Development of Social Enterprises as Way of Mitigating the Social Situation in the Donbass
The aim of the paper is to investigate the European experience of social enterprises disseminating, i.e. the definition of social enterprises, their legal forms, forms of social enterprises support, as well as to explore how this experience could be applied in Ukraine, especially in the Donbas regio...
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nasplib_isofts_kiev_ua-123456789-876192025-02-09T17:49:32Z Development of Social Enterprises as Way of Mitigating the Social Situation in the Donbass Розвиток соціальних підприємств як спосіб пом'якшення соціальної ситуації у Донбасі Развитие социальных предприятий как способ смягчения социальной ситуации в Донбассе Lyakh, O.V. International and Regional Economics The aim of the paper is to investigate the European experience of social enterprises disseminating, i.e. the definition of social enterprises, their legal forms, forms of social enterprises support, as well as to explore how this experience could be applied in Ukraine, especially in the Donbas region. The findings from the research provide a more holistic understanding of growth of social enterprise sector in the OECD countries. This detail adds to an understand the researched topic in the local context, puts forward recommendations on what is required to legitimize social enterprise in Ukraine, and allows to determine what measures are appropriate for fostering social enterprises sector growth in Ukraine and in the region Donbass which is suffering from military conflict. Outcomes facilitates forthcoming research and practical activity connected with social enterprises by overcoming the handicaps caused by the lack of legal recognition commonly acceptable in EU definitions of social enterprise, social entrepreneurship as well as the absence of a national statistics of social enterprises and state policy for development of social enterprises, even in case of the Donbass that is urgently needed this sector growth. Мета статті полягає в дослідженні європейського досвіду поширення соціальних підприємств, тобто визначення соціальних підприємств, їх організаційно-правових форм, підтримки соціальних підприємств, а також визначені, як цей досвід може бути застосований в Україні, особливо в регіоні Донбас. Висновки з дослідження забезпечують більш цілісне розуміння зростання сектору соціального підприємництва в країнах ОЕСР. Це додає до розуміння теми дослідження у місцевому контексті, висуває рекомендації про те, що потрібно, щоб узаконити соціальне підприємство в Україні, і дозволяє визначити, які заходи є необхідними для зміцнення зростання сектору соціальних підприємств в Україні і в Донбасі, який страждає від військового конфлікту. Результати полегшують майбутні дослідження і практичну діяльності, пов'язану з соціальними підприємствами, долаючи перешкоди, викликані відсутністю юридичного визнання загальноприйнятого у ЄС визначення соціального підприємства, соціального підприємництва, а також відсутністю національної статистики соціальних підприємств та державної політики в галузі розвитку соціальних підприємств, навіть у разі Донбасу, який терміново потребує зростання цього сектору. Цель статьи заключается в исследовании европейского опыта распространения социальных предприятий, т.е. определения социальных предприятий, их организационно-правовых форм, поддержки социальных предприятий, а также в установлении, как этот опыт может быть применен в Украине, особенно в регионе Донбассе. Выводы исследования обеспечивают более целостное понимание феномена роста сектора социального предпринимательства в странах ОЭСР. Это способствует интерпретации темы исследования в местном контексте, выбору рекомендации относительно того, правового закрепления социальных предприятий в Украине, и позволяет определить, какие меры необходимы для ускорения роста сектора социальных предприятий в Украине и в Донбассе, который страдает от военного конфликта. Полученные результаты облегчают будущие исследования и практическую деятельности, связанную с социальными предприятиями, преодолевая препятствия, вызванные отсутствием юридического признания общепринятого в ЕС определения социального предприятия, социального предпринимательства, а также отсутствием национальной статистики социальных предприятий и не принятием государственной политики поддержки развития социальных предприятий, даже для Донбасса, который остро нуждается в росте этого сектора. 2014 Article Development of Social Enterprises as Way of Mitigating the Social Situation in the Donbass / O.V. Lyakh // Економічний вісник Донбасу. — 2014. — № 4(38). — С. 59-66. — Бібліогр.: 28 назв. — англ. 1817-3772 https://nasplib.isofts.kiev.ua/handle/123456789/87619 332:330.341.32 en Економічний вісник Донбасу application/pdf Інститут економіки промисловості НАН України |
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Digital Library of Periodicals of National Academy of Sciences of Ukraine |
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International and Regional Economics International and Regional Economics |
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International and Regional Economics International and Regional Economics Lyakh, O.V. Development of Social Enterprises as Way of Mitigating the Social Situation in the Donbass Економічний вісник Донбасу |
| description |
The aim of the paper is to investigate the European experience of social enterprises disseminating, i.e. the definition of social enterprises, their legal forms, forms of social enterprises support, as well as to explore how this experience could be applied in Ukraine, especially in the Donbas region. The findings from the research provide a more holistic understanding of growth of social enterprise sector in the OECD countries. This detail adds to an understand the researched topic in the local context, puts forward recommendations on what is required to legitimize social enterprise in Ukraine, and allows to determine what measures are appropriate for fostering social enterprises sector growth in Ukraine and in the region Donbass which is suffering from military conflict. Outcomes facilitates forthcoming research and practical activity connected with social enterprises by overcoming the handicaps caused by the lack of legal recognition commonly acceptable in EU definitions of social enterprise, social entrepreneurship as well as the absence of a national statistics of social enterprises and state policy for development of social enterprises, even in case of the Donbass that is urgently needed this sector growth. |
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Lyakh, O.V. |
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Lyakh, O.V. |
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Lyakh, O.V. |
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Development of Social Enterprises as Way of Mitigating the Social Situation in the Donbass |
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Development of Social Enterprises as Way of Mitigating the Social Situation in the Donbass |
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Development of Social Enterprises as Way of Mitigating the Social Situation in the Donbass |
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Development of Social Enterprises as Way of Mitigating the Social Situation in the Donbass |
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Development of Social Enterprises as Way of Mitigating the Social Situation in the Donbass |
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development of social enterprises as way of mitigating the social situation in the donbass |
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Інститут економіки промисловості НАН України |
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2014 |
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International and Regional Economics |
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https://nasplib.isofts.kiev.ua/handle/123456789/87619 |
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Development of Social Enterprises as Way of Mitigating the Social Situation in the Donbass / O.V. Lyakh // Економічний вісник Донбасу. — 2014. — № 4(38). — С. 59-66. — Бібліогр.: 28 назв. — англ. |
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O. V. Lyakh
59
Економічний вісник Донбасу № 4(38), 2014
UDC 332:330.341.32
O. V. Lyakh,
PhD (Economics),
Institute of Industrial Economy NAS of Ukraine, Kyiv
DEVELOPMENT OF SOCIAL ENTERPRISES AS A WAY OF MITIGATING
THE SOCIAL SITUATION IN THE DONBASS
Significant losses of economic potential and the
human capital in the Donbass are the consequences of
political crisis and military opposition in the East of
Ukraine. Modernization of economy and restoration of
social stability in the region after the end of the antiter-
rorists operation will require elaborating of special
measures of economic and social policies. In doing
that, it is necessary to agree with opinion of Jean-Paul
Fitoussi and Joseph Stiglitz that “the design of good
policies can’t be grounded on the artificial separation
between social policies and macroeconomic ones…”
[1, p. 15]. The economic goals of the measures for the
Donbass` renaissance and economic restructuring will
connect directly to increasing of competitiveness and
attractiveness of the region for investors and high qual-
ity labour force. However, increasing of the regions
competitiveness and attractiveness means improving
the quality of life of its inhabitants. In turn, the com-
munity's quality of life also depends on the level of
integration into employment and social inclusion of
population of the disadvantaged communities. In order
to tackle with the unemployment and social disintegra-
tion in the Donbass region it would be useful to put
into effect a comparatively new for Ukraine social
innovation that engages additional resource – social
initiative of residents of the localities and groups of
interest. This social innovation is social entrepreneur-
ship and social enterprises that broadly recognized as a
new approach for mitigating of unemployment, pov-
erty, lack of public finances for social services, espe-
cially in former socialist countries [see, 2 – 7].
The potential contribution of social enterprises to
work integration, job creation, and service delivery
remains largely unrealized in Ukraine as well as in
other CIS countries, particularly in relation to disad-
vantaged groups including the long-term unemployed,
ex-criminals, people with disabilities, internally dis-
placed persons and ethnic minorities [6, p. 6]. The
situation in the Donbass is worse due to closure or bad
operating of many enterprises, especially of small ones,
and absence of public funding for so-called "budget"
organizations that is shrinking the demand on produc-
tion and services of SMEs. One have to take in account
that the growth potential of SMEs in the region, espe-
cially in coalminers’ settlements has been greatly un-
derused even in peacetime [7, p. 120 - 124]. Thus, the
niche for development of social enterprises in the re-
gion is considerable. On the other hand, a significant
opportunity for the development of social enterprises in
the Donbass confirmed by activation of the volunteer
movement on both sides of the military confrontation
there. Moreover, new approaches like an encouraging
of social enterprises are needed to tackle major social
issues during the declared reforms of social security in
Ukraine, “... most especially in the presence of the
systematic retreat of the governments from the provi-
sion of public goods in the face of new political ideo-
logies that stress citizens’ self-sufficiency and give
primacy to market-driven models of welfare” [8, p. 1].
The phenomenon of social enterprise / entrepre-
neurship emerged long before its theoretical generali-
zation as a practical activity due to development of the
cooperatives movement and evolution of the third sec-
tor (NGOs) towards commercialization and involve-
ment into public service provision, as well as in rare
cases in result of spin-off of social activity and related
assets from business corporations. The concept of so-
cial enterprises have been widely discussed in academ-
ic circles and literature mainly in the OECD countries
since the early 90s of the last century [9]. Since then,
the social enterprises have found strong enough recog-
nition in academic and political circles, reflected in the
curricula of universities and business schools, en-
trenched in the legislation of individual countries an d
in the regulations of the European Union, as well as
appropriate public agencies for support this business
have been created. Various private foundations have
set up training and support programmes for social en-
terprises or social entrepreneurs. Moreover, there were
research centres for social enterprises initiated in many
countries and international ones under umbrellas of the
OECD office (Centre for Entrepreneurship, SMEs and
Local Development) and European Commission (the
EMES European Research Network in 1996. Formally
established as a non-profit association (ASBL under
Belgian law) in 2002 and named after its first research
program, on “the emergence of social enterprises in
Europe” (1996-2000), EMES was originally composed
of European university research centers and individual
researchers. After many years of collaborative research
and projects jointly conducted with researchers from
other regions, EMES has decided in 2013 to open its
membership to researchers from around the world1). In
2001 leading Latin-American business schools and the
Harvard Business School established the Social Enter-
prise Knowledge Network (SEKN) [9].
1 See: http://emes.net/who-we-are/
O. V. Lyakh
60
Економічний вісник Донбасу № 4(38), 2014
The clusters of business entities and persons regis-
tered as social enterprises or social entrepreneurs have
been referring in official documents, analytical reports,
academic papers and reflecting the statistics of differ-
ent countries as a separate economic sector under the
name: Social Economy (European Union, Francophone
Canada), Solidarity Economy (Latin America), Peo-
ple’s Economy (Pacific Asia), Associative Movements
(Muslim countries), Civil Society Economy (South
Africa), and Community Economic Development
(Australia, Anglophone Canada, New Zealand, USA).
Now the concepts of social economy, social en-
trepreneurship and social enterprise are attracting many
scholars and policy makers in wide range of societal
sciences (sociology, political studies, economics, and
management) which are showing a clear research inter-
est more than a decade later in order to address to
modern social challenges. Among them are C. Bor-
zaga, J. Defourny, L. Favreau, J. Hausner, M. Huysen-
truyt, G. Galera, A. Kaderabkova, J.-L. Laville, M.
Mendell, F. Moulaert, R. Nogales, M. Nyssens, V.
Pestoff , E. Rudyk, R. Spear, and others. The research
activities were concentrated on such topics as reasons
for emerging and evolution of the social economy (SE)
as well as its role and concrete areas for support of
socio-economic sustainable development [6; 9 – 11 ],
legal, financial and organizational issues of diverse
legal forms of SE subjects functioning [10; 13 – 15].
Recently in publications devoted to the SE topic, more
clear emphasis is made on connection of social enter-
prises and entrepreneurship with innovation activity [3;
13 – 16].
In last decade, the topic of social entrepreneurship
becomes more common in public life and scientific
research in Ukraine. A significant contribution to the
promotion social entrepreneurship in Ukraine make the
Social Enterprise Support Center set up in October
2010 at the SESP Association1, and the Resource Cen-
ter "Social Initiative" created in September 20122.
These Centers were founded under the joint initiative
of the British Council in Ukraine, East Europe Founda-
tion, PricewaterhouseCoopers in Ukraine, Erste Bank
and the International Fund "Renaissance" (the project
"Development of social entrepreneurship in Ukraine").
However, the publications on the web sites of the Cen-
ters as well as in special literature on economics and
sociology are mostly describing practical examples of
social enterprises in the country and Western experi-
ence of social economy development, as well as some
training materials on the topic. A rare exception are
publications [17 – 19] that attempted to generalize the
theoretical foundations of the concept of the social
economy in relation to the Ukrainian realities as well
as to define measures to creating institutional and eco-
1 http://sesp.org.ua/web/sesp/sesp-EN.nsf/0/ BEE
B3F7 CAF10DA9AC2257911005076A8
2 http://socialbusiness.in.ua/
nomic environment friendly for social enterprise de-
velopment in the country [20 – 23].
The aim of the paper is to investigate the Europe-
an experience of social enterprises disseminating, i.e.
the definition of social enterprises, their legal forms,
forms of social enterprises support, as well as to ex-
plore how this experience could be applied in Ukraine,
especially in the Donbas region.
The development of social enterprises and corpo-
rate social responsibility are the constituent parts of
such a concept as social entrepreneurship, that “…blurs
traditional boundaries between institutional sectors,
public and private, types of innovations, and their crea-
tors and users” [3]. Under that definition, the entrepre-
neurs` activity addressed social issues in which profits
serves as a tool to achieve this goal is understand [5].
More broad definition gives the publication of the Sec-
retariat of the OECD Centre for Entrepreneurship,
SMEs and Local Development: “Social entrepreneur-
ship – a type of entrepreneurship that aims to provide
innovative solutions to unsolved social problems and
challenges. It often goes hand-in-hand with social in-
novation processes. Social entrepreneurs organise
themselves across a wide spectrum of organisations
which have an entrepreneurial approach and whose
primary mission is to tackle social problems and gen-
erate radical or more limited social changes. Social
entrepreneurship is therefore about solving social prob-
lems rather than exploiting market opportunities in
order to maximise profits” [14, p. 222].
In Europe, despite the absence of universal and
indisputable definition of the social enterprise [9; 14],
this concept has been increasingly using to identify an
alternative way of doing independent business, which
occurs when an enterprise created in order to pursue
primarily social aims while simultaneously carrying
out commercial activities. Thus, a social enterprise
differs from the phenomenon called corporate social
responsibility (CSR) because of the priority goals pur-
sued by the owners or creators of the company. In the
case of CSR, social outcomes are secondary, while
social enterprises resorting to commercial activity pri-
marily to ensure financial stability for social activities.
The European Commission gives the term “social
enterprise” the following meaning: “an operator in the
social economy whose main objective is to have a so-
cial impact rather than make a profit for their owners or
shareholders. It operates by providing goods and ser-
vices for the market in an entrepreneurial and innova-
tive fashion and uses its profits primarily to achieve
social objectives. It is managed in an open and respon-
sible manner and, in particular, involves employees,
consumers and stakeholders affected by its commercial
activities” [24].
Instead of seeking “an elegant short definition”,
the EMES European Research Network conceptual
approach of social enterprise`s definition preferred
O. V. Lyakh
61
Економічний вісник Донбасу № 4(38), 2014
from the outset the selection of nine indicators into
three subsets (dimensions):
(1) the economic and entrepreneurial dimensions:
• a continuous activity producing goods and/or selling
services;
• a significant level of economic risk;
• a minimum amount of paid work;
(2) the social dimensions:
• an explicit aim to benefit the community;
• an initiative launched by a group of citizens or civil
society organizations;
• a limited profit distribution: the primacy of the social
aim is reflected in a constraint on the distribution of
profits;
(3) the participatory governance:
• a high degree of autonomy;
• a decision-making power not based on capital owner-
ship;
• a participatory nature, which involves various parties
affected by the activity [15, pp. 44-46].
The European Economic and Social Committee
share this position: “The EESC understands that a clear
definition is needed so that efforts can be focused, but
rather than a definition, proposes a description based
on shared characteristics such as:
• having primarily social objectives as opposed
to profit objectives, producing social benefits that serve
the general public or its members;
• being primarily not-for-profit, with surpluses
principally being reinvested and not being distributed to
private shareholders or owners;
• having a variety of legal forms and models:
e.g. cooperatives, mutuals, voluntary associations,
foundations, profit or non-profit companies; often com-
bining different legal forms and sometimes changing
form according to their needs;
• being economic operators that produce goods
and services (often of general interest), often with a
strong element of social innovation;
• operating as independent entities, with a strong
element of participation and co-decision (staff, users,
members), governance and democracy (either repre-
sentative or open);
• often stemming from or being associated with
a civil society organization” [5, p.2].
Nevertheless, how term “social enterprise” is de-
fined, it comprises such legal forms of enterprises as
cooperatives, associations, foundations, mutual benefit
and voluntary organizations and charities [25]. Despite
their diversity, social enterprises provide social ser-
vices and contribute to integration unemployed and
disabled people to work (e.g. training and integration
of unemployed persons) thus assisting in the develop-
ment of disadvantaged areas (especially remote rural
and economically distressed areas).
While empirical evidence shows that social entre-
preneurship is growing in many countries, measuring
it – like measuring the social economy, the third sector
and the non-profit sector – is difficult. This is due not
only to the variety of the entities belonging to the field,
but also to the fact that these entities vary according to
the geographical context and that countries recognise
social entrepreneurship differently [14, p. 187]. Ac-
cording to web site of European Commission on
10/06/2015, there are 2 million social economy enter-
prises in Europe, representing 10% of all businesses in
the EU. More than 11 million people – about 6% of the
EU’s employees – work for social economy enterpris-
es. They have different legal forms and various objec-
tives ranging from agriculture and banking to provision
of employment and sheltered workshops1.
The role of social enterprises in spurring innova-
tion, especially social ones has been recognised and
reflected in strategic document of European Commis-
sion, launched in 2011 and named “Social Business
Initiative. Creating a favourable climate for social en-
terprises, key stakeholders in the social economy and
innovation” where is declared, in order to promote a
highly competitive social market economy, the Com-
mission “…has placed the social economy and social
innovation at the heart of its concerns” [24, p.2]. Later
the European Economic and Social Committee (EESC)
has clarified the main actions of the Initiative: improv-
ing access to funding; increasing visibility of social
entrepreneurship; improving the legal environment. To
further, unlock the potential of this sector, the EESC
calls for a supportive environment for social enterpris-
es and for their better integration into all EU policies.
In doing that partnerships with regional and local au-
thorities, as well as social entrepreneurs themselves
will play an important role [26].
The experience of the European Union, US and
other OECD countries shows that social enterprises
perform important functions for socio-economic devel-
opment through:
• contribute to the development of local econo-
my and society, offering certain opportunities for job
creation and new forms of entrepreneurship and em-
ployment;
• help overcome social isolation (due to their
possible activities for employment of handicapped or
with mental disabilities people; those who been unem-
ployed for a long time; former criminals and others);
• stepping up participation and voluntary work
of citizens, strengthening thus the unity of the commu-
nity;
• contribute to the development of a wide range
of social services that are necessary for local society,
but that does not of interest for business as usual (low-
profit, activity connected to significant costs for per-
sonnel special training so on);
1 http://ec.europa.eu/growth/smes/promoting-entre
preneurship/ we-work-for/social-econo my/ index_en.htm
O. V. Lyakh
62
Економічний вісник Донбасу № 4(38), 2014
• reduce the burden on local budgets in solving
social problems;
• improving the structure of social programs in
the region.
By fostering of citizens` self-organization and
supporting social enterprises whose activities are aimed
at solving issues of communities, the local authority
contributes to employment as well as self-employment,
allows to diversify the process of social services
providing to the inhabitants, strengthening integrity of
local societies and social capital, thus significantly
reduces the level of social tension. This answers not
only to a criterion of social inequality reducing, but
also to the aim of decreasing possible local conflicts
and increasing social safety.
Another aspect is related to the fact that, by im-
proving the level of work inclusion through support of
social enterprises, the local government has the chance
to divert resources to other activities or projects, which
in the opposite case would be directed on social ser-
vices delivering in general or on improving the living
conditions of certain disadvantaged groups of inhabit-
ants in the community.
Contemporary Ukrainian legislation does not pro-
vide a definition of social enterprise and does not in-
clude any specific normative acts regulating the activi-
ties of such enterprises. However, there are elements of
Ukrainian law, which provide certain grounds for de-
velopment of social enterprise (see [6, pp. 161 – 162]).
For instance, enterprises of citizens’ unions can be
formed in accordance with Article 112 of the Commer-
cial Code of Ukraine and with Article 20 of the Law on
Citizens’ Unions for the realization of economic activi-
ties with the purpose of fulfilling their statutory goals.
Non-governmental organizations of disabled people,
set up according to the Law on Principles of Social
Protection of Disabled people in Ukraine can have
commercial and non-commercial activities. An im-
portant element contained in Ukrainian law is that the
state, territorial centres and the public have the oppor-
tunity to control the statutory social activities of com-
munal (non-commercial) enterprises and the way en-
terprises’ profits can be used for socially significant
goals.
The survey of the project [6] concluded that re-
spondents at the regional level indicated the need to
improve the legislative base regulating the activities of
nongovernmental organizations and to develop and
adopt a specific law on social enterprises. The govern-
ment organization experts interviewed by the project
share this view. However, the representatives of inter-
national organizations interviewed during the project`s
survey, proposed alternatives way: to amend the civil
code and tax code. In general, the majority of respond-
ents highlighted the need to introduce tax privileges to
stimulate the development of social enterprises [6, p.
162].
In April 2013 the Committee on Economic Policy
of Verkhovna Rada of Ukraine considered draft law
"On social enterprises", which was presented by the
MP O. Fel`dman. According to the conclusion of the
Chief scientific and expert department of the Parlia-
ment and the comments of the Committee members,
the bill was rejected. We consider it appropriate to
provide a citation from the expert conclusion placed on
the Commission web site1:
"In our opinion, the use of the term "social" to de-
termine the type of enterprise isn`t relevant, so far as
mentioned term describes a certain relationship of
business with society, that is inherent for any business,
and not associated with any organizational form of
enterprise, or the activities which it deals, or with any
other conditions under which one kind of enterprise
can be separated from others. In addition, when one is
using this definition inadvertently seems that all other
enterprises are "non-social", which is not true".
This quote shows that even experts of the Ukraine
parliament does not understand the concept of social
entrepreneurship, to say nothing of officials at regional
and local levels. Thus, official recognition of social
enterprise is necessary, whether adopting a special law
or amendment to the Commercial Code and relevant
laws.
Mr. O. Fel`dman in April 2015 again submitted to
the Committee on Economic Policy of Verkhovna
Rada of Ukraine the draft law "On social enterprises",
while almost did not change its content [27]. We sug-
gest that the draft of the bill needs substantial revision
and improvements, the basic contents of which are
summarized below.
1. The draft law that presented to the Parliament
completely ignores the fundamental principle for social
enterprises that recorded in the laws and regulatory
documents of many countries and the European Com-
mission. It refers to the prohibition or restriction of
profit distribution for owners or shareholders of the
business and reinvesting enterprises profits on its statu-
tory social goals.
2. According to the draft, the status “social” will
be assigned if an enterprise meets the following crite-
ria:
(1) employment of persons assigned to socially
vulnerable groups, if the proportion of which is at least
half of the total number of employees; (2) provision of
social services defined by the Law of Ukraine "On
Social Services", if more than half of the recipients of
those services are disable people; (3) provide jobs and
social services to persons from socially vulnerable
groups, if the share of such persons is not less than 30
1 http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?
pf3511=46025
O. V. Lyakh
63
Економічний вісник Донбасу № 4(38), 2014
per cent of total number of employees and at least 30
per cent of recipients of social services are disable
people; (4) sell goods and services socially vulnerable
people at prices equal or below the self-cost of produc-
tion; (5) investing in socially important projects.
Firstly, the range of possible applicants for the
status of "social enterprise" significantly narrowed
because number of beneficiaries is limited only social-
ly vulnerable people.
Secondly, this set of criteria does not fit to such
important social enterprises operating in some EU-
member countries, USA and Canada as the Community
Economic Development Corporation (CEDC) and the
Community Interest Company (CIC). The CEDC and
CIC in many countries play a significant role for the
socio-economic recovery of depressed areas (see [28]),
so they can be effective agents of economic restructur-
ing and the restoration of social infrastructure in the
Donbass.
Thirdly, the criterion of "investments in socially
important projects" is vague and raises more questions
than answers.
3. The draft law stipulates that social enterprise
status granted by the Interdepartmental Commission on
public support for social enterprises that suggested to
be created. This corresponds to the practice of state
support for social enterprises in some countries. For
example, the Social Enterprise Unit operates within the
British Department of Trade and Industry, also under
the decision of the USA President B. Obama the White
House Department of Social Innovation and Civic
Participation was created. At the same time, given the
declared profound decentralization of public admin-
istration in Ukraine, strengthening of local self-
government and further democratization of public life,
one can consider it appropriate to delegate the function
of assignation of the social enterprise`s status at a local
level. To do this, local governments should create a
public commission on social entrepreneurship in which
representatives of the NGOs and social enterprises
should be included. It is also needed to delegate the
competence for providing various tax exemptions and
preferences for social enterprises to the local level,
given the fact that fiscal decentralization should pass
taxes on profit as the main source of local budgets.
4. Article 9 of the draft law provides that “mem-
bers (participants) of social enterprise which is formed
by joint a property (property rights) have the right to
participate in managing the company according to their
stake (share) in the property company, unless otherwise
provided statute”. One keep in mind that this article
does not meet the European practice of democratic
management in social enterprise based on the principle
of "one person - one vote". In addition, the vast majori-
ty of national legislation concerning social enterprises
contains a provision that called "lock assets", under
which the assets of the social enterprise is indivisible
(except ones that have legal form of cooperative, lim-
ited or share company), and in a case of closing is
transfer to another social enterprise.
5. In conclusion, of the Chief scientific and expert
department of the Parliament concern the draft law "On
Social Enterprise" made observations on that draft
chapter IV "State support of social enterprises" con-
tains five articles, four of which are not related to state
support. It should accept. Moreover, it should be noted
that the represented in the draft measures for support of
social enterprises are, with no specific view general list
of these measures: "... tax benefits while taking in-
vestment, privileges in land issues, returnable and non-
repayable financial assistance, loans, facilitate to grant
priority when placing public orders and the perfor-
mance of state programs».
Taking in account previous comments on the
transfer of competence for the regulation of social
entrepreneurship at the local level, we can conclude the
following:
- The law "On social enterprises in Ukraine"
should play the role of framework document that de-
fines the essence of subject, the basic criteria and pro-
cedures for granting the status of a social enterprise,
the main responsibility of government and regional
public authorities for promoting social enterprises. Due
to absence of national social enterprise concept, it will
be better on the initial stage of social enterprise legiti-
mating to adopt the EMES European Research Net-
work concept of social enterprise. This would allow
elaborating the national one eventually.
- Concerning the issues of creation, registration,
closure of social enterprises – these questions should
be addressed in accordance to the regulatory norms
relevant for the organization-legal form that have cho-
sen by specific social enterprise;
- The concrete measures for social enterprises
support have to be initiated by regional and local au-
thorities based on the real opportunities for funding
this support. Such initiatives can be incorporated in
traditional practice of elaborating 2-year programs for
small and medium size business development by ob-
last`s administrations and local authorities.
- Appropriate forms of social enterprises support
can be chosen by regional and local self-governments
based on their possibilities from listed bellow:
• Specific enabling legal, fiscal, and regulatory envi-
ronments might be needed for social entrepreneurs,
according to the form that their initiatives take. For
the Donbass region, it is needed urgently to deter-
mine such environments that is friendly for social
enterprises like the Community Economic Devel-
opment Corporation and the Community Interest
Company.
• Public procurement measures should be developed
so that social enterprises can consolidate and ex-
pand their growth.
O. V. Lyakh
64
Економічний вісник Донбасу № 4(38), 2014
• Support market development for social enterprise
and provide training for public officials and social
enterprises to deal with public tenders.
• Offering fiscal incentives to attract investors for
social enterprises start-up and offering multiple
forms of credit enhancement;
• Provide training and learning to social entrepre-
neurs and comprise social entrepreneurship in
school and university curricula;
• Evaluating the impact of social entrepreneurship
development in selected areas and conducting re-
search in order to assess the different needs of the
entities belonging to the social economy sector.
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Лях О. В. Розвиток соціальних підприємств
як спосіб пом'якшення соціальної ситуації у
Донбасі
Мета статті полягає в дослідженні європейсь-
кого досвіду поширення соціальних підприємств,
тобто визначення соціальних підприємств, їх ор-
ганізаційно-правових форм, підтримки соціальних
підприємств, а також визначені, як цей досвід може
бути застосований в Україні, особливо в регіоні
Донбас. Висновки з дослідження забезпечують
більш цілісне розуміння зростання сектору
соціального підприємництва в країнах ОЕСР. Це
додає до розуміння теми дослідження у місцевому
контексті, висуває рекомендації про те, що потріб-
но, щоб узаконити соціальне підприємство в
Україні, і дозволяє визначити, які заходи є необ-
хідними для зміцнення зростання сектору соціаль-
них підприємств в Україні і в Донбасі, який страж-
дає від військового конфлікту. Результати по-
легшують майбутні дослідження і практичну
діяльності, пов'язану з соціальними підприємства-
ми, долаючи перешкоди, викликані відсутністю
юридичного визнання загальноприйнятого у ЄС
визначення соціального підприємства, соціального
підприємництва, а також відсутністю національної
статистики соціальних підприємств та державної
політики в галузі розвитку соціальних підприємств,
навіть у разі Донбасу, який терміново потребує
зростання цього сектору.
Ключові слова: соціальне підприємство,
соціальне підприємництво, соціальна економіка,
третій сектор, неприбуткові організації, соціальні
інновації, ЄС, Україна, Донбас.
Лях А. В. Развитие социальных предприя-
тий как способ смягчения социальной ситуации
в Донбассе
Цель статьи заключается в исследовании евро-
пейского опыта распространения социальных
предприятий, т.е. определения социальных пред-
приятий, их организационно-правовых форм, под-
O. V. Lyakh
66
Економічний вісник Донбасу № 4(38), 2014
держки социальных предприятий, а также в уста-
новлении, как этот опыт может быть применен в
Украине, особенно в регионе Донбассе. Выводы
исследования обеспечивают более целостное по-
нимание феномена роста сектора социального
предпринимательства в странах ОЭСР. Это способ-
ствует интерпретации темы исследования в мест-
ном контексте, выбору рекомендации относительно
того, правового закрепления социальных предпри-
ятий в Украине, и позволяет определить, какие
меры необходимы для ускорения роста сектора
социальных предприятий в Украине и в Донбассе,
который страдает от военного конфликта. Полу-
ченные результаты облегчают будущие исследова-
ния и практическую деятельности, связанную с
социальными предприятиями, преодолевая препят-
ствия, вызванные отсутствием юридического при-
знания общепринятого в ЕС определения социаль-
ного предприятия, социального предприниматель-
ства, а также отсутствием национальной статисти-
ки социальных предприятий и не принятием госу-
дарственной политики поддержки развития соци-
альных предприятий, даже для Донбасса, который
остро нуждается в росте этого сектора.
Ключевые слова: социальное предприятие, со-
циальное предпринимательство, социальная эко-
номика, третий сектор, некоммерческие организа-
ции, социальные инновации, ЕС, Украина, Дон-
басс.
Lyakh O. V. Development of Social Enterprises
as Way of Mitigating the Social Situation in the
Donbass
The aim of the paper is to investigate the Europe-
an experience of social enterprises disseminating, i.e.
the definition of social enterprises, their legal forms,
forms of social enterprises support, as well as to ex-
plore how this experience could be applied in Ukraine,
especially in the Donbas region. The findings from the
research provide a more holistic understanding of
growth of social enterprise sector in the OECD coun-
tries. This detail adds to an understand the researched
topic in the local context, puts forward recommenda-
tions on what is required to legitimize social enterprise
in Ukraine, and allows to determine what measures are
appropriate for fostering social enterprises sector
growth in Ukraine and in the region Donbass which is
suffering from military conflict. Outcomes facilitates
forthcoming research and practical activity connected
with social enterprises by overcoming the handicaps
caused by the lack of legal recognition commonly ac-
ceptable in EU definitions of social enterprise, social
entrepreneurship as well as the absence of a national
statistics of social enterprises and state policy for de-
velopment of social enterprises, even in case of the
Donbass that is urgently needed this sector growth.
Keywords: social enterprise, social entrepreneur-
ship, social economy, third sector, non-for-profit or-
ganizations, social innovations, EU, Ukraine, Donbass.
JEL R 22, R 58
Received by the editors: 24.11.2014
and final form 23.12.2014
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