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from Social Enterprises in Estonia, Finland and Lithuania: case studies and teaching resources

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Raminta Pučėtaitė, Vilnius University

The organization Workshops of Treasures is a typical case of social business with the status of a non-profit organization in a post-socialist context where social entrepreneurship is at an early development stage.

There are two types of social businesses in Lithuania. One type is social enterprises (SEs) which operate on the basis of the Law of Social Enterprises of the Republic of Lithuania (2004) and represent work integration social enterprises (WISE). The Law of SEs defines an SE as an entity that facilitates integration of socially excluded groups, e.g., disabled people, single parents raising children under 8 years of age, the long-term unemployed etc., into the labor market, and distinguishes two types of SE depending on the target group of socially integrated employees, i.e., a social enterprise and a social enterprise of disabled people. The law grants the right for these SEs to receive financial support from the state in the form of subsidies and tax benefits. The status of “social enterprise” can be obtained by an entity of almost any legal form. According to the data from National Labor Exchange, there were 177 SEs de jure at the beginning of 2019. Usually these organizations operate in the non-governmental sector providing low-skill social services. Despite its intentions to facilitate systemic social integration the Law has been criticized for failure to achieve the desired impact (Rusteikienė, Pučėtaitė, 2015; Varnienė, 2018). Although the missions of these organizations in the applications for the status of SE are of a social character, their implicit (and often primary) goal is often economic: social enterprises tend to employ people with minor disabilities who do not have considerable challenges in the labor market anyway to meet the criteria for compensation, offer cheaper services in the market and outcompete other companies in, e.g., public procurement. In most cases, they do not reinvest their profits in innovation, well-being of the target groups or scaling-up of their social impact.

The other type of social business in Lithuania is based on a broader definition of social entrepreneurship that can be found in academic literature, e.g., as a process of creating value by combining resources in new ways. These resource combinations are intended primarily to explore and exploit opportunities to create social value by stimulating social change or meeting social needs (Mair and Marti, 2006). This understanding is integrated in one of the prevailing definitions of social enterprises in Europe, i.e., the European Commission’s Social Business Initiative which defines a SE as an operator in the social economy whose main objective is to have a social impact rather than make a profit for its owners or shareholders. It operates by providing goods and services for the market in an entrepreneurial and innovative fashion. This concept is embedded in the Decree of the Minister of Economy of the Republic of Lithuania on the Approval of the Concept of Social Entrepreneurship (2015). Paradoxically, this concept is subordinate to the Law of Social Enterprises, which is based on a narrow understanding of SEs.

To promote social business in the country based on a wider understanding, the Decree of the Minister of Economy of the Republic of Lithuania on the Approval of the Action Plan for Promotion of Social Entrepreneurship in 2015–2017 was passed. This resulted in the amendments to the Decree of Social Entrepreneurship in 2016 which broadened the understanding of SE, defining it as an entity with 1) a social mission which makes a positive impact on society and environment in fields ranging from transportation and logistics, agriculture, tourism etc., to landscape cleaning, preserving the authenticity of Lithuanian culture, civil education etc.; 2) at least 50 percent of income from operations in the market with the aim of earning profits by employing people rather than relying on volunteers; 3) at least 50 percent reinvested profit; and 4) as an enterprise is independent of public or private organizations with other than social goals. Moreover, a bill for amending the Law of social enterprises and recommendations to public institutions about the models of gradual transfer of public services to SEs was developed in 2018. Although these amendments were not passed by the end of the spring session of 2019, the amendments to the Law of Public Procurement would allow the inclusion of social businesses in the group of service providers to which simplified public procurement procedures could be applied. These steps are considered important to improving the eco-system of SEs in general.

As there is no special status of social business, their number varies from 30 to 90 by different sources. The forms of these organizations range from non-governmental to private limited liability companies. However, even private companies share some characteristics of non-governmental ones by attempts to change social stereotypes, develop place-based identity of young people, contribute to safer environment of the city, and increase the welfare of families with children etc.

References

1. Decree of the Minister of Economy of the Republic of Lithuania on the Approval of the Concept of Social Entrepreneurship (2015). No. 4-207, 03/04/2015 (amended 29/08/2016, Decree no. 4-533).

2. Law on Social Enterprises of the Republic of Lithuania (2004). No IX-2251, 01/06/2004.

3. Rusteikienė, A., Pučėtaitė, R. (2015). Socialinis verslas kaip darniųjų inovacijų kūrimo laukas [Social business as a field for creating sustainable innovations]. In Pučėtaitė, R., Novelskaitė, A., Pušinaitė, R. (Eds.). Organizacijų etika, novatoriškumas ir darniosios inovacijos [Organizational Ethics, Innovativeness and Sustainable Innovations]. Vilnius: Akademinė leidyba, pp. 148 – 163.

4. Varnienė, H. (2018). Socialinių įmonių įstatymas pripažintas kaip sudarantis sąlygas neskaidriam ir neefektyviam lėšų naudojimui [The Law of Social Enterprises is acknowledged as providing conditions for untransparent and ineffective use of finance]. 15min.lt, February 9, 2018. Available at: https://bit.ly/3ncCK1r. Accessed on 10-12-2019.

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