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446. Вггалш Барський. На bcíx етапах добору за кандидатами пильно спостертае громaдськiсть. Юридична газета. - 25.08.2015. - № 34 (480). URL: https://www.vkksu.gov.ua/ua/about/na-wsich-ie-tapach-doboru-za-kandidatami-pilno-spostierigae-gro-madskist.
7. Про затвердження Порядку проведения контролю та повно! перевiрки деклараци особи, упов-новажено! на виконання функцiй держави або мюцевого самоврядування: Наказ Нацюнальним агентством з питань запобiгання корупцп ввд 15.04.2020 № 144/20. Офщшний вiсник Укра!ни. 2020. № 33. Стор. 49. Ст.1122.
SOCIAL ENTREPRENEURSHIP IN RUSSIA
Shpinev Iu.
PhD in Law, Senior Researcher in the Sector of Business and Corporate Law, Institute of State and Law of the Russian Academy of Sciences,
Moscow, Russian Federation
Abstract
The article deals with the issues of legal regulation of social investment in Russia. The most acute problem of social entrepreneurship is the lack of funding. The article attempts to classify investments in social entrepre-neurship by the ratio of the expected economic benefit and the socially directed effect from traditional investments to charity. The paper notes that the main areas of financial support for social entrepreneurship in Russia can be such well-established financial institutions in developed countries as crowdfunding, social and green bonds, and meson financing. Another important issue related to social entrepreneurship, according to the author, is the place of non-profit organizations in the system of social entrepreneurship. This issue is particularly relevant now, since the current Russian legislation defines social entrepreneurship as commercial enterprises. In conclusion, it is concluded that despite the fact that the trends of social entrepreneurship in recent decades have appeared in developed Western countries, our country has its own rich experience in solving social problems, which can and should be used in the new socio-economic conditions.
Keywords: investment in social entrepreneurship, social entrepreneurship, social investment, investment, social-transformative investment, impact investment.
Social entrepreneurship has relatively recently entered the economic life of Russia. This phenomenon is of particular importance now, during the economic crisis and the pandemic [8, 83]. To date, neither in our country, nor in the world as a whole, there is no common understanding of this phenomenon. Some Russian authors distinguish the following views on social entrepreneurship, meaning by it: a type of social support for vulnerable groups of the population, a way to help economic improvement, an additional method of combating social problems, or simply a socially oriented business [11].
In the legal literature, the opinion is expressed that social entrepreneurship is an advanced entrepreneurial activity aimed at solving social, environmental and cultural problems [6, 207] or an activity that produces social value along with making a profit [2, 114].
Given that modern models of social entrepreneur-ship have been developed in foreign countries, it is useful to study the features of investing in this business area in the most successful countries from the point of view of social entrepreneurship.
At the same time, it is necessary to take into account the fact that in different countries there are not only different approaches to the organization and financing of social entrepreneurship, but also to the very concept of «social entrepreneurship».
Not so long ago, this term was fixed in the Russian legislation, in which social entrepreneurship is understood as a type of entrepreneurial activity that is aimed at solving socially useful tasks in order to solve various social problems. At the same time, to be recognized as
a social enterprise, a small or medium-sized business must meet the criteria set out in Article 24.1 of Federal Law № 209 - FZ of June 24, 2007 «On the Development of Small and Medium-sized Businesses in the Russian Federation» (hereinafter referred to as the Law on the Development of Entrepreneurship) [4].
In accordance with the law, enterprises can count on state or municipal assistance:
- creating jobs for socially unprotected categories of citizens listed in the law, provided that at such an enterprise at least half of the employees belong to such unprotected categories, and the share of their remuneration is at least a quarter;
- selling goods produced by citizens from socially unprotected categories, provided that the share of the company's income from such activities should be at least half, and at least half of the net profit should be directed to the further development of the enterprise within the framework of socially oriented activities;
- produce goods intended for citizens from socially vulnerable groups, contributing to overcome or compensate for the limitations, as well as providing the opportunity to participate in ordinary life, despite the presence of certain individual characteristics and limitations, provided that the share of business income from such activities shall be not less than half, and at least half of the net profit should be directed to further development of the company through social activities. At the same time, the law contains a limited list of activities in which a social enterprise can count on state assistance. These include activities for the provision of the following services social orientation: household,
medical, psychological, educational, employment in the field of education, contributing to the increase communication skills, social adaptation and rehabilitation, also the activity of production and sales of medical equipment and technical means of prosthetic and orthopedic products and software, the use of which implies no other use except for the disabled;
- carrying out activities aimed at achieving other socially useful goals and solving social problems, provided that the share of the company's income from such activities should be at least half, and at least half of the net profit should be directed to the further development of the company within the framework of socially oriented activities. At the same time, the law also contains a limited list of activities that include:
- to provide psychological and pedagogical services aimed at maintaining motherhood and childhood, strengthening family values and raising children;
- organization of children's recreation;
- providing services in the field of preschool, general and additional education of children;
- to provide psychological, pedagogical, social and medical assistance to those in need during the development of the general education program, as well as adaptation in the social environment;
- training of employees of socially oriented nonprofit organizations and volunteers;
- providing services in the cultural and educational sphere (including museums, theaters, libraries, etc.);
- to provide services for the preservation and protection of the identity of the peoples of the Russian Federation, as well as the expansion of interethnic communication;
- for the production of periodicals and books on education, culture and science.
According to the law under consideration, the following types of support are supposed to be provided to social enterprises:
- providing the necessary infrastructure;
- the provision of direct financial support;
- the provision of material support;
- providing information support;
- providing consulting and methodological support;
- assistance in the organization of international cooperation and acquisition business partner;
- organization of professional and additional education for employees of social enterprises;
- providing assistance on other issues in the field of support for social enterprises.
Despite the fact that the law specifies the use of the concepts defined in them for the purposes of this law, the normative acts do not contain other normative definitions of social entrepreneurship. Thus, it seems quite acceptable to consider the concept of social entrepreneurship, given in this law as the official position of the state on the issue under consideration.
As a result of the analysis of this definition and the criteria for classifying enterprises as social, we can draw a number of conclusions.
The state has identified the categories of the most socially vulnerable citizens; to which it has assigned:
- disabled people and other persons with disabilities;
- lonely and parents with many children;
- pensioners and persons of pre-retirement age;
- graduates of orphanages;
- persons released from places of deprivation of liberty;
- refugees and internally displaced persons;
- poor people;
- persons without a fixed place of residence;
- other citizens who need social assistance.
It should be noted that in contrast to the signs of enterprises that can be classified as social and count on state assistance, the list of which is closed, when compiling the list of socially vulnerable citizens, the legislator preferred to leave the list open, since it is impossible to determine in advance all the cases in which a person may need this or that social support.
The list of socially unprotected strata of citizens contains all categories, persons who were provided with social support in our country before, during the Soviet period: these are disabled people, large families, and orphans. At the same time, the list is now significantly expanded, taking into account the social, economic and political changes that have occurred since the end of the last century. Thus, the list includes refugees and internally displaced persons, the poor and persons without a fixed place of residence. Some of them, for example, refugees and the poor, were basically absent as categories, while persons without a certain place of residence, although they were present as a negative social element, could not count on social assistance.
Since the state includes small and medium-sized businesses as subjects of social entrepreneurship (social enterprises), neither non-profit enterprises nor representatives of large businesses belong to it.
As S. S. Zankovsky notes, the Law on the Development of Entrepreneurship solves three issues simultaneously: it designates small business entities, and also sets requirements for them and measures of state support [13, 260].
We consider it possible to agree with the conclusions of M. S. Nestesova about the sufficient effectiveness of this law [9, 68], in this connection, the proposal made by P. P. Battakhov about the need to issue a special law on social entrepreneurship [3, 6] raises doubts.
It is necessary to note the following interesting fact. The Soviet Union, like all countries of the sociological camp, has always been more socially oriented than the much more economically developed countries of Western Europe and the United States. In these countries, the main focus was on providing opportunities to earn good money and, as a result, have a decent life. No one was interested in issues of social equality, the main task of any commercial enterprise was to earn as much money as possible, social security and environmental issues were of little concern to anyone. Time passed. Capitalism has come to Russia. Since the beginning of the economic recovery after the failed perestroika, Russia has become little different from its Western partners: a giant stratification of society in terms of income, a disregard for the environment for the sake of the economy, and so on. And our western neighbors suddenly
began to develop socially oriented entrepreneurship, to fight for the environment and social equality, i.e. to implement all the ideas that we so quickly abandoned at the end of the century. In our opinion, our country has a much richer experience of social entrepreneurship than the most developed countries. Without ignoring the modern experience of foreign countries and innovative technologies, we need to turn to our rich experience of a socially oriented state. It seems that there you can find a lot of proven methods that are now «inventing» developed countries.
Wider, relative to the statutory definition of social entrepreneurship, presented by the Fund «Our future», according to which social entrepreneurship refers to innovative activities aimed at the solution of social problems in terms of self-sufficiency and sustainability.
At the same time, the very principle of the operation of socially significant problems by the citizens themselves has long been known. So, quite often, churches in Russia were built on the donations of ordinary people, and those directly involved in the construction worked only for food, which can be considered a harbinger of social entrepreneurship. The issues that arise in the process of formation and development of social entrepreneurship in Russia require further study by the scientific community, business and government agencies. Thus, the question of the sectoral nature of social entrepreneurship is interesting, which, according to a number of scientists, is determined by its belonging to the business law [14, 83-84].
Social entrepreneurship is a complex phenomenon that has a number of contradictions related to the peculiarity of the declared goals and the means to achieve them. Among such contradictions, the following can be distinguished:
- focus on the public interest in combination with personal benefit in view of the need to obtain a positive economic effect;
- the presence of social and economic goals in the implementation of socially oriented economic activities;
- ongoing disputes about whether representatives of social entrepreneurship belong to small businesses or to the" third sector " of non-profit enterprises;
- significant differences in the conditions for the emergence and development of social entrepreneurship in different countries;
- the lack of full-fledged legislation regulating social entrepreneurship with the increasingly active participation of citizens and organizations in this process [10].
The above contradictions have a negative impact on the possibility of obtaining certain resources necessary for the implementation of its activities. Thus, the constant search for interested investors is one of the most important issues that the founder of a socially-oriented business project faces. The lack of necessary finances forces citizens who have decided to devote themselves to social entrepreneurship to use not only all possible mechanisms for finding funding for their projects, but also to create new, innovative investment mechanisms. It thus appeared crowdfunding, social impact bonds, etc. It seems that the development of new
forms of financing of social entrepreneurship will only expand with the further improvement of this area itself.
Currently, there are many options for investing in social entrepreneurship. Classifying all investments by the ratio of the expected economic benefit and the socially directed effect from traditional investments to charity, we will get the following options for attracting finance for social entrepreneurship.
1. Ordinary investments, which can be described as financial investments with the aim of obtaining the maximum market return in the shortest possible time. The main and only purpose of such investments is to make a profit. Any social orientation in this case is not assumed, but it can take place if the enterprise itself leads to any socially positive results. But such results themselves are not important from the point of view of social significance for the investor.
2. Responsible Investment (RI), which can be described as an investment, the decision to invest in which is made with the obligatory consideration of responsible financial behavior [7, 57].
It should be noted that responsible investments differ from traditional ones in that they contribute to the formation of public goods [5, 32] in the context of financial science and are not directly related to socially significant effects. In addition, responsible investments are characterized by the "sustainability" factor, which also distinguishes them from traditional investments from the point of view of the economy [7, 58].
3. Socially responsible Investment (SRI) is a so-called «harmless» investment, in the decision-making process for which the analysis of the social and environmental consequences of investments is carried out [1, 16]. As an example of socially responsible investments, we can cite investment in non-ethically and socially questionable sectors of the economy from the point of view of the advanced public. Under the dubious companies as the example of the tobacco and coal companies, the organizers of gambling etc. Thus, this type of investment already contains certain rudiments of a social orientation. The receipt of a positive socially significant effect by an enterprise that has received financial assistance as a result of such an investment will no longer be completely accidental.
4. ESG-investments (Economic, Social, Governmental) involve investing in projects and organizations that carry out their activities in accordance with environmental, social and corporate factors. The ESG principles are not clearly defined, but non-financial information disclosed by companies usually contains issues related to the environment, social direction, and corporate governance. Environmental issues include climate change, environmental pollution, the decline of forests and animal species, and the depletion of natural resources. On social issues, the main focus is on working conditions, the inadmissibility of slave labor and the restriction of child labor, compliance with safety regulations and working with harmful conditions, etc. In the context of corporate governance, special attention is paid to the inadmissibility of corruption, a competent tax strategy, the validity of remuneration for top managers, etc. [12, 120].
5. Socially transformative investments (transformative investments, social impact investments, impact investing) involve investing in companies and funds to achieve measurable, socially or environmentally beneficial impacts, as well as financial returns. In this case, the main purpose of investing such investments is not only to generate income and not even so much to get it, but rather a certain social or environmental effect that these investments are aimed at. Meanwhile, the financial result is expected, but in contrast to the previous types of investment, part of this income is again directed to achieve socially useful goals.
6. Program investment means financial investments in those non-profit and commercial organizations whose activities contribute to the charitable activities of the investor.
7. Venture charity (venture philanthropy) - involves not only financial resources, but also the expenditure of their own time, experience, intellectual and other resources in a long-term partnership with an organization with the goal of achieving any socially significant benefits. It should be noted that the positive socio-social effect is primary here.
8. Philanthropy (traditional charity) - represents absolutely gratuitous donations without any calculations for financial return on any universal or socially significant values.
The use of any other type of financial assistance, from traditional investments to charitable donations, will bring public benefit, because
first, as mentioned above, social entrepreneurship is constantly under-funded;
fecondly, regardless of the ultimate goal of the investors, the funds allocated by them will be used to finance social issues.
Based on the definition of social entrepreneurship, fixed in the Law on the Development of Entrepreneur-ship, it is socially transformative investments that, in our opinion, fully correspond to the goals and methods of achieving the stated socially significant goals.
The main instruments of impact investment are simple debt and equity financial instruments adapted to meet the social challenges of transformative investments. As a rule, such securities are provided to those who wish on more favorable terms, including at lower interest rates or for a longer period.
Such financial instruments used in the process of transformative investment can include, in particular:
- quasi-capital (profit sharing);
- interim financing;
- meson financing;
- investments in shares and shares of social enterprises;
- bonds (social, green, development bonds;
- debt instruments (collateralized and unsecured loans, loans convertible loans);
- mixed financing (a combination of debt, grant financing, government or bank guarantees).
In our opinion, the financial instruments of transformative investments can also include the activities of crowdfunding platforms, the purpose of which is to create favorable conditions for collective cooperation of people (donors) who voluntarily pool their money or
other resources together, usually via the Internet, in order to support the efforts of other people or organizations (recipients). At the same time, it should be noted that the goals for which people unite through crowd-funding are not always deeply social, although such goals tend to prevail.
At the same time, there is an opinion that transformative investments differ from crowdfunding, since they are mainly debt or equity investments that use more than the traditional payment terms for venture capital. Such forms of profit-making as an IPO or a buyout of a startup in the commercial sphere, which are traditional for crowdfunding platforms, may not be available in this case.
In conclusion, it is necessary to draw the following conclusions:
The state has established a closed list of the most socially vulnerable citizens, and this list largely coincides with the categories of citizens who were provided assistance during the Soviet period.
Since the state includes small and medium-sized businesses as subjects of social entrepreneurship, neither non-profit enterprises nor representatives of large businesses belong to it.
The main areas of financial support for social entrepreneurship in Russia can be such well-established financial institutions in developed countries as crowd-funding, social and green bonds, and meson financing. The use of the latter will indicate not only the desire of individual citizens to participate in solving certain social problems, but also the desire of authorities at all levels to support social enterprises in solving significant social problems.
Without ignoring the modern experience of foreign countries and innovative technologies in the field of social entrepreneurship, our country needs, first of all, to rely on its own experience of a socially oriented state.
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