The state of social enterprise in Russia
The past, present and future of social enterprise in the Russian Federation
What approach have social enterprises taken to tackling the crisis so far?
On 18 April, the consultative Civic Chamber of the Russian Federation held a roundtable discussion entitled Social enterprise past and present – a new role in the Russian economy. Social enterprise was chosen as the discussion topic because this year marks a decade since the foundation Towards Change was established, and the 15th anniversary of the fund for regional social programmes, Our Future.
Past and present
Yulia Arai holds an economics doctorate and is the Academic Director of the Graduate School of Management at St Petersburg University. She explained that social entrepreneurs who came for training in 2012 tended to be from either the non-profit or for-profit sectors. Business models were broadly the same across the board: non-profits ran social enterprise projects, while for-profit companies operated with a clearly articulated social mission.
“They didn’t know very much about each other. As the concept of social enterprise was not recognised as legitimate, it was an exercise in identifying common ground,” said Ms. Arai.
Stakeholder management was not particularly evolved at the time. Social entrepreneurs either delivered goods and services for their beneficiaries or employed them. They were wary of hybrid formats involving two legal structures. But the joint efforts of the government, Towards Change and Our Future meant that the sector gradually began to mature.
Ms. Arai believes that when the Social Entrepreneurs Act was passed in 2019, the sector shifted from its start-up period to one of laying firmer foundations.
In her view, the increasing sophistication of social enterprise business models can now be mapped out. Entrepreneurs have noticed they can secure resources as both non-profit and for-profit entities. Various forms of partnership with each other, big business and the state have started to develop.
Since then, the ambit of social enterprise has also expanded. Between 2010 and 2012, everyone tended to work in education, and social and medical services. But today, cultural, rights-based and environmental issues are also in play.
Evgeniya Dmitrieva sits on the Committee for Economic Development and Corporate Social Responsibility at the Civic Chamber of the Russian Federation. She feels that social enterprise has been debunking myths since its inception, including that socially focused work cannot be a business, is an unattractive investment opportunity, and is completely unprofitable.
Issues that also need tackling include how to measure social impact and how a social enterprise can evidence it.
Yulia Zhigulina (executive director of Our Future) also notes that large numbers of people do not understand how to measure social impact. That is why Our Future has been using it as a criterion for choosing who to support and put forward for the Momentum for Good award, and deciding how that should be done.
“We provided interest-free funding and compared the impact. We tended to receive quite similar requests to tackle acute social problems. At one point, there was a shortage of kindergarten places. As the additional places were being created in different organisational formats, we could compare them. Some people would come and say: give us 5 million roubles and we will set up two groups of 25 people each. And others would say: please give us 10 million and we will organise a group of 15. So where is the social impact greater?” Zhigulina asks.
She maintains that social entrepreneurs solve social problems first and foremost. Therefore, to assess social impact, you need to measure changes in people’s quality of life and the transition that occurs for the project’s target audience.
“The average social impact recorded with the projects we support is three roubles for every rouble invested – that’s monetised social impact. The highest level, in education, is seven roubles for each invested rouble,” says Yulia.
In her opinion, methods and instruments for measuring social impact are very much needed at this juncture. They will then become a support structure for transition, which will make it possible to say that social enterprise is the basis of Russia’s social economy.
Uncertainty at crisis level
Andrei Andrusov is investment director at the SOL Centre for the Promotion of Innovation in Society. Far from fading away, the question of social impact is set to develop further in his view.
In the immediate term, however, there are high levels of uncertainty across the country because markets have reacted differently to political events. At any rate, he says that the number of new clients in the education market has fallen away because of the departure of certain social networks. Sales have therefore decreased, while fixed costs have continued as usual.
The SOL Centre is drafting crisis programmes for its work, but believes in continuing to build entrepreneurship capacity.
“The planning horizon is currently about a week, and investing in that environment is impossible. But we are looking to the future with hope,” says Andrusov.
As he sees it, people will continue to engage in education, environmental issues, manufacturing and the recovery of sectors that have recently dipped.
According to Yulia Varchenko, executive director of Towards Change, there is very little left in the market for infrastructure organisations that cover social enterprise.
“It is now time to start meaningful partnerships. Multi-stage approaches and different types of support are starting to make projects sustainable,” she said.
Towards Change wants the idea of social enterprise to be scaled up and wants social franchises to be established. To make that happen, successful entrepreneurs need to share their experiences. In addition, Towards Change is not closing any programmes this year. From 1 June, submissions will be sought for a competition to select who will be invited to join an incubator where social project grants are available.