On May 28, Minsk welcomed the Third Belarusian Social Business Forum, a platform to exchange best practices and discuss how businesses can contribute to solving social and environmental problems. This article presents an overview of the development of social entrepreneurship in Belarus and Russia, the possible adoption of a Belarusian social entrepreneurship legislation and of the situation in Latvia, which adopted a similar legislation last year.
In her opening remarks, Aksana Yelova, social curator of the Support Programme of Belarus of the Federal Government of Germany, noted: “For the third year now, we have been bringing together all those interested in the topic of social entrepreneurship development. The first forum gave us a general understanding of social entrepreneurship and allowed us to learn about foreign practices to develop this field, and the second one was about social investment and assessing social impact, while for this third forum we decided to focus on our local achievements, practices and developments. It is very important for us to get some feedback and understand what to do in the future.”
Draft legislation on social entrepreneurship
Aleh Takun, Head of the Employment Policy Department of the Ministry of Labour and Social Protection of the Republic of Belarus, spoke about the work being done to develop the draft law on social entrepreneurship:
“Normative regulations of social entrepreneurship has been discussed in various ways for the past two years. During this time, most government agencies realized that social entrepreneurship as a phenomenon exists and continues to develop in its own way. However, the time has come for the government to acknowledge that this phenomenon is a valuable and useful one, as it helps the state to solve a number of important social problems. Earlier this year, the Ministry of Labour and Social Protection created a group to develop a draft concept for the law on social entrepreneurship. The group includes representatives of government agencies, businesses and community initiatives. The discussions led to a working draft of the legislation which is now under consideration by a public advisory council. We continue to receive great suggestions from business communities, from the Belarusian Association of the Visually Handicapped and a number of other actors. When it is finalized and approved, the draft legislation will be presented to the Council of Ministers to be included in the legislative activity plan for the next year.”
At the moment, the concept includes a normative description of the purpose and main objectives of the legislation, i.e. why it is necessary and what specifically it will regulate. The legislation will specify what social entrepreneurship is, who are the social entities (both legal entities and individuals), and will probably introduce new concepts (social enterprise, social entrepreneur, social investor, individual entrepreneur). It will also identify problems these social entrepreneurship entities are going to tackle. The work on the draft legislation started with the issue of employment for people with disabilities. However, as Aleh Takun underscored, there are many more areas of development which are also important for the country: environment, education, social services, etc.
Further, the draft legislation proposes to identify ways to solve these problems:
1. employing socially vulnerable categories of citizens (not only people with disabilities, but also people living with HIV, ex-convicts, former drug users, refugees, etc.);
2. implementing socially significant economic activities;
3. systematically directing the profits or products to solve social problems or meeting social needs.
The draft legislation includes a section which describes restrictions on social entrepreneurs and enterprises. This may be about hiring of a certain percentage of people with disabilities and individuals from other socially vulnerable categories, using part of the profits for social causes, etc. Even though many support mechanisms for social enterprises, like tax benefits, already exist, they are scattered across various areas of the law. Therefore, the draft concept will focus on the intangible support measures, i.e. recognizing the status of the social enterprise, including it in the relevant register and acknowledging the social impact of the enterprise. Some expertise and organizational assistance will be available in the existing Centre for Development and Support of Entrepreneurship. Aleh Takun has promised that if the draft legislation is approved, the general public will be involved in preparing such a law, and noted that it would be much easier to promote it if there were more positive examples of social entrepreneurship and mentions of it in the media.
Social entrepreneurship in Belarus and Russia: a comparison
Maksim Padbiarozkin and Alyona Lis (ODB Brussels) described the main trends in the development of social entrepreneurship in the two countries.
In the past few years, Belarus has seen an increase in the number of various initiatives and projects supporting the elderly. Regional identity projects are being implemented, as well as projects related to new technologies, in particular, to development and promotion of mobile applications which help solve social problems. Listing a number of successful examples, Maksim Padbiarozkin highlighted an educational app for children with autism “ABA coach”, a platform for helping stray animals “Saveus”, a mobile game for children with speech impediments “CatZu”, an app to arrange for home garbage removal “RecyclingTaxi”. In addition to this, an impact investment forum has been organized, and social investment and social impact are increasingly popular. According to Maksim Padbiarozkin, this became possible for several reasons:
- Development of crowdfunding (e.g. the new platform Molamola);
- Development of startups, creation of incubators, training platforms and programs;
- Organization of social hackathons, creatons, competitions of social projects;
- Emergence of local foundations (“Dobra” Foundation), which finance social projects;
- Donor interest in social entrepreneurship projects ( Program of Support for Belarus of the German Federal Government, United Nations Development Program, USAID;
- New credit products (Development Bank);
- Traditional businesses being more willing to cooperate with social enterprises (by including social enterprises into their production chains, visiting performances by the inclusive theatre, etc.).
Alyona Lis added: “W used to have cooperation between businesses and social enterprises, anddd now social enterprises themselves become sustainable and act as forum partners, like “Tsenny Capital” (Essential Capital), which printed name badges for the event”.
Dmitry Klimkovich, Director of Minsk social enterprise “Essential Capital”, Alyona Lis, Head of ODB Brussels, a lawyer from BelAPDIiMI, the Belarusian Association of Assistance for Children and Young People with Disabilities, and Aksana Shauchenka, head of “Meteorite Plus"
According to various estimates, Russia now has from 5,000 to 15,000 social enterprises, with 25 out of 100 projects closing down every year, as this is typical for businesses in general. Just 1% of Russian entrepreneurs are engaged in social entrepreneurship, and their contribution to the country's GDP in 2017 was 0.36% (in Belarus and Latvia it was about 0.32%). Speaking about the differences in social entrepreneurship in Russia, Alyona Lis noted the expansion of access to care homes for the elderly, and to kindergartens for children. This is due to the fact that the duration of maternity leave in Russia has decreased, while the number of kindergartens has remained the same as it was when parental leave was 3 years. Thus, social entrepreneurship in the field of kindergartens provided the answer to this social problem.
How is social entrepreneurship supported in Russia?
This field started to develop in 2000s, mainly with the help of individuals and foundations. Representatives of “Our Future”, one of the most famous foundations, visited Belarus to conclude an agreement with the Belarusian Confederation of Entrepreneurs. The foundation invests in training for social entrepreneurs, provides interest-free loans for business development, etc. In addition, Russia has a state Centre for Promoting Social Innovation that provides training for entrepreneurs, as well as branches of foreign foundations like Impact Hub Moscow, which organize their own competitions.
Russia does not have a law on social entrepreneurship yet, even though discussions and attempts to adopt it started much earlier than in Belarus. On March 5, 2019, the concepts of “social enterprise” and “social entrepreneurship” were introduced to the Legislation on support for small and medium businesses in its first reading. At the same time, steps are being made to increase the participation of the non-state sector in solving social problems. There is a plan to transfer control over social services to social entrepreneurs, and non-profit and commercial organizations.
In addition to foundations which support social entrepreneurship in Russia, crowdfunding plays an important role as well. Crowdfunding platform Planeta.ru, which allows people to raise start-up capital, has become more and more popular over the past year and a half. Despite the rather complex relations between Russia and the European Union, the EU considers social entrepreneurship to be a promising direction in project funding.
According to the latest study organized by the SOL Foundation, the problems and needs of social entrepreneurs in Russia include the lack of access to capital, lack of cooperation and mutual assistance between social enterprises, lack of social impact measuring practices, insufficient product visibility (special branding), which leads to problems with marketing and selling to a wider audience.
Social entrepreneurship law in Latvia: one year later
Liene Reine-Miteva, director of Social Entrepreneurship Association of Latvia, said that there had been a number of prerequisites for the adoption of a social entrepreneurship law in her country.
On the one hand, there was demand from CSOs that worked in this area. On the other hand, there was demand from the European Union, as the economic crisis had brought on social problems that had to be solved. In 2014, the Cabinet of Ministers supported the draft law, and in 2015 the Social Entrepreneurship Association of Latvia was formed, which became part of the working group developing the piece of legislation. They had an opportunity to get a grant from the European Social Fund. Liene noted that even with such support from the government and political will, the whole process took a lot of time, so the law was only adopted in 2018.
The law provides a clear definition of the concept of social entrepreneurship, and stipulates that a social enterprise has to be registered as a limited liability company. Thus, although CSOS can continue their work to be included into the register, they still need to establish a commercial company and receive the special status. Any such organization should have a clear and measurable social impact. The law provides for 3 types of social enterprises, according to their goals:
1. integration enterprises (those that employ representatives of vulnerable groups);
2. enterprises that produce goods and services for vulnerable groups;
3. all other organizations that work for the public good and have a positive social impact (education, environment, health, etc.)
To obtain the status of a social enterprise, an organization must meet the following 5 criteria::
- The social goal is the only and primary goal of the enterprise and has been stated in the company statutes;
- Owners have agreed that it will be a social enterprise;
- Profits cannot be distributed but are reinvested in the company or put towards the social goal of the company;
- Company employs paid staff (at least one employee);
- Democratic governance element.
The law also spells out restrictions on activities, for example, on the production of alcoholic beverages. At the same time, small local producers of alcohol can still be included in the register, provided they meet all the aforementioned criteria.
According to Liene, although the legislation is quite strict, it provides the companies with a number of advantages. Social enterprises are not subject to corporate income tax, are allowed to bring in volunteers, receive donations and gifts, participate in the preferential procurement procedure, and apply to the ALTUM protection and investment programme of the Ministry of Welfare. (grants from 5,000 to 200,000 euros). In addition, since social enterprises usually solve local problems more effectively, the law strongly encourages them to establish cooperation with local authorities. Therefore, municipalities have a variety of both financial and intangible tools to support social enterprises (reduced real estate tax, grant programmes, etc.).
In order to obtain the status of a social enterprise and be included in the register, the company has to apply to the Ministry of Welfare. Twice a month, the ministerial Commission on Social Enterprises organizes meetings which include 5 representatives of ministries (welfare, finance, economy, environment and regional development, culture) and 5 representatives of non-governmental organizations who are selected during an open competition. Representatives of the company can also take part in its meetings to answer questions in person. The Commission can either give the green light, or make recommendations for improvements. The final decision to assign the status of a social enterprise is made by the Ministry. In addition, social enterprises must submit annual reports to the Ministry proving their measurable social impact. As part of the ESF Social Entrepreneurship Support Project, social enterprises are provided with grants for implementation of business plans that are available not only to large companies, but also to young ones, which can be a good start for a business.
Liene noted that the Commission does very important work verifying the social impact of companies’ goals and models, as there are many unscrupulous individuals who are trying to apply for grants.
At the moment, the register of social enterprises has 58 companies, but there are about 200 similar companies in Latvia. Liene cited several successful examples:
- KK Original Design produces support equipment for children with limited mobility.
- Vigo – stroke survivor rehabilitation app, which sends them reminders to take their meds, exercise, etc.
- Café M – the first zero waste café in the Baltic countries. You can get coffee to go there only if you bring your own mug.
- Sonido call centre, which started as a traditional business but then began to employ people from vulnerable groups and later opened a psychological support hotline.
- OWA – fashion brand that produces premium high-quality clothing. The enterprise also employs people from vulnerable groups.
- BlindArt – manufacturer of innovative textile materials with unusual tactile properties used for clothing and furniture. The enterprise works with blind and visually impaired people. They took part in Milan Fashion Week. The company positions itself as a fashion brand and uses the quality of the product, rather than its social goal, as its unique selling point.
In conclusion, Liene noted that the adoption of the law was a very important step to bring the community together, but its results can only be truly judged when the Commission receives the first reports from social enterprises.
Organizers of the Third Belarusian Social Business Forum:
the Support Programme of Belarus of the Federal Government of Germany. The programme has been implemented since 2002 on behalf of the Federal Ministry for Economic Cooperation and Development (BMZ) and the German Society for International Cooperation (GIZ). By supporting this program, the Federal Government has contributed to the development of German-Belarusian initiatives, which, having started as humanitarian programmes, have now turned into partnership-based project work.
ODB Brussels. The organization supports local initiatives, non-commercial organizations and professional associations in Belarus, introduces and adapts the best European practices to create a society based on high values and standards.
Office of the UN Global Compact Network in Belarus.
The visit of the foreign expert was supported by the European Union within the framework of the Social Entrepreneurship Incubator project.
The forum was held with the support of the Ministry of Labor and Social Protection of the Republic of Belarus.
Partners of the Forum:
Social enterprise “Tsenny Kapital” (Essential Capital)" (Minsk).
Text by: Alina Krushinskaya
Photo byt: Vitali Brazouski