Позитивные изменения. Том 4, №1 (2024). Positive changes. Volume 4, Issue 1 (2024)

Valeria Zavgorodnyaya, Irina Laktyushina

DDOI 10.55140/2782-5817-2024-4-1-67-73

With the emergence and development of hybrid non-governmental organizations and social entrepreneurship, coupled with companies' growing emphasis on social impact, the boundaries between them are increasingly blurring — a trend noted by experts. This process inevitably leads to an evolution towards a shared form — impact entrepreneurship, which merges the best aspects of social projects with business. What signifies the start of this movement, what signs are presently observable, and what can we expect in the future if this developmental stage reaches its logical conclusion?

Valeria Zavgorodnyaya

PhD in Economics, General Director, Impact Solutions Bureau

Irina Laktyushina

Project Manager, Impact Solutions Bureau

NGOS AND SOCIAL ENTERPRISES: DIMINISHING DISTINCTIONS

The social and environmental challenges contemporary society faces are becoming progressively more complex and layered. Poverty, inequality, and climate change require innovative and comprehensive approaches and sectoral transformation since often the most efficient solutions emerge from adjacent fields or collaborative efforts among various stakeholders. We can already discern the initial indications of a shift towards altering the established order.

Firstly, there is growth and professionalization within the non-profit sector. According to the Ministry of Economic Development, in 2022, Russia saw the establishment of over 10 thousand new non-governmental organizations, and nearly 10.5 thousand in 2021. As of the end of 2022, 210 thousand non-governmental organizations were operating in our country, with 46 thousand being socially oriented.[75] Concurrently, the realm of social entrepreneurship sees notable growth: in 2023, according to the Ministry of Economic Development, the number of social enterprises in the Unified Registry of Small and Medium-Sized Enterprises surged by nearly 3 thousand, nearing 11 thousand.[76]

It is crucial to acknowledge that not all entities functioning as social enterprises and meeting formal criteria submit applications for the registry, thus the factual count of social enterprises in Russia is considerably greater. Among the multitude of approaches to defining social entrepreneurship, we adhere to the criteria set forth by the Foundation for Regional Social Programs “Our Future”.[77] The Foundation’s experts define social entrepreneurship (SE) as innovative business activity directed towards solving or alleviating social problems in society. They include the following as criteria for social entrepreneurship: social impact, financial viability, entrepreneurial approach, innovation, self-sufficiency, and scalability. Moving forward, we will discuss SE in the broader context of small and medium-sized enterprises that apply an entrepreneurial method to address social issues. We disregard whether or not these entities are registered as social businesses in the Registry of Small and Medium-Sized Enterprises.[78]

The precise count of social enterprises (SEs) remains elusive because, regrettably, it is unclear what proportion of the nearly 50,000 socially oriented NGOs are hybrids and possess a secondary legal entity as a social enterprise. Nonetheless, with the increasing number of programs and initiatives for NGOs to monetize services and the pervasive trend of moving beyond grant dependency, it is plausible that already 20 to 30 % of NGOs also qualify as social enterprises.

Nonprofit organizations are increasingly regarded as attractive workplaces by business sector professionals. As identified by studies from the Social Information Agency and Zircon Group, 41 % of leaders and 43 % of staff members have backgrounds in the commercial sector. 34 % of senior managers and 31 % of staff[79] come from the domains of education, culture, and healthcare within public institutions. Many of these individuals, in line with the general trajectory of NGO development and the trend towards service monetization, integrate entrepreneurial tools into their organizational practices.

The distinctions between NGOs and social entrepreneurs are growing increasingly indistinct. For instance, it is often challenging to promptly ascertain an organization’s legal structure based on its description alone. Try to deduce whether we are discussing NGOs or social businesses based on the following descriptions.