Позитивные изменения. Том 2, № 3 (2022). Positive changes. Volume 2, Issue 3 (2022)

Valeria Zavgorodniaia

PhD in Economics, Program Director, Impact Hub Moscow

Irina Laktyushina

Program Coordinator, Impact Hub Moscow

NEW CHALLENGES

Social entrepreneurship is still a relatively new sector in Russia: as of August 2022, only 6,921 social enterprises (SEs) had been registered in the country. Moscow region, with 722 SEs registered, is the leader among the regions. It is followed by the Republic of Bashkortostan with 362 social enterprises, Nizhny Novgorod with 324, Khanty-Mansi Autonomous Okrug (Yugra) and Primorsky Krai. These businesses mostly operate in areas like education, social work, environment, information technology, medicine and health.

According to a study by the ZIRCON group[14 - Social Entrepreneurship in Russia: Prospects for Development (2021). Analytical report on the findings of an expert survey. Moscow: ZIRCON, Social Business Group. Retrieved from: http://www.zircon.ru/upload/iblock/a9b/sotsialnoe-predprinimatelstvo-v-rossii-perspektivy-razvitiya.pdf (accessed: 23.09.2022) (In Russian).], despite their small numbers, social entrepreneurs already note underwhelming investment in the social sector and the lack of impact investors. They also mention underdeveloped relationships between social entrepreneurs and the state, lack of visibility of their products in the production of goods and services, lack of large and medium-sized businesses interested in developing social entrepreneurship, and difficulties with obtaining loans.

The first time social enterprises faced great difficulties was in 2020–2021, during the COVID-19 pandemic. According to a study conducted by Impact Hub Moscow in partnership with experts from the Graduate School of Management at St. Petersburg State University and the University of Massachusetts Boston, 10 % of social entrepreneurs surveyed have experienced a reduction in external funding. 82 % of innovations in this area were implemented mainly with their own funds, the efforts of their employees and internal developments. Commercial and hybrid organizations during the pandemic focused on strategies to improve efficiency – optimizing costs and business processes. Non-profit organizations, in turn, placed greater emphasis on attracting non-profit funding.

In 2022, social entrepreneurs face new challenges: 11 % of the 518 SEs surveyed in March 2022 said they felt the impact of sanctions on their business. 84 % found this question hard to answer, and 5 % said they did not feel any effect of the sanctions. About 60 % of the respondents decided to look for new channels to promote their goods and services. More than a third of the social entrepreneurs surveyed are in search of investment and affordable loans; about the same number of businessmen are quickly developing new marketing mechanisms, such as discounts, deferred payment programs, bonus programs for their businesses[15 - TASS (2022) About 40 % of social entrepreneurs surveyed are busy looking for investment during the crisis. Retrieved from: https://tass.ru/ekonomika/14592497 (accessed: 23.09.2022) (In Russian).].

Clearly, the teams and leaders of many social enterprises have been in a position of survival rather than rapid growth for many years. At the same time, according to the “Social Entrepreneurship in Russia: Prospects for Development” study, hopes for the further development of social entrepreneurship are pinned not only on external stakeholders – government, big business, private foundations, but also on the consumers of their services and social effect – also known as impact, or social impact.

The teams and leaders of many social enterprises have been in a position of survival rather than rapid growth for many years. Hopes are pinned, including on the consumers of their services.

For the consumer, of course, it is of primary importance that the consumer’s problem is solved in the quickest and most efficient way possible. And identifying this way, among other things, includes the need to evaluate one’s activities: the emergence of in-demand goods and services is based on the needs of the target audience. Actively working with consumers to identify their “pains” and requests and creating new goods and services based on them is the driving force of social entrepreneurship development.

DO WE (NOT) NEED IT?

Large businesses and the non-profit sector are actively using assessment and have had notable success in doing so. This is dictated primarily by the need to publish regular public reports and meet performance standards.

The published reports on the impact of business and NGOs are of sufficient volume already to allow numerous studies and competitions. For example, the best NGO annual reports are selected annually as part of the “Point of Reference” competition of the Donors Forum, and the Institute for Emerging Market Studies at the Skolkovo Business School released the “Gold Standard” of impact assessment in 2021 – a collection of cases and practices for measuring the social and environmental impact of business.

When it comes to business, there are a large number of methodological approaches that can be used to assess various aspects of its social impact. It is worth noting the four main methods that have the highest potential for application in the corporate context: “Theory of Change,” the Business for Societal Impact (B4SI) model, formerly known as the London Benchmarking Group, the Social Return on Investment (SROI) model, and the Impact Management Project.

The situation is different in the sector of social entrepreneurship: only a small proportion of entrepreneurs are engaged in assessing the social effect of their activities. First, because existing approaches to impact assessment in the business community are too complex and resource-intensive for social entrepreneurs, and there is no universal assessment standard for their business. Second, few SE leaders see the point and benefit of this action. More often than not, social business grows from the enthusiasm of its founders, who build it up against all odds, using their own resources and blazing with the desire to “commit good.” The purpose of such a business is to address a specific social problem. This begs the question: Why measure anything at all? The business somehow works, the problem is somehow solved. The team is focused on addressing operational tasks, and has no time or resources for analysis and refection.