Policy Recommendations: How social enterprises can get better conditions to grow in rural areas

See the Swedish press release here
See the Irish press release here
See the Icelandic press release here
See the Norwegian press release here
See the Finnish press release here

Social enterprises develop practical solutions to social challenges and often serve as an engine of social innovation, with the primary goal of creating social value rather than private profit. This can include, for example, businesses that run cafés or services where people far from the labour market are given jobs and support to re-enter employment.

Despite their growing importance in rural areas, many social enterprises operate without long-term funding, clear regulatory frameworks or support tailored to their needs. As a result, their potential to contribute to local services, job creation and social inclusion remains constrained.

The new policy recommendations provide concrete guidance on how rural policy can be designed to strengthen social enterprises. They draw on research, dialogues, pilot studies and tested methods involving social entrepreneurs, support organizations and decision‑makers in Finland, Ireland, Iceland, Norway, and Sweden. Together, they outline what is needed to create more stable and enabling conditions for social entrepreneurship.

“Social enterprises are increasingly expected to address societal challenges in country, without being given the tools they need. That is not sustainable. There is political will, but existing systems are not designed for how these organisations actually operate. The recommendations show what needs to change,” says Yvonne von Friedrichs, doctor in Business Studies at Mid-Sweden University and the project manager of MERSE.

Five areas for policy reform

The policy recommendations identifies five priority areas for action. First, it calls for clearer political recognition of social enterprises, including shared definitions and improved data. A central proposal is the introduction of “rural proofing” – ensuring that policies are systematically assessed for their impact on rural areas.

Second, the report highlights the need for long-term funding. Short-term project grants are described as a recurring barrier. Instead, it proposes multi-year funding schemes alongside blended finance models combining grants, loans and development support, adapted to smaller organisations.

Third, public procurement is highlighted as a strategic lever. Greater use of social criteria could open up opportunities for social enterprises while strengthening local services, labour market integration and care provision.

The report also points to the need for more targeted support systems, including advisory services that reflect the realities of cooperative and community-based business models, as well as better tools to measure and demonstrate social impact.

Finally, it argues that social enterprises should be seen as strategic partners in local and regional development, particularly for municipalities facing challenges related to service delivery, workforce shortages and social inclusion.

An underused resource

MERSE concludes that social enterprises represent a significant, but still underused, resource in rural development. The recommendations are intended to inform policymaking at national, regional and local levels.

“Social enterprises are already creating jobs and addressing societal needs where other actors fall short. With the right conditions, they could play a much stronger role in name of country´s rural development and contribute to more resilient local communities,” says Yvonne von Friedrichs. 

MERSE – Business Models Empowering Rural Social Entrepreneurship, is carried out between 2023 and 2026 as part of the EU’s Interreg Northern Periphery and Arctic (NPA) programme. The project brings together researchers, public bodies and support organisations from Finland, Ireland, Iceland, Norway and Sweden. It is funded by Interreg NPA, alongside Region Jämtland Härjedalen and Region Västernorrland. According to the project team, international collaboration has been key.

“We have mapped and compared the conditions for social enterprises in five countries and we see that many of the challenges are shared across Northern Europe. Working together has made it possible to identify solutions that are both widely relevant and adaptable to local contexts,” says Yvonne von Friedrichs. 

The next step is implementation. As many rural areas face declining populations, labour shortages and reduced access to services, the report outlines how social enterprises could become a more integral part of long-term development strategies — provided the right policy conditions are in place.

Key Policy Recommendations

The MERSE policy recommendations highlight five areas where policy change is needed to strengthen social enterprises in rural are: 

• Clearer recognition of social enterprises. Many social enterprises currently operate without a clear place in policy frameworks or statistics. MERSE calls for common definitions and improved data, alongside the introduction of “rural proofing” — ensuring that policies are systematically assessed for their impact on rural communities.

• More long-term funding. Short-term project funding remains a major barrier to stability and growth. The report calls for multi-year funding schemes and the development of blended finance models — combining grants, loans and capacity-building support — tailored to smaller and resource-constrained organisations.

• Public procurement as a strategic tool. The public sector is seen as a key driver of change. By making greater use of social criteria in procurement, more social enterprises could compete and contribute to areas such as local services, labour market integration and care provision.

• Better adapted support systems. Social enterprises often operate under different conditions than traditional businesses. The report highlights the need for advisory services and support structures that reflect cooperative, democratic and community-based business models, alongside tools to better measure and communicate social impact.

• Social enterprises as development partners. Finally, MERSE emphasises the need to position social enterprises as strategic partners in local and regional development. Stronger collaboration between municipalities and social enterprises could help deliver services and solutions rooted in local needs.

See the full policy recommendations here.

What difference could the recommendations make and who are they aimed at?

The Policy recommendations show how social enterprises could become a stronger driver of sustainable development by contributing to:

• Increased employment and inclusion, particularly for people far from the labour market.

• Stronger local services in areas where public and private provision is limited.

• More resilient and vibrant rural communities.

• With the right policy frameworks in place, they could help more people live and work in rural areas.

The policy recommendations are aimed at:

• National and regional policymakers.

• Municipalities and public authorities.

• Organisations supporting enterprise development.

• Public sector actors working with procurement and development programmes.

• They are also relevant for social entrepreneurs themselves by clarifying future opportunities and support structures.

About MERSE

MERSE is an international research and development project running from 2023 to 2026 within the EU Interreg Northern Periphery and Arctic programme. It aims to strengthen the conditions for social enterprises in rural areas. For more information, go to https://www.interreg-npa.eu/projects/merse/home/