Social entrepreneurship in scientific and social discourses of Ukraine (the beginning of the 21st century)

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Social entrepreneurship in scientific and social discourses of Ukraine (the beginning of the 21st century)

Liubov Sheptytska

Liudmyla Kot

Любов Шептицька

Людмила Кот

Abstract

social enterprise economy

The purpose of the research is to study the development level ofa social entrepreneurship at the current stage in Ukraine, to highlight further prospects for its development, reveal scientific and social views on theoretical and practical aspects of social entrepreneurship as a new phenomenon and tendency in economy. Methodology of the Research. To achieve this goal, general scientific and special scientific principles and methods have been applied, as well as the principles of verification, scientific pluralism, systematicity and consistency. The Scientific Novelty. Considering a significant interest in the problem of a social entrepreneurship issue, which can be traced in modern foreign and domestic historiography, there is the need not only to consider theoretical concepts, but also practical aspects of a social entrepreneurship in Ukraine. The full-scale invasion of the Russian Federation, the hostilities in Ukraine, the introduction of martial law had an impact on a rapid growth of the number of socially vulnerable population groups, absence or a significant weakening of their social protection mechanisms. Therefore, a social entrepreneurship with its socio-practical orientation is capable of helping to partially or completely solve the problems of socially vulnerable population groups. It is worth noting that the study of the dynamics of a social entrepreneurship development in Ukraine, especially in recent years, is an urgent issue. In particular, in the Ukrainian and foreign historiography the main approaches to the interpretation of the term “social entrepreneurship" have been covered, the development dynamics of this type of entrepreneurial activity has been traced, and the key problems that need to be resolved have been outlined in order to increase the number and quality of changes in a social entrepreneurship effectively. The Conclusions. A social entrepreneurship is a type of enterprise in which, in addition to a commercial component, solution of certain social problems is provided. However, tendencies in the contemporary English-language historiography suggest a broader definition, i.e. the idea of the so-called hybrid organization, which offers not only opportunities for a financial enrichment, but also responsibility in the social sphere. It has been determined that from the 1990s to 2022, a positive dynamics of growth in the number of this type of an entrepreneurial activity can be observed in Ukraine. However, due to financial difficulties, a large part of them continue to hire workers unofficially. In Ukraine, a social entrepreneurship, in addition to financial difficulties, faces an insufficient level of grant support (the main help is given by foreign investors), in particular domestic funds, organizations, including the public sector. Legislative regulation of this type of an entrepreneurial activity also requires further development.

Key words: social entrepreneurship in Ukraine, social business, sociality.

Анотація

СОЦІАЛЬНЕ ПІДПРИЄМНИЦТВО В НАУКОВОМУ І СУСПІЛЬНОМУ ДИСКУРСАХ УКРАЇНИ (початок ХХІ ст.)

Мета дослідження - з'ясувати рівень розвитку соціального підприємства в Україні на сучасному етапі, окреслити подальші перспективи його розвитку, розкрити наукові і соціальні погляди на теоретичні та практичні аспекти соціального підприємництва як нового явища і тренду в економіці. Методологія дослідження. Для досягнення цієї мети використано загальнонаукові та спеціально-наукові принципи і методи, а також принципи верифікації, наукового плюралізму, системності й послідовності. Наукова новизна роботи. Зважаючи на значний інтерес до проблеми соціального підприємництва, який простежується у сучасній зарубіжній та вітчизняній історіографії, особливої уваги потребує розгляд не лише теоретичних концептів, а й практичних аспектів діяльності соціального підприємництва в Україні. Повномасштабне вторгнення Російської Федерації, бойові дії в Україні, введення воєнного стану вплинули на швидке зростання кількості соціально вразливих груп населення, відсутніст, або ж значне послаблення механізмів їх соціального захисту. Відтак соціальне підприємництво із його соціально-практичною орієнтованістю здатне допомогти розв'язати частково, або ж повністю проблеми соціально незахищених верств населення. Варто відзначити, що вивчення динаміки розвитку соціального підприємства в Україні, особливо в останні роки, є актуальним питанням. Зокрема комплексно висвітлено основні підходи до трактування терміна “соціальне підприємництво" в українській та зарубіжній історіографії, простежено динаміку розвитку цього виду підприємницької діяльності, окреслено ключові проблеми, які потребують урегулювання задля ефективного зростання чисельності, якісних змін у соціальному підприємництві. Висновки. Соціальне підприємництво - це вид підприємства, у якому, окрім комерційної складової, передбачено розв'язання певних соціальних проблем. Однак тенденції в сучасній англомовній історіографії пропонують ширше визначення, тобто ідею так званої гібридної організації, що пропонує можливості не лише фінансового збагачення, а й відповідальності у соціальній сфері. Стверджено, що від 1990-х до 2022 р. в Україні простежується позитивна динаміка зростання чисельності такого виду підприємницької діяльності. Однак через фінансові труднощі значна частина підприємців продовжують наймати працівників не офіційно. В Україні соціальне підприємництво, окрім фінансових труднощів, зіштовхується із недостанім рівнем грантової підтримки (головно допомогу отримують від іноземних інвесторів), зокрема вітчизняних фондів, організацій, у тому числі від державного сектору. Потребує також подальшої розробки й законодавче врегулювання діяльності цього виду підприємницької діяльності.

Ключові слова: соціальне підприємництво в Україні, соціальний бізнес, соціальність.

The Problem Statement

A social entrepreneurship aims at implementing social changes through its entrepreneurial activity. That is, the main thing is not a commercial activity, but assistance, a social support of vulnerable groups, directing the received profit to solve socially significant problems. Unlike a traditional business model, a social entrepreneurship is a relatively new type of activity, therefore it faces a number of problems, including the lack of a clear legal regulation of activity, differentiation in terminology, and a number of bureaucratic difficulties.

The Review of Recent Researches. The concept of “social entrepreneurship” was first used in the USA, in the 1970s by non-profit organizations that started their business to provide job to vulnerable, socially unprotected categories of the population (Dobrova, 2015, р. 112). There is a claim that the very concept of “social business” was introduced into scientific circulation by the Nobel laureate Mohammad Yunus. In his opinion, this is an enterprise that benefits a significant number of the population (Byelova & Rosul, 2022, р. 131), this form of business should become the “leading model of capitalism”. One of the examples of this type of entrepreneurship is “Grameen Bank”, founded by M. Yunus (Dobrova, 2015, р. 112). Even more thorough explanation of “social business” and further implementation in scientific research belong to the American social businessman William Drayton. In the 1980s, W. Drayton founded the “Ashoka” project, which united social innovators from around the world (Dees, 2007, р. 24). This type of entrepreneurship, according to W. Drayton, “appears in the world, taking into account a new strategic environment, in which the social half of society's activity becomes as entrepreneurial, competitive, productive and powerful as business” (Rahim & Mohtar, 2015, р. 11).

The term “social entrepreneurship” is widely used and has various modifications, there are ongoing discussions about the very definition (Daud-Fhiri, Dlyana Ishak, Abdullah, 2018, р. 1). The main factor in the definition of “social entrepreneurship” can be considered its “sociality”, which “modifies its essence and fills it with opportunities to create special values, provide advantages to a significant part of society, while satisfying social goals” (Bila & Shevchenko, 2021, p. 29). The following are the key features of a social enterprise: an innovative activity, a dual orientation that combines non-commercial goals with the need to make a profit, a public nature of their activities, complexity of organization and development, presence of significant risks (Bila & Shevchenko, 2021, рp. 29-30).

A researcher Iryna Skorokhod classified social enterprises according to the following criteria: “degree of integration of the social programme and business processes” (K. Alter), “activity goals and direction of profit use” (H. Diz, Dzh. Emerson), “mission, availability of income from the main activity and availability of an innovative component” (Yu. Blahov, Yu. Arai), “specifics of the organization of business activities” (Skorohod, 2021, р. 126).

Therefore, the presentation of one definition to such a multi-level concept is complicated by such factors as the presence of a large number of social problems, since this business must always find solutions to solve them, the lack of a clear distinction between social entrepreneurship and charity (Skorohod, 2021, рp. 126-127).

In the English-language historiography, there is a statement that a social entrepreneurship should be aimed exclusively at social goals (missions), at the same time, if an organization (with social goals) is aimed at making a profit, then it should not be included in the list of social enterprises. This opinion was shared by Gregory J. Dees, Scott Shane, Charles Gundy, and Scott Helm. However, it is worth noting that S. Helm and Ch. Gundy noted that a social entrepreneurship is “only an extension of an entrepreneurial model used in a commercial sector” (Rahim & Mohtar, 2015, р. 12).

At the same time, there was a trend in the understanding of a social enterprise as such, which is not limited to narrow frameworks that focus only on the social goals of such cases. Instead, they recognized that it is possible to have financial goals and social missions. Globalization processes also affect the economy significantly, so the search of new competitive advantages constantly takes place (Butenko & Kot, 2019, р. 42), new forms of business interaction takes place as well (Pavlishyna & Kot, 2020, p. 137). The idea of the so-called hybrid organization, which is also called a social enterprise or social activity, was supported by the researchers Sylvia Dorado, Dave Townsend and Timothy Hart (Townsend & Hart, 2008). Thus, such hybrid organizations demonstrate the possibility of a financial growth and social responsibility (Rahim & Mohtar, 2015, р. 12). Thus, as Pamela Hartigan noted, “an organization that is also profit-oriented can also be run as a business as long as it maintains its social mission” (Hartigan, 2006, p. 42).

It is worth noting that a clearer definition of “social business” was proposed at the international conference “Social Media Week” in London in 2013. According to this proposal, “social business” is recognized as one of the trends of the next year (Dobrova, 2015, р. 113).

In 2011, a research group led by Siri Terjesen prepared an analytical report on the prevalence of social enterprises “Global Entrepreneurship. Monitor of the Report on Social Entrepreneurship”. The result of a standardized survey in 49 countries during the year of2009 showed that “mid-economy hybrid social entrepreneurship (1.30) has a higher prevalence rate compared to non-profit social organizations (1.05)”. All regions of the world, except Western Europe and the USA, have a greater, or at least the same, level of hybrid social organizations compared to non-profit social organizations (Rahim & Mohtar, 2015, pp. 12-13).

Thus, in the Ukrainian historiography, among a number of studies of the social model of entrepreneurship, the works of I. Bila, K. Husak, V. Nazaruk, I. Skorokhod, O. Shevchenko, O. Achkasova, and R. Sholya can be highlighted. In the English-language historiography - the works of G. J. Dees, S. Dorado, C. Gundy, S. Helm, S. Shein, and the others.

Analytical studies demonstrate the growth of the level of a social enterprise, however, as the Ukrainian economists Iryna Bila and Olena Shevchenko rightly noted, there are differences in the legal status, organizational forms and classification criteria of such organizations in different countries. On the basis of legal status, the following groups of social enterprises can be distinguished: “countries with an officially defined status of a social entrepreneurship and clear criteria for its identification” (Bulgaria, Italy, Lithuania, Slovakia, Finland, Croatia); countries without fixed legal status of this type of business (Estonia, the Czech Republic); countries with officially defined status of social enterprises, but only their general characteristics (Great Britain, Denmark, Ireland, Luxembourg, Slovenia); “countries in which a social entrepreneurship is widespread without separately established norms regarding its status and identification criteria” (Austria, Belgium, Greece, Spain, the Netherlands, Germany, Poland, Portugal, Romania, Hungary, France, Sweden). And other countries in which there is no legal status and criteria for defining a social entrepreneurship, but there are similar forms of enterprises, for example, non-profit organizations to solve certain social problems (Cyprus, Malta) and “public benefit organizations” (Latvia) (Bila & Shevchenko, 2021, p. 30).

Note that when analyzing scientific, social and media sources for our research, we relied on the methodological approaches proposed in the articles of O. Katsora (Katsora, 2020), M. Haliv and V. Ilnytskyi (Haliv & Ilnytskyi, 2021; Haliv & Ilnytskyi, 2022).

The purpose of the research is to study the development level of a social entrepreneurship at the current stage in Ukraine, to highlight further prospects for its development, reveal scientific and social views on theoretical and practical aspects of social entrepreneurship as a new phenomenon and tendency in economy.

The Results of the Research

In Ukraine, the concepts of “social entrepreneurship”, “social enterprise”, “social economy enterprises” have not been approved at the legislative level (Dobrova, 2015, р. 115). However, the very development of these concepts can be traced back to 1991 with the restoration of Ukraine's independence. After all, in 1990, although elections to the Verkhovna Rada of the Ukrainian SSR were held, which partially renewed the composition of Parliament, Declaration on State Sovereignty was adopted, but systemic changes in the economy of the sphere began in the following years (Lukyanchenko & Zvonko, 2023, p. 118). In 1991, the Law of Ukraine “On the Basics of Social Protection of the Disabled in Ukraine” was adopted, and according to Art. 14 there was formulated a mechanism that enabled organizations representing people with special needs to establish economic enterprises “without the purpose of obtaining profit, as well as an economic and entrepreneurial activity through the creation of self-supporting institutions and organizations with the status of a legal entity, as well as enterprises based on a collective ownership of public organizations. The enterprises production of public organizations of the disabled is included in the state order in accordance with the procedure determined by the Cabinet of Ministers of Ukraine” (Nazaruk, 2017, p. 53). Such first prototypes became the following enterprises: The Ukrainian Society of Organizations of the Blind (UTOS), the Ukrainian Society of Organizations of the Deaf (UTOH) (Nazaruk, 2017, p. 54).

Regarding the next important years in the development of a social entrepreneurship, according to a researcher Vasyl Nazaruk, the key year was 2004. The “Network of Civil Action in Ukraine” (UCAN) with the financial support of the United States Agency for International Development (USAID) implemented the “Social Entrepreneurship” project in Ukraine. That is, after conducting a series of trainings with the US expert circles on the creation of social enterprises by public organizations, this phrase “entered the Ukrainian lexicon” (Nazaruk, 2017, p. 54).

During the years of 2004 - 2007, the “Network of Civil Action in Ukraine” supported 28 projects in Ukraine. In 2010, with the support of the British Council in Ukraine, Consortium “Promoting the Development of Social Entrepreneurship in Ukraine” was established, which included “Eastern Europe” Foundation, “Renaissance” International Fund, the commercial bank “Erstebank” and the international auditing company “PWC” (Nazaruk, 2017, p. 54).

Owing to the work of the Consortium, during the years of 2010 - 2013, trainings were held with international experts, and 4 resource centres for the development of a social entrepreneurship were founded in Ukraine (Kyiv, Donetsk, Sokal, Simferopol). Also in 2013, the first attempt was made to collect and systematize information about social enterprises “Catalogue of Social Enterprises in Ukraine 2013”. In addition, the “All-Ukrainian Forum I of Social Entrepreneurs” was held (Nazaruk, 2017, p. 54).

In 2013, for the first time a bill on a entrepreneurship was submitted to the Verkhovna Rada for consideration, but it was not approved (Volkova & Shevchenko, 2016, 28). According to the draft law “On Social Enterprises” dated March 11, 2013 No. 2508, submitted for consideration by O. Feldman “A social enterprise is defined as a business entity formed by a juridical person and/or individual entrepreneurs, the priority of activity is to achieve social results, in particular, in the field of health care, education, science, culture, environment, provision of social services and support of socially vulnerable population groups (unemployed, low-income, elderly, disabled and other people determined by law)” (Proekt Zakonu Ukrainy, 2013)

In 2014, the first book “Each of us Creates Change: Social Entrepreneurship and Strategic Philanthropy” was published, which covered the phenomenon of a social entrepreneurship from a theoretical and practical perspective. In 2015, Western NIS Enterprise Fund (USA) (www.wnisef.org) with the support of USAID, “Social Investment Programme” was launched, which aimed at providing loans for the development of social enterprises through commercial banks in Ukraine (Nazaruk, 2017, р. 55).

In 2015, O. Feldman submitted a revised draft law “On Social Enterprises” dated 04/23/2015

N.2710. However, it was not adopted again, because it received a negative response from the “anti-corruption examination of the normative legal act”. The following year, the issue of a social entrepreneurship was actively implemented in the educational and scientific sphere. In 2016, “Social Entrepreneurship” course was launched at the Lviv Business School at the Ukrainian Catholic University. It is also introduced as an elective discipline in Bachelor's programme of the School of Social Work of the National University “Kyiv-Mohyla Academy” (Nazaruk, 2017, p. 56).

In 2016, at “II All-Ukrainian Forum of Social Entrepreneurs” there were 300 participants, i.e. three times more than at the first forum. “Catalogue of Social Enterprises of Ukraine 2016” with a description of 150 enterprises was compiled (Nazaruk, 2017, p. 56).

In connection with the aggression of the Russian Federation in the East of Ukraine and the annexation of the Crimean peninsula, new groups of socially vulnerable population groups appeared in Ukraine: internally relocated people (VPO), participants in the hostilities. Therefore, international organizations intensified their support for Ukraine, in particular, donor organizations introduced programmes to support VPO, especially for the establishment of their own enterprises. Among such programmes, it is possible to single out the “UN Development Programme, the International Organization for Migration, the International Renaissance Fund” and the others (Nazaruk, 2017, p. 56).

Thus, from the point of view of regulatory and legal provisions, in our country there are still enterprises that can be classified as social (Dobrova, 2015, p. 115). Due to the fact that the concept of “social enterprise” is not included in the normative legal acts of Ukraine, the work of such enterprises is regulated by the existing laws of Ukraine, which concern “enterprises or organizations in accordance with the organizational forms of the legal entity under which they are registered”. According to the results of the research of 2016 “Social Entrepreneurship in Ukraine” (by Natalia Husak, Victoria Kuznietsova, Tetiana Stetsenko), enterprises of this type are legally registered as “individual entrepreneurs, public organizations, public association enterprises, private enterprises, limited liability companies, charitable organizations, public association organizations, state enterprises, agricultural cooperatives, public unions” (Husak, 2017, p. 61).

Also, on the basis of the above-mentioned analytical research report, certain trends in the development of social enterprises in Ukraine can be traced. For example, the majority of them operate in large cities, the most common form of organization is the FOP; in general, enterprises that have been operating for 1 to 3 years predominate. The key areas of work are “support of socially vulnerable population groups and development of local communities” (Husak, 2017, pp. 61-62). As for the cash turnover of social enterprises in 2015, the majority of them reached the amount of up to 500,000 hryvnias. Among them, the largest expenditure items are reinvestments and wages (Husak, 2017, p. 61). Among the problems of the development of social entrepreneurship is impossibility of competition with other enterprises, at the same time, there is a lack of start-up investments (Skorohod, 2021, p. 127). Therefore, in reality, the number of social enterprises is significantly greater than static and analytical materials testify, because a significant number of employees of such entrepreneurs are not officially employed, because they lack funds. Although a number of social enterprises are based on innovative business models, their turnover significantly lags behind “classic enterprises” (Sholia, 2019, р. 123).

Therefore, the main problem is the lack of financial and investment support from the state. At the same time, a crisis period continues in Ukraine, which, according to an economist, researcher Oksana Achkasova, has been going on since 2019 “recently the turbulence of the external environment caused by the COVID-19 pandemic has increased even more due to the introduction of the martial law and hostilities in a significant territory of Ukraine” (Achkasova, 2022, р. 38). As a result, there was a rapid increase in unemployment, in particular, an increase in the number of vulnerable categories of the population. According to the results of the study by the sociological group “Rating” at the beginning of April of 2022, 53% of people lost their jobs due to the war, 22% - continued to work in an usual mode, 21% - distant or partially, 2% - found a new job. The majority of people who lost their jobs were from the eastern regions of Ukraine (Achkasova, 2022, p. 38).

It is worth noting that despite such difficult conditions recently, in particular, as of2022, the number of social enterprises has increased, which, according to a researcher O. Achkasova, is “a peculiar reaction to the manifestations of the socio-economic crisis and the need to find alternative sources of funding and tools in solving social problems of the most vulnerable categories of citizens” (Achkasova, 2022, p. 40).

However, despite difficult operating conditions of the majority of organizations in Ukraine, certain measures are being taken to support the Ukrainian social entrepreneurship. Among a number of projects, it is possible to single out, for example, the activities of the “Renaissance” International Fund within the framework of “EU4USociety” Project in cooperation with the European Union, which is conducting “Crowdfunding for Social Entrepreneurship” competition. The purpose of this project is “to strengthen existing social enterprises, popularize a social entrepreneurship and create a positive practice of attracting community funds by social enterprises to create new or expand operating social enterprises” (Achkasova, 2022, р. 40). Substantial support is also provided by Eastern Europe Fund, Innovation Development Fund, and Social Investment Fund. These organizations provide targeted funding by a grant support. In addition to funds that provide a financial support to projects, it is also worth mentioning agencies (TASIS, Save Children, IREX, “Open Society” Institute), which not only issue grants, but also involve entrepreneurs in joint projects (Achkasova, 2022, p. 40).

The EUnlocking project, which also supports a social entrepreneurship in Ukraine and is implemented by the Gustav Stresemann Institute (Germany), is also of great practical importance. “Egalite International” (Ukraine), organization “AXA Management Consulting” (Moldova), Association “ECO-RAZENI” (Moldova), National Centre for Aid and Information to NUO in Moldova “CONTACT” (Moldova) and “Pro NGO” (Germany). This project is financed by EU according to the programme EU4Youth (Achkasova, 2022, p. 40).

It is also worth noting that local self-government bodies partially also support social enterprises in the context of small and medium-sized business support programmes. In some regions of the country, interest rates on loans to enterprises are reimbursed, premises are rented on preferential terms (Achkasova, 2022, p. 41).

The Ukrainian economists Iryna Bila and Olena Shevchenko identified factors that restrain the development of social enterprises in Ukraine. In addition to insufficient funding from the state, the researchers pointed at problems with motivation to create social enterprises, society's ignorance of their potential. Also, the results of the analytical study “Social Entrepreneurship in Ukraine. Economic and Legal Analysis” conducted in 2020 with the support of the European Union proved a considerable dependence of social enterprises on foreign financing and investments. Mainly, social enterprises received support from “nongovernmental non-commercial public organizations (92 %), which involve entrepreneurs in social projects, provide free educational, informational and advisory assistance” (Bila & Shevchenko, 2021, pp. 31-32)

The Conclusions

A social entrepreneurship is a complex concept and a relatively new way of doing business. The multilevel nature of this concept, the lack of a clear distinction between different types of socially oriented business complicates a unified interpretation. The Ukrainian historiography is dominated by the approach to the interpretation of this term through the prism of its social significance and goals, i.e. the main activity of such an enterprise is to solve social challenges of society, to help socially vulnerable population groups. Instead, in foreign historiography, mainly in English, in addition to the interpretation outlined above, the idea of the so-called hybrid organization of social enterprises is gaining popularity, hence its classification and understanding from the point of view of combining financial goals and social missions.

The Ukrainian scholars and business environment show interest in the development of this business model. After all, a social entrepreneurship contributes to the solution of a number of problems of socially vulnerable population groups, in particular their employment, adaptation in society, as well as new jobs offer, development of local communities, cooperation within local communities, etc.

Despite the difficulties associated with the full-scale invasion of the Russian Federation into Ukraine, social enterprises continue to operate, mainly owing to international support, and carry out organizational and financial assistance measures.

The social significance of social enterprises is aimed at solving urgent problems of society, improving the lives of a large part of the population and, in general, the further development of the country as a whole. For a further and effective development of a social entrepreneurship in Ukraine, the following measures should be implemented: a legislative regulation of provisions on social enterprise in Ukraine, establishment of cooperation practices of state and business structures, introduction of training courses, a broad information campaign, which would aim at increasing the level of awareness of the main advantages of this type of activity, increase the level of financing and the provision of soft loans not only by international organizations and funds, but also by domestic business environments.

Acknowledgement. We express sincere gratitude to all members of the editorial board for consultations provided during the preparation of the article for publishing.

Funding. The authors did not receive any financial support for the research, authorship and / or publication of this article.

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