Alexandra Moskovskaya: We Need Clear Criteria for Social Entrepreneurship
One of the most important factors in developing social entrepreneurship in Russia is the introduction of the concept into the legal framework. In October 2014 a bill was presented for discussion in the State Duma with amendments formalizing the definition of social entrepreneurship in law. Alexandra Moskovskaya, Director of the HSE Centre for Social Entrepreneurship and Social Innovation Studies, spoke to the Novy Biznes - New Business website about the importance of this initiative and the points that should be included in the law on social entrepreneurship.
Legislative authorization is a very important stage in the development of social entrepreneurship. Today it exists in various forms in many European countries, in America, and Asia. But not all countries have come to it and not all at once. For example, legislative regulation of social entrepreneurship in the U.S. and Canada is developing on local levels; and while in Canada it happens through new legislation, in the U.S. it happens by means of introducing new forms of business entities, which suit various types of companies depending on their goals and development trajectories.
One law for the whole country means a higher level of responsibility, as it should be part of the existing legal system. This is the first task, and it’s technical, but quite complicated. The second task is goal-setting. We need to understand what exactly we want from this law. Lawmakers in Russia haven’t clarified it yet, and nor havethe experts who supported the bill as it exists today. That’s why, if you ask me, whether Russia needs a law on social entrepreneurship, my answer will be ‘yes’. But if you ask: do we just need some kind of law or other on social entrepreneurship? I’ll say ‘no’. We don’t need ‘any old’ law, since it will only be useful if it is a good, well made law.
Let’s look at it closer.
The aim of the social entrepreneurship law is to identify certain types of companies and areas of activity we want to develop, and to offer means of state support or stimulating mechanisms in order to promote them in the areas that are most needed by society. It seems easy enough: all we have to do is determine the companies, determine the means of support, and offer local governments funds to provide the support.
But we know that the devil is in the detail. First, not every definition would help detect social enterprises. The regions should be armed with clear criteria, to help them distinguish social entrepreneurship from other forms of economic activity in the profit and non-profit sectors. Without this, there can’t be any support. Bearing in mind the lack of Russian-language information on actual experience of social enterprises in Russia and globally, this is essential, as we do hear very ill-informed comments on social entrepreneurship both from officials and experts. They can hardly be blamed for it: Russia has as yet too little experience in social entrepreneurship. And the law must solve this problem. As of today, it is not clear enough; the definition is vague and allows for too many various interpretations.
Second, the criteria of social entrepreneurship can’t just be pulled out of a hat and should be in line with the globally-established understanding of social entrepreneurship.
This established understanding is based on three characteristics of social entrepreneurship.
First: a social task implementation as the main, not secondary result of a company’s work; in other words, the company should be created specially to solve a social problem or to reduce it. One of theevaluation criteria in this case is the distribution of the biggest share of the profit for social purposes, not for shareholders’ revenues.
Second: economic sustainability, which is provided by means of selling products or services on the market as the key source of the company’s revenues.
Third: an innovative approach to the solution of a social problem (this can be a new product or service, new business model, which makes an existing service available for a wider range of consumers, or the use of previously unused resources). In inter-state recommendations recognized by authoritative international organizations the ability to promote decisive social changes and introduce new approaches in social services are seen as key advantages of social entrepreneurship.
Let’s go back to the bill. It mentions neither profit distribution nor new methods of solving social problems. Then there is the question, what exactly does it aim to support – a declared social mission in a company’s charter, business in the social sphere, quotas of workplaces for the disabled, or something else? The bill doesn’t give an answer.
There are some other issues that need to be specified in the law, since the criteria of social entrepreneurship are not limited to the three characteristics mentioned above.
The first issue is social standards. In order to give privately owned companies access to the social sphere, the state should be confident that the quality of these services won’t deteriorate. This is especially important in health care, social work, and children’s education. If we allow new and non-state companies to work in these fields, we should be ready for the risk of mistakes, unprofessional work, and inconsistencies in regulation at the beginning. We should also be prepared for corruption. It’s impossible to insure against it, but the regulating authorities should be armed with a system of interim services’ evaluation, which would allow the state to keep its share of responsibility for the work of non-governmental companies.
The second issue is bringing together the support policy for social entrepreneurship carried out by various types of business entities. As of today, non-profit organizations are supported by one set of government bodies, and small enterprises and self-employed entrepreneurs – by others. One of the law’s important functions could be unifying support for social entrepreneurs from the state. It would not only make it easier for local authorities, but promote the development of various forms of organization as well. This practice exists today in Great Britain, France, Italy, Canada and some other countries.
The third issue goes beyond the framework of the social entrepreneurship law, but should accompany it or even be a step ahead of it: this is the issue of developing recommendations for training social entrepreneurs as well as trainers who would promote social entrepreneurship in the Russian regions. The federal budget sponsors such training and support, but in Russia there is a huge shortage of people who know what social entrepreneurship is, so it often becomes a source of misunderstanding. We at HSE have often suggested developing these kind of recommendations for the federal government. A general training framework would give the regions the opportunity to adjust the existing experience to their local specifics. As of now, they lack experience and many of them have to start from scratch; and we have the experience, but can’t help them.
Why is a vague law dangerous? Today we can hear argumentss advocating the bill like, ‘we have to give it a start’, ‘let’s do, not talk’, ‘first make the proposal, and sort out the details later’. I can say in response that it has already started and a lot has been done already. The Russian Ministry of Economic Development’s
orders on regional subsidies for supporting social entrepreneurship are improving every year, and have already set the trend for developing social entrepreneurship. On a national scale, the competitions of the ‘Our Future’ foundation, which, among other things, set the criteria for social entrepreneurship, are an important part of this work. A loose wording of the law could hardly add anything useful. But the risk of ambiguity is high.
Today the concept of social entrepreneurship is gaining popularity and used very widely, and it is often confused with business in the social sphere. Even a blurry law could stimulate business to come to the social sphere, which is good. What is bad is that social entrepreneurship will have a hard time trying to compete with experienced business entities for state support and public attention: mainly because social entrepreneurs have higher standards in terms of service quality and lower ones in terms of profit. International experience of state support and stimulation for social entrepreneurship aims to balance the conditions, so that social entrepreneurship doesn’t lose to business at the start and is able to implement its advantages both in terms of innovation and solving social problems. Under Russian conditions, this should also include overcoming the lack of trust from the population, which also affects ‘real’ business. Preparation of the law’s text should aim for implementation of these tasks.
Prepared by Maria Kriger