Why is the social enterprise sector in Lithuania, which has a potential of billions of euros, stagnating?

Viktorija Bražiūnaitė. Džoja Barysaitė photo

On 17 November, we celebrate Social enterprise Day worldwide and in Lithuania. On this occasion, I would like to openly share my insights on the situation of social enterprise in Lithuania and why we need to pay more attention to the development of this sector.

In many countries, this business model is valued and especially promoted by the Government because quite impressive figures demonstrate the value it generates. For example, in Quebec, a city the size of Vilnius, there are over 11 000 social enterprise enterprises employing 220 000 employees and 90 000 volunteers. They generate revenues of around 48 billion Canadian dollars. Social enterprises show tremendous potential.

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In Lithuania today, regulation of social enterprise is still in its infancy: we do not have a statutory definition of what social enterprise is, so it is difficult to regulate it and promote its sustainable development, while more than 2 million social enterprises are operating in Europe, which accounts for as much as 10 % of all EU enterprises: more than 6% of EU employees work in social economy enterprises. But, unfortunately, we are only at 0.6%, Estonia – at 6.2%, and Poland – at 2.3%.

What is the situation in Lithuania, and what is needed for more successful social enterprise development?

In the spring of 2015, the Ministry of Economy approved the Social enterprise Concept, and at the end of 2015, the Action Plan for the Promotion of Social enterprise 2015-2017 was approved. The plan included specific measures to create a favourable legal, financial and tax environment for social enterprise, promote a social enterprise culture and raise awareness.

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In 2016, the Ministry of Economy highlighted the recommendations of the Lithuanian Social enterprise Criteria, and the National Progress Programme 2014-2020 set a target of transferring 15% of public services to non-governmental organisations, social enterprises or other non-state sectors.

In 2017, the Government adopted a Resolution, “On the Approval of the Implementation Plan of the Government Programme of the Republic of Lithuania”, which provided for the initiation and adoption of the Social Enterprise Law, but no further decisions were taken in the legal framework.

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In 2018, a draft Law on the Transfer of Public Services to Social enterprise Entities was prepared using individual partnership instruments: public procurement, concession, and public-private partnership. The main objective of this measure was to promote the development of social enterprise by streamlining the process of public service delivery, i.e. not only for public services to be provided by budgetary and public institutions but also for the state or municipality to purchase them on the market from social enterprise entities. However, in the absence of a legal framework for social enterprise, this measure has not been popular.

Seven years have passed since the adoption of the “Social enterprise Concept”, which set out a clear roadmap for the development of the ecosystem, but things are moving very slowly: there is still no formal legal definition and no appropriate conditions for the sustainable and coherent development of the social enterprise ecosystem.

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In 2019, the Organisation for Economic Co-operation and Development (OECD) provided Lithuania with a set of recommendations and key objectives to enable the country’s sustainable growth of a social enterprise. However, it is difficult to promote its sustainable development without a legal status for social enterprise, an open and flexible approach of state institutions towards the creation and development of social enterprise, mutually agreed measures to promote social enterprise and clarity on institutional leadership. And above all, open dialogue. Also, social start-ups have no financial instruments for testing (verifying) social innovation and assessing its suitability for a specific context.

For several years now, the Lithuanian Social enterprise Association (LISBA) has been analysing international best practices and prerequisites for successful social enterprise, organising discussions among the main ecosystems, and preparing proposals to the responsible institutions on how to improve conditions. And right now, together with its partners, the European Diesis Network, is analysing the best practices of foreign legal systems for social enterprise.

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The feasibility study, together with LISVA’s recommendations for the development of social enterprise, is planned to be presented at the “National Dialogue on Social enterprise Development” event, organised by LISVA in partnership with Diesis Network, a European network covering more than 20 countries through its main national federations and support networks, which bring together more than 90,000 organisations and 1.2 millions of workplaces.

The event aims to discuss international best practices in legal frameworks and to pave the way for dialogue between key stakeholders in the Lithuanian ecosystem to accelerate the development of the social enterprise sector in the country. The event will feature speeches by high-level representatives of the United Nations, the European Commission and the OECD, as well as colleagues from other associations and practitioners. This initiative aims to address the current lack of open and transparent dialogue on the vision and directions for a breakthrough in this area.

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Several things are already emerging: the sustainable development of the social entrepreneurship ecosystem requires a conversation and an open dialogue between all actors in the ecosystem, clearly identifying the potential, needs and lessons learned. The proactivity and engagement of social entrepreneurs and the demonstration of the impact and change they create are particularly important.

Why is it essential to promote social entrepreneurship, especially now?

We face complex challenges such as climate change, digitalisation, rising inequalities and demographic change. In addition, the ongoing war in Ukraine and the energy and economic crises have added to the situation’s complexity and made us realise that we need to strive for inclusiveness, fight poverty and provide better social services. Moreover, as we overcome the immediate consequences of these crises, it is becoming clear that a fundamental change in our society is needed to achieve an even more sustainable model, both environmentally and socially. In this sense, social enterprise is at the forefront because of its commitment to putting people and the planet first.

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The potential of social enterprise is also recognised and valued by traditional business authorities. “Hannah Bernard, Head of Corporate Banking at Barclays, says: “Businesses across the spectrum have been tested to their limits during the pandemic, but the resilience and creativity demonstrated by social enterprises in continuing their growth and doing so much good – despite these challenges – is astonishing. Many of the societal and environmental challenges we face will only intensify, and we believe that social enterprise has many answers. We are proud to strengthen our support for these businesses, with expert help and new funding opportunities, as they continue to do great things in our society.”

The social and economic consequences of the war in Ukraine and the COVID-19 crisis make it more urgent than ever to move towards a resilient economy and society. Social enterprises worldwide are demonstrating an extraordinary ability to contribute to strengthening and building resilient communities and managing fundamental change while contributing billions of dollars to national economies. I am confident that, with an agreement and concerted efforts, we, too, can achieve a breakthrough in social enterprise.

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