhile, American scholars and practitioners are sceptical about the unstructured use of the concept of social cooperatives.

Scholars explain that some cooperatives are social enterprises (or social cooperatives). They argue that the motives and interests of members are more critical to the definition of social cooperatives than the form of the organisation or the nature of the capital [17]. Furthermore, Anglo-Saxon scholars more often associate social cooperatives with the concept of community cooperatives [18].

The normative basis of cooperatives is reflected in what is known as the Rochdale Principles, a list of seven principles developed by the International Cooperative Alliance (ICA). Developed in 1937 and last updated in 1995, this list of principles includes the following: (1) free and open membership (non-discrimination, motivation, and remuneration); (2) democratic control of members; (3) economic participation of members; (4) autonomy and self-reliance; (5) education, learning, and information; (6) cooperation between cooperatives; and (7) cooperatives must care for their communities [19,20]. The last three principles imply that cooperatives should have a social function. The social cooperatives are covering and unifying two pillars of sustainability (economic and social), while some promote environmental governance.

Social cooperatives began to emerge in Italy in the 1970s and 1980s. At that time, cooperative initiators created a new type of enterprise following the traditional model and examples (Italy had many worker, service, and agricultural cooperatives). In 1991, the Italian government created a social cooperative law, which included the concept of the social cooperative and a relatively broad regulation of the new cooperative organisation and its activities [21,22,23]. The Italian Law on Social Cooperatives (381/1991) requires that social cooperatives act in the community’s general interest by enabling citizens’ social integration and promoting human development [15]. The Italian law stipulated that social cooperatives could only provide: (1) social or educational services (known as ‘Type A’ cooperatives); and (2) other activities employing at least 30% disabled workers (known as ‘Type B’ cooperatives) [24,25,26].

The social cooperative model differs from traditional cooperatives and mutual aid associations in that it serves not only the interests of its members but also the interests of the community as a whole or a specific group, as well as social objectives [5]. Social cooperatives, like other social economy organisations, respond to the social needs of society (services are provided to non-members) and seek to achieve social impact through a specific business model [15]. Social cooperatives address the following problems: long-term unemployment, employability, and access to social and care services. Social cooperatives are better at responding to complex crises in socially, economically, and ecologically unsustainable environments. Comparing the social cooperative organisational model with the prevalent unsustainable economic model (“waste-based and social inequality-based”) reveals its advantages.

Social enterprises (social cooperatives and similar companies with different legal statuses) actively provide health, environment, social, and education services. They often have charitable purposes, making them an effective public social welfare policy tool. In addition, a significant proportion of social enterprises are Work Integration Social Enterprises (WISEs), which aim to employ and integrate people who have successfully gained access to the labour market [27].

According to the scientific literature, cooperatives are divided into producer (distinguished as agricultural producers), worker, consumer (or small business), solidarity, and service provider [18,20]. Recently, a debate has been ongoing to validate specific legal forms defining renewable energy production cooperatives. [28].

The analysis shows that social cooperative definitions are associated with two elements: (1) a cooperative organisation and the collective interest of the members; (2) a distinctive social mission or field of activity (provision of social services, social integration, or other activities in the social economy or the not-for-profit sector, etc.). The definitions also clarify the business model by contrasting it with traditional cooperatives. It is also understood as part of social policy or, more broadly, public service delivery policy. However, the above public policy context (central and sub-national governments) is only sometimes emphasised.

OECD experts on the genesis of social enterprise have noted that cooperatives have acquired a social dimension and status (particularly in Europe) as they have involved a wide range of stakeholders and volunteers. [24]. Experts note that each country has introduced its own regulations [15], which include consolidating possible economic activities (legislators have often stipulated that they must be active) and imperative instructions to provide services to non-cooperative members (see Table 2).

Most EU countries have institutionalised social cooperatives as social enterprises (see Table 1). The concepts of social cooperatives have been defined, and the forms of activities envisaged are in Belgium, the Czech Republic, Germany, Spain (social initiative), France (collective interest), Portugal (social solidarity), Hungary, and Poland [1,20]. Many of these countries also have legislation regulating other forms of cooperatives.

The law experts note that cooperative law must clearly define the legal forms of general and special cooperatives (most commonly credit unions and social cooperatives) [20,29]. The fundamental principle of social cooperatives is social interest. It becomes an alternative to the profit principle, the basis for traditional cooperatives. On the other hand, it is not just a limited social function (a certain solidarity or altruism). The principle and the legal form thus reduce the objectives of mutual support and profit-making.

Different traditions of social thought, the legacy of the cooperative movement, and different models and contexts of social cooperatives influence attitudes and perceptions. Social cooperatives are associated with two elements: (1) a cooperative organisation and the collective interest of the members; and (2) a distinctive social mission or field of activity (provision of social services, social integration, or other activities in the social economy or non-profit sector, etc.). The definitions also clarify this business model by contrasting it with traditional cooperatives.

Scholars question why this social (or equitable development) function has become essential and to what extent it has been identified [20,30]. Experts have several common explanations: (1) essentially, cooperatives are atypical business organisations designed to meet members’ interests and human needs (e.g., work, family, and personal needs) [20]; (2) legislators have sought to reconcile the obligations of cooperative members with those of other employees. The principles mentioned above have been necessary for this [31]; and (3) social and sustainable development values are significant, although their importance is declining (as confirmed by empirical research) [32].

Table 2. Legal forms and formalised activities of social cooperatives.

Country	Legal Form	Possible Field of Activities
		2011	2020–2021
Italy	A social cooperative.	Social, educational, cultural, and primary health care services (“A” and “B” cooperatives).	Mixed cooperatives. Expansion of activities to include new areas of activity—management of council flats, social tourism, regeneration of brownfield sites, and production and sale of organic and ethical products.
Spain	Social initiative cooperatives.	Support services in health, education, culture, or other social activities; labour market integration.	Social housing management for youth (a new type of social cooperative).
France	Cooperative communities of general interest.	Production of goods or services of collective interest.
Portugal	Social solidarity cooperatives.	Integrating socially vulnerable groups.
Belgium	A social cooperative.	Wide range of services.
Poland	A social cooperative.	Employment of socially vulnerable groups. People from socially vulnerable groups can only set up social cooperatives.	Provision of social, cultural, educational, health, sports, and local development (e.g., tourism) services. The establishment of social cooperatives is not strictly regulated.
Hungary	A social cooperative.	Recruiting socially vulnerable groups and meeting other needs.
Czech Republic	A social cooperative.		Carrying out activities in the areas of social integration, employment, and social exclusion.
Croatia	A social cooperative.	A concept has been introduced, but the fields of activity are not defined.
Greece	Workers’ cooperative as a social enterprise; social cooperative as a limited liability company.	Mental health service provision (integrated into the mental health system).	Operating in three areas: (1) integration of excluded groups; (2) integration of special groups; and (3) provision of mental health services.

Source: [1,21,33,34,35,36].

Table 2. Legal forms and formalised activities of social cooperatives.

Country	Legal Form	Possible Field of Activities
		2011	2020–2021
Italy	A social cooperative.	Social, educational, cultural, and primary health care services (“A” and “B” cooperatives).	Mixed cooperatives. Expansion of activities to include new areas of activity—management of council flats, social tourism, regeneration of brownfield sites, and production and sale of organic and ethical products.
Spain	Social initiative cooperatives.	Support services in health, education, culture, or other social activities; labour market integration.	Social housing management for youth (a new type of social cooperative).
France	Cooperative communities of general interest.	Production of goods or services of collective interest.
Portugal	Social solidarity cooperatives.	Integrating socially vulnerable groups.
Belgium	A social cooperative.	Wide range of services.
Poland	A social cooperative.	Employment of socially vulnerable groups. People from socially vulnerable groups can only set up social cooperatives.	Provision of social, cultural, educational, health, sports, and local development (e.g., tourism) services. The establishment of social cooperatives is not strictly regulated.
Hungary	A social cooperative.	Recruiting socially vulnerable groups and meeting other needs.
Czech Republic	A social cooperative.		Carrying out activities in the areas of social integration, employment, and social exclusion.
Croatia	A social cooperative.	A concept has been introduced, but the fields of activity are not defined.
Greece	Workers’ cooperative as a social enterprise; social cooperative as a limited liability company.	Mental health service provision (integrated into the mental health system).	Operating in three areas: (1) integration of excluded groups; (2) integration of special groups; and (3) provision of mental health services.

Source: [1,21,33,34,35,36].

OECD experts state that some cooperatives operate in the social economy. However, these organisations do not directly impact communities but instead represent the interests of their members as one of their key objectives [15]. Social cooperatives provide social services in the public interest. On the other hand, some countries (e.g., France, Germany, and Italy) prohibit traditional cooperatives from operating in social services [21].

The EU and some countries have policies to support cooperatives as social economies or social enterprises. These policies include several measures: (1) exclusive legal regulation; (2) specific support programmes or measures. Agricultural cooperatives have been supported the most due to the political objectives of the authorities and the interests of farmers [7,28,37]. The challenges of climate change and growing social inequality strengthen national and EU policies to support social cooperatives, which are treated as organisations encouraging sustainability.

Social cooperatives are subject to specific tax exemptions in Italy, Spain, and other countries [15]. The development and popularity of social cooperatives in Hungary and Poland have been boosted by the EU Structural Funds [33,36]. Generally, policies supporting and regulating social cooperatives are directly linked to public policies on social enterprise (the social economy), company law, and tax law.

Experts distinguish social cooperatives from other organisations based on economic criteria. A distinction is made between mutual benefit organisations (e.g., traditional cooperatives, some associations, economic communities) and public benefit organisations (e.g., NGOs) or voluntary organisations (professional associations, clubs) [38,39]. Equally important is the nature of the capital (members invest their capital and, within the legal framework, can raise other capital from sources of government support, private donors, e.g., crowdfunding, etc.).

Mutual interests to solve social problems, help target groups, gain profits, and gain other benefits unite social cooperative members. J. Defourny and M. Nyssens, two of the most prominent researchers in the European non-profit sector, have classified social enterprise models according to the three interests (mutual, capital, and general/social) and the resource nature (market-dominated, hybrid, and non-market-dominated) [5,22].

Thus, the model of social cooperatives is built on two foundations: the business/capital market (profit-seeking and profit-sharing) and non-financial objectives (working with a target group, solving social problems, etc.) and the support they receive [5]. In general, the social cooperative model is distinguished by balancing members (self-interest) and general society’s (a shared social mission is critical) interests with those of the target groups (usually by providing social services to the target groups).

Scientists generally attribute the formation and development of cooperatives to two factors: the cooperative tradition or a specific legal framework [1,15,40]. For example, in Southern Europe, France, and Belgium, the emergence of social cooperatives has been driven by the cooperative movement in agriculture, healthcare, and credit. The social economy and the welfare state are also critical for the functioning of social enterprises. Four groups of factors are identified to describe cooperative incentives (see

Table 3. Factors and incentives for setting up and operating social cooperatives.

Factors and Incentives	Short Description
Economic and entrepreneurial	Socio-economic missions (economic activity linked to a social mission) reduce economic risk due to market income and other sources (tax incentives, subsidies, benefits, etc.).
Social	Collective action and entrepreneurship. Benefits for communities or individual social groups. Aiming to create social value. Profit sharing in a non-profit organisation.
Participation	Democratic decisions and participation (not compulsory), autonomy.
Cultural	The cooperative tradition. A historically developed movement. Identities with cooperatives.

Source: [1,15,36,40,41].

).

Researchers have observed several factors impacting cooperatives’ performance: (1) Social cooperatives must provide services to target groups. They cannot engage in advocacy activities like other NGOs (although the government often supports these activities); (2) social cooperatives face economic risks from their income generation, etc.; and (3) social cooperatives tend to employ permanent ‘full-time’ staff with the commitment to pay wages and other obligations [41]. Social cooperatives derive a significant part of their income from government support programmes, tax incentives, or other forms of support. This can distort the nature of their activities and prevent them from selling their services on the market.

As empirical studies have shown, cooperatives are most often based on open membership and volunteering (often with employees). Naturally, cooperative members benefit most from their activities [6]. In addition, the independence of social cooperatives from the influences of the government and other stakeholders (private business actors, investors) is also essential. Researchers also noted the rapid development of social cooperatives as a concern. For example, the rapid growth of cooperatives in Italy has forced them to market and serve social interests/functions [42]. In addition, cooperatives have become overly competitive, and the markets for their services have become highly stressed.

Finally, the social cooperative model has structural limitations that can be attributed to the national ecosystem of social enterprises, a weak cooperative tradition, an unfavourable legal framework, and support policies. On the other hand, it can be assumed that these unfavourable factors should not completely limit the application of the social cooperative model, as shown by the Central European cases. This can be revealed by an empirical study on the application of the social cooperative model in a country with unfavourable conditions (e.g., no cooperative tradition, undeveloped social enterprise ecosystem, no favourable support policy, etc.). The Lithuanian case will therefore be used to examine how favourable (e.g., dynamic development of the social enterprise ecosystem, possible support policies for the transfer of public services to NPOs) and unfavourable (e.g., lack of a specific legal framework, weak cooperative tradition, and movement) factors can influence the establishment of social cooperatives in a top-down or bottom-up way.

This study combines the theories of social economy and links them with a causal-comparative research approach (research studies focused on factors that are important for setting up social cooperatives). These three conceptual approaches allow us to analyse social cooperatives as part of the social economy (in the case of Lithuania, a newly established one) and to separately identify the constraining and promoting factors. Social economy theory recognises that cooperatives are freely voluntary organisations created by members through labour and capital contributions [13].

It is important to note that several authoritative groups of scholars and experts work within this conceptual framework. The International Scientific Commission on Social and Cooperative Economy (ISCSE) was the first to start the scientific debate several years ago on the theoretical approaches of the so-called school of social innovation and its importance in the pursuit of social missions [7,41]. Based on this theoretical approach, scholars explain that social cooperatives create social innovation (new social services and ways of delivering them) and are certain agents of change [43]. At this point, it is important to note that the model of cooperatives depends on the legal regulations and the national setting of the cooperative movement.

Scholars have generally distinguished two factors in the formation and development of cooperatives: the cooperative tradition or specific legal frameworks [15,21,40]. Four groups of factors are commonly identified in explaining the incentives for cooperative activity (see

Table 4. Factors and incentives for setting up and operating social cooperatives.

Factors	Short Description
Economic and entrepreneurship	Socio-economic missions (economic activity linked to a social mission). Reduce economic risk due to market income and other sources (tax incentives, subsidies, benefits, etc.).
Social	Collective action and entrepreneurship. Benefits for communities or individual social groups. Aiming to create social value. Profit sharing in a non-profit organisation.
Organisational	Democratic decisions and participation (not compulsory), autonomy.
Cultural	The cooperative tradition and movement. Identities with cooperatives.

Source: [15,21,36,41].

).

Social cooperatives’ activities are determined not only by their organisational model and the legal foundations they have created but also by the economic and business environment. Researchers have observed several factors that affect the performance of cooperatives: (1) social cooperatives (like other social enterprises) have to provide services to their target groups. They cannot, like other NGOs, engage in advocacy activities (although the government often supports these activities); (2) social cooperatives face economic risks in terms of income generation, etc.; and (3) social cooperatives tend to employ permanent ‘full-time’ staff, which entails a commitment to pay wages and other obligations [41].

Social cooperatives derive a significant part of their income from government support programmes, tax incentives, or other forms of support. This can distort the nature of their activities and move them away from their ambition to sell their services on the market. For this reason, the government provides certain legal safeguards in the form of restrictions on dividend payments, strict supervision, etc. Some studies show that the development of cooperatives has also been encouraged by government support policies and measures. Thus, development was not only bottom-up but also in the reverse direction, top-down. The transfer of public services was particularly important for their development [21].

Equally important is the cooperative model of social business, determined by organisational and legal forms. Most often, cooperatives (as empirical studies reveal) are based on open membership and volunteerism (often with employees). Naturally, the members of cooperative societies are the ones who benefit most from their activities [6].

In addition, the autonomy of social cooperatives from the influences of the government and other stakeholders (private business actors, investors) is also important. Another problem observed by researchers relates to the too rapid development of social cooperatives. For example, the rapid growth of cooperatives in Italy has forced them to market and serve social interests and functions [42].

These conceptual approaches were used to analyse the data collected during the qualitative research and partly to develop the design of the qualitative research.

3. Results—Qualitative Research: Opportunities for Social Cooperatives in Lithuania

The study raised two qualitative research problems: (1) there are no favourable factors (in the social business ecosystem and the cooperative movement), needs, or incentives for establishing social cooperatives; and (2) the business model of a social cooperative is only acceptable to some actors in the social ecosystem.

Historically, the initiation and further development of the social cooperative business model have been influenced by complex environmental factors: (1) the movement of traditional cooperatives and established business practices (in Italy, Belgium, individual regions of Spain, and elsewhere); and (2) the crises in the provision of social and other public services (increasing demand, ineffectiveness of social policies). On the other hand, the development of social cooperatives has also been stimulated by the visions and ideas of actors (both the founders of the new model and the political-administrative elites) in developing or supporting the social cooperative business model. Thus, the factors mentioned above, acting in a complex way in individual European countries, have contributed to the development of social cooperatives as a business model that has become dominant or prominent in the social economy ecosystem.

In Lithuania, social business has been developed without distinguishing (through regulation or support policy) a specific model (a particular organisational form), and many social businesses are developed by organisations with different legal forms (e.g., closed joint stock companies, small partnerships, etc.). Moreover, the social business ecosystem has developed in a bottom-up direction with limited involvement and support from public authorities.

Considering the Lithuanian contextual factors and the historical trends in the development of social cooperatives, the aim was to determine which factors might be necessary for establishing social cooperatives. The interviews explored the potential impact of several factors:

• The tradition of cooperation and the activities of cooperatives in agriculture;
• The impact of social capital, social business practices, and the potential impact on initiating cooperative companies;
• The acceptability of the cooperative model in legal and social business contexts.

Before starting the analysis of the interviews, it is essential to note that only some participants were familiar with the social cooperative as a social business model. Some of them were familiar with it because they had researched their activities, discussed them with foreign experts, and visited cooperatives in foreign countries (Belgium, Poland, etc.). The other part had a more general understanding of the business model. This study’s limitation was addressed by clarifying and explaining this business model at the beginning of the interviews.

Participants in the qualitative research needed help identifying the cooperative tradition’s impact and best practices on possible social cooperative initiatives. Most informants found it difficult to relate the development of new forms to the cooperative tradition developed in agriculture (interviews with INF10 and INF8). On the other hand, informants representing social businesses and communities talked about cooperation experiences in setting up social businesses (community business centres, co-working spaces, etc.) (focus group interviews; interviews with INF11 and INF8). They stated that several small entrepreneurs are active in the social field and have cooperative experience. The informants stressed that these could be used successfully (interview with INF8 and INF10). It was also mentioned that their innovative social initiatives were prototypes of social cooperatives.

One informant was sceptical about the social cooperative model, noting the importance of the specific socio-cultural context (focus group interview). He commented that the historical-cultural context should be used to find the best form and not just to refer to the proposed models from the United Kingdom, Italy, or other models (focus group interview).

The qualitative research sought to identify the potential need for establishing a social cooperative company as a social business model. Some of the informants in the focus group commented that it was not relevant to create a distinctive form of social business. For example, one informant gave the following reasons for her views:

“The situation today is that it was adopted in 2019, but it is stuck in Parliament. There was also a separate initiative to define some of what social business is. There was also a separate initiative to define social business by including it in the social business law. Now that process is also somewhat stalled. I believe another form should not be singled out and defined. These are only certain legal forms of activity. Whether it is a limited liability company, a small partnership, or a public limited company does not resolve the issue. These are just certain legal forms. Lithuania needs a vision of where we are going next. I think that this would bring more irritation and disorder. We just need to tidy up more of what we have started, and we need to tidy it up. There is a kind of deadlock” (focus group interview).

Several other informants (responding to the question in individual interviews) echoed this view, noting that the time for new initiatives has yet to be ripe as the foundations for social capital enterprises need to be laid (interview with INF10). All interviewees generally stressed that social business is a sector that accommodates all actors operating in one form or another and that one form should not be privileged.

There are two possible explanations for these opinions. On the one hand, it is due to expert knowledge and insight into social business and formulating a position in the general interest. On the other hand, the focus group interviews highlighted the speakers’ interests in terms of interest representation and advocacy positions. For example, one respondent spoke favourably about the definition of the legal form of social cooperatives in legislation and the development of a business model:

“In my opinion, why not. But again, there should be a clear clarification of the objectives, the mission and what is to be done. Only in my opinion should one come up with, and refrain from using, the term social enterprise. Because social enterprise, but for those who understand it, social enterprise is a thing of confrontation. […] it would be better not to use this term” (focus group interview).

Social cooperatives have been set up by social and other medical professionals (nursing, mental health) in some Western European countries. The qualitative study aimed to determine the attitudes of social workers, nursing professionals, and employment professionals towards creating and operating social cooperatives (as already mentioned, representatives of the above-mentioned professional associations were included in the study). The representatives of these organisations who participated in the focus group mentioned existing practices and gave examples. For example, it was mentioned that individual workers create NGOs (usually providing social care and similar services) and choose a public corporation’s legal form and an individual activity’s legal form (focus group interviews). A few informants said that individual municipalities encourage and are interested in transferring these services to NGOs or social businesses (focus group interviews). It was mentioned that a group of new services (social care at home) could be attractive for individual and joint care professionals. However, professionals saw some potential disadvantages in the possible operation of cooperatives.

“There are so many forms of legal action to choose from that it sometimes begs the question. There is a nuance here. Because, you know, the institutions in the budgetary sector guarantee quality through guarantees, licences, and that’s it. It is more difficult to control an individual practitioner. I see a danger here.” (focus group interview).

This interview reveals that informants saw potential limitations in social business forms and had doubts about the possible broader development of social business. At the same time, some of them wondered whether there would be sufficient incentives for professionals to set up social cooperatives.

The qualitative research sought experts’ views on the possible economic activities of social cooperatives and the possible delimitation of legitimate activities (as regulated in Italy and some other countries). The informants commented that the current regulation, which does not restrict the areas of activity, is acceptable.

“Social businesses can operate in many areas, including the environment and psychological solutions services. […] We, for example, are working on transferring public services. We think these services should be transferred to NGOs, social businesses or traditional businesses where they can be effective. The important thing is that there is a choice because not all municipalities have the capacity. Social businesses are in their infancy, which is true of NGOs. […] So social cooperatives can develop and try to do that. We should now be talking about how we can help them now. I do not think creating a specific legal entity is essential. We should discuss other incentives that would help social businesses, such as financing measures and tax breaks. It’s not just a case of not wanting to run in front of the train but of assessing the situation as it is” (focus group interview).

The informant (representing the agency under the Ministry responsible for supporting social businesses) shared his opinion and pointed out that the Lithuanian social business policy prioritises the transfer of public services and that other types of support are discussed. The Lithuanian authorities are considering strengthening social business enterprises through taxes, public service transfers, and other support measures.

The study explored views on the potential for a social cooperative to combine a social mission (social interest), worker cooperation, and profit-making. Some informants commented that the legal form of a social cooperative reconciled business and social interests, which they viewed positively.

“The argument you made against public bodies is an argument for social cooperatives. Because social cooperatives can share a part of the profits without […] Well, that is the advantage of a social cooperative over some other forms. And when they are all co-owners …” (focus group interview).

Continuing, the informant explained that some NGOs distribute the income they receive by increasing the salaries of their members or finding other ways. Meanwhile, he considered social cooperatives a good legal form to combine interests. Some informants pointed out that the current regulations allow the establishment of cooperatives now. One informant in the focus group shared this view:

“… if we are talking about social services, and social care, we need to train social workers to set it up and explain how it works, and we need good managers. Then other measures or incentives can be used […] But apart from agriculture, such cooperatives do not exist or exist in principle. So I think that, in principle, you would have to do something to get things going. More than changing the law or legal form would be required in that sense. More efforts should be made to make the public and activists see the advantages and benefits of social cooperatives” (focus group interview).

This interview shows that experts and practitioners understand there are opportunities for cooperative businesses to work in the social sphere, but they have limitations. Moreover, this informant was well aware (he had himself founded several social enterprises and was involved in the Lithuanian and EU policies of supporting social and small businesses) of the obstacles to setting up a social cooperative and argued why strict measures should be taken, starting with raising awareness of this business model.

Another informant was somewhat sceptical about the regulation of the social cooperative model. He also based his observations on the specificity of the social cooperative model in Italy and looked for parallels in Lithuanian legal forms:

“Our association is a member of the largest social business association in the world, the head of which has advised on implementing the social business model in the Republic of Poland. He is Italian himself, and we talked a lot. And we are talking a lot because we are stuck in Lithuania and need solutions. Poland, too, has challenges, so we cannot say that this country has solved everything and that there is a panacea. That is the first thing here. Regarding the Italian cooperative companies, there are ‘A’ and ‘B’ social companies. There is one that would correspond more or less to our Public Enterprises, where 100% is invested in social missions, and we do not have another equivalent. Still, we can look for correspondence with the legal form of a small partnership. Well, we have not defined it, and if there is a definition and criteria, then in Lithuania, we would have to define those criteria. The main criterion is that the social business must reinvest. It is important to set those criteria for reinvestment. […] Today, in Lithuania, there are many legal forms for business. This is not a problem, and social businesses are being created, such as Public Enterprises and Small Partnerships” (focus group interviews).

In this interview, it can be noted that the informant identified the definition of regulatory criteria for regulating the profit generated by social business models and the perceived relevance and different impacts. On the other hand, he needed to correctly equate Italian cooperatives of type ‘A’ with the legal norm of NGOs in Lithuania, where Public Enterprise dominate. It should be noted that there are substantial differences between these legal forms [1]. Further, in the interviews, the informant shared her experiences, saying that some Lithuanian social business founders specifically chose to combine the small partnership and the social mission (it was mentioned that they did not choose a public enterprise), seeing the benefits of doing so.

As discussed above, many countries regulate and supervise social business quite strictly. The qualitative research sought to determine to what extent this would be relevant in Lithuania and what experts’ views would be on a stricter definition of activities, the scope of activities of enterprises, control over the structure of income and expenses, etc. The interviewees, in their reflections and discussions on the topic, commented on the fact that there is no need for overregulation. An informant working in a government agency with social enterprises observed:

“I don’t think we… I don’t think we should. The question then would be, where will the businesses that do not ‘fit’ under the definition of social business go? We need to think about what to do with those businesses. For example, if I create a social business in the field of environmental protection and I don’t fall under that definition, then what do I need to do, and how do I need to develop the business” (focus group interview).

The informant continued by noting a need for a more precise understanding and definition concerning individual social business models and social cooperatives. The focus group discussion revealed a need for more clarity about social business and how it differs from other non-profit organisations providing services. The interview material indicates that things are more straightforward for government agencies regarding NGOs operating in the social economy. Meanwhile, other social businesses (using the legal forms of business companies and with a social mission) need clarification about the correspondence.

During the interview, some of the informants brought up the idea that social cooperatives can address not only social and economic issues but also environmental ones. They suggested that the creation of solar energy cooperatives would enable the Lithuanians to take advantage of this type of “mixed-type” social entrepreneurship. The informant explicitly highlighted neighbourhood cooperatives that would include tenants in apartment buildings. They would be a hybrid organisation that combined cooperatives for social and renewable energy. In light of the views expressed, it can be seen that energy-saving issues can provide an additional incentive to strengthen social cooperative ideas and incentives for support and development. Moreover, the development of the social and green energy cooperative model may be in the interest of a part of the population (the lower class and/or those living in apartment blocks, those without sufficient investment).

To summarise the qualitative research findings, the conditions are unfavourable for establishing social cooperatives. Lithuania has no strong cooperative movement, and a small number of cooperative societies operate only in narrow sectors of the economy—agriculture and forestry. It is difficult for social business founders to follow best practices, understand cooperative companies’ organisations, etc. The analysis of the interview material reveals that professionals (representatives of associated organisations in the social services sector, civil servants) need to gain a better understanding of social cooperatives and the advantages of this social model. Experts in policy processes to support social entrepreneurship also need a more precise understanding. In general, the debate on the legalisation of social business models and their legal forms is mainly carried out by experts and academics without the involvement of other actors in public policy processes. This is due to several prominent reasons: Lithuania has chosen a specific policy of support and regulation of social business that does not legitimise (as legal forms) and prioritises several social business models.

The social cooperative company model as a basis for social business development was attractive to only some study participants. Some informants favoured the idea of business development where social entrepreneurs or service providers (social workers, care professionals, local community craftsmen, etc.) come together to establish a cooperative company, whether or not it has a legal form. They explained that, by its very nature, this model of social entrepreneurship has advantages in terms of cooperative principles, profit sharing, etc. Another part of the informants was more sceptical about establishing social cooperatives, noting that in the social entrepreneurship ecosystem, the most prominent ones are the NPOs that use the legal form of an NGO (i.e., public enterprises) and the popular legal form of a small community. They argued that the legal form is not a significant issue but that what matters is the establishment and the success of the activities in line with the social mission and other principles of a social business company. On the other hand, the analysis of the opinions revealed a contradiction in the concepts of social business.

4. Discussion on the Development of Social Cooperatives in Lithuania

Lithuania has relatively few social businesses (90 social businesses in 2018). Due to cultural, economic, and social constraints, essential incentives for developing the social economy have not been created in Lithuania [37]. The economic activities, organisation, and support policies of Lithuanian cooperative societies should be studied more. In recent years, only a few publications have been published on the analysis of agricultural cooperatives [37,44,45]. Based on existing publications, it is difficult to answer the questions—what are the concepts of cooperative organisation, the tradition or movement of cooperatives, and the problems of the operational and regulatory environment? There are significantly more publications in social business studies and research.

As the research has shown, notions of social economy enterprises must be better established in Lithuania and still raise questions for academics and public policy analysts. Social business is defined differently (more general definitions of social enterprises and social economy are found in legislation and public policy documents) and needs to be clearly understood. On the other hand, this is common to Lithuania, but already in terms of authoritative comparative studies and evaluations [5,21].

In 2013–2021, the issue of definitions of social business in Lithuania has been the subject of intense debate, which scholars link to criticism of the Lithuanian social enterprise model and legislative initiatives. Scholars reflecting on the debate on social enterprises in Lithuania have addressed the political and academic debate related to legal (more broadly, public policy) and academic definitions [4,46,47,48].

Researchers explain that the responsible authorities have adapted EU public policy concepts and ignored existing practices when developing legislation [49]. Academic discussions and NGO advocacy have contributed to the Minister of Economy’s Order on the Approval of the Social Business Concept and the draft Law on Social Business Development. The legislation mentioned above defines the concept of social business (the concept of social economy, the social business model, and the eligibility criteria for social business status). The drafters of the ordinance have opted for a broad concept of social business, defining it in terms of eligibility criteria (the most important being social benefits and reinvestment of profits). Thus, the concept of a social cooperative and the cooperative model were not defined. Still, it was foreseen that cooperatives could be classified as social businesses if they fulfilled the essential criteria. On the other hand, there needs to be more analysis of the effects of the cooperative tradition or the possibilities of establishing social cooperatives as an organisational form.

Research shows Lithuania’s traditional cooperative system is underdeveloped and fragmented [37,50,51]. Meanwhile, the social business ecosystem is rapidly forming and dynamically expanding (at least since 2016–2018), but in a specific way [52,53]. Empirical evidence shows that most cooperatives are active in agriculture and forest management (forest owners’ cooperatives). Agricultural cooperatives have gradually decreased over the last few decades [37]. In Lithuania, only around 12% of farmers are involved in cooperatives. Meanwhile, the number of agricultural owners’ cooperatives and the number of their members have gradually increased [54]. The cooperative movement is hampered by regulatory constraints, financing (or capital-raising) problems, and negative public attitudes.

Research has shown that the Lithuanian social business ecosystem has been in a phase of change since 2015. It has been observed that the social enterprise and social economy sub-systems of the employment model continue to operate. Each has its actors, not only central ones but also state agencies, associations, and coordinating ones at the local level. The social business ecosystem includes several dozen actors grouped according to specific categories. The Lithuanian social business ecosystem is heavily influenced (both in its creation and development) by the EU institutions.

Lithuanian social enterprises generate part of their income from commercial services, but support from EU structural funds and state and municipal budget programmes is equally important. Most Lithuanian social economy enterprises are active in social integration, culture, youth employment, sports, and physical activity development. Research has shown that most social economy enterprises depend on state and municipal sources of support. On the other hand, it is relatively small, and advocates of NGOs and social economy enterprises have sought to gradually transfer some public service provision to them. Similarly, the state has also started the transformation of social enterprises.

Scan acts as a further motivation to support and develop social cooperative concepts. Additionally, some members of the population (such as those from the lower classes or who live in apartment complexes, those who lack sufficient investment, and those who are not as well-off) may benefit from the growth of the social and green energy cooperative model.

The qualitative research revealed that the energy crisis resulting from the Russia–Ukraine war and the long-term challenges of ensuring sustainable development can stimulate social and cooperative ideas. This may involve the establishment of energy or green cooperatives in marginalised communities or neighbourhoods. Such social-green cooperatives could help address challenges to sustainable development.

5. Conclusions

Social cooperatives are associated with (1) a cooperative organisation and the collective member interest; and (2) a distinctive social mission or field of activity (e.g., provision of social services, social integration, etc.). The social cooperative model balances the member mutual interests with the general society’s interests (a common social mission is critical) and those of the target groups.

The development of social cooperatives is determined by several key factors: (1) social problems and the need for solutions through cooperative action; (2) the tradition of cooperatives and the incentives of the traditional cooperative movement; (3) a high level of social capital and social trust; and (4) government regulation (specific legal frameworks), fiscal incentives, and support through public policies. Policies supporting social enterprises include: (1) an exclusive legal framework and (2) specific support programmes or individual measures (targeted grants, asset relief, etc.). Lithuania has few social business enterprises because cultural, economic, and social constraints have yet to create essential incentives for the development of the social economy. The social ecosystem has developed from the bottom up and is based on the activism of social business initiators. Social cooperatives are known to experts only as a social business model. Notably, the establishment of social cooperatives has yet to be studied in research, analytical studies, etc.

The qualitative research revealed that the conditions for establishing social cooperatives could be more favourable. Social business founders need assistance following best practices and understanding cooperative organisation, money, etc. The interviews revealed that professionals (representatives of associated organisations in the social services sector and civil servants) have to understand social cooperatives and the advantages of this social model. Policy experts supporting social entrepreneurship also need more knowledge due to the current policy and regulation of social business models in Lithuania. Participants in the qualitative research thought the definition of the fields of activity of a social cooperative should be more flexible. Participants stressed the importance of safeguards to fulfil the social cooperative mission.

The social cooperative company model as a basis for social business development was appealing to some study participants, who thought that this model had advantages in terms of cooperation principles and profit distribution. Other informants were more sceptical about establishing social cooperatives, noting that social business uses the legal forms of NGOs (i.e., public enterprises) and the popular legal form of small partnerships. They argued that the legal form is irrelevant and that establishing and succeeding in the activity in line with the social mission and other social business principles is essential. The view analysis revealed a disagreement with the social business concept.

The study was inevitably limited due to the qualitative approach and the specific research focus on contextual factors. First, our analysis does not consistently compare social cooperatives with other forms of organisations (e.g., social enterprises), as we focused on positive and negative factors for the establishment of social cooperatives. Secondly, some qualitative research participants had a very general or specific understanding of the social cooperative model. Therefore, participants reflected on or discussed factors regarding social enterprise organisations or NGOs working with social services. Some interventions by interviewers were needed for clarification of the social cooperative concept. Another limitation is that the findings may be temporary in nature as the social ecosystem and related factors change. Future analyses could confirm and strengthen the present results.