Social Businesses in Russia and Eastern Europe Making Strides Despite 2020 Turmoil
The social business ecosystem in Russia and Eastern Europe is surviving amid the global pandemic, political upheaval, and war, laying the groundwork for future social change.
While the spread of COVID-19 has crippled small businesses in Eastern Europe and Russia, social enterprises are proving surprisingly resilient amid an increasingly crisis-ridden environment. Infection rates are peaking at new records in the region, and the pandemic has been eclipsed by other woes, from economic turmoil, unemployment, and poverty, to violent repression (Belarus) and open war (Armenia and Azerbaijan).
Small, young, and often based on weak business plans, social businesses have been among the most vulnerable operations in this volatile year. Although many have temporarily closed down or linger in “wait-and-see” mode without government support, a small group has been able to seize new opportunities amid the crisis. In adapting to the changing circumstances, they are welcoming new supporters and strengthening social solidarity in their countries.
For some, like Daria Alexeeva, a star in Russia’s budding social startup scene, the timing is just right. Her network of Charity Shops, selling used clothing collected in Moscow and other cities and donating proceeds to various charities, is growing in popularity as shoppers look for cheaper alternatives amid the economic crisis. In September alone, her foundation “Second Breath” registered a record collection of 86 tons of clothing.
Other social entrepreneurs like Tatyana Drozdova were forced to rethink their business model altogether. Drozdova’s organization, Young Old, provides commercial market research on the senior demographic to businesses and reinvests the profits into platforms and programs for the elderly. Her organization’s flagship event, the “Young Old Festival,” was a massive success in years past, attracting more than 15,000 seniors annually to a 2-day event on lifestyle and social health for the elderly. “This event could not go digital,” said Drozdova. “So we decided to do something else.”
While researching seniors and social isolation, she learned something surprising about the community she serves. “You think most elderly are looking for friends,” she said. “But what they really want is a romantic partner!”
So Young Old teamed up with one of Russia’s largest mobile operators to develop Older, a new dating app especially designed for seniors. With a first prototype ready, they are currently pitching the idea to Moscow’s small community of impact investors. “We have done what we tell our community to do: adapt swiftly and be flexible.”
The challenges are more formidable in Armenia, where all businesses are involved in the humanitarian response to the war with Azerbaijan that reignited in October. Social business, still in its infancy, is trying to adapt to the new social needs brought on by pandemic and war.
The Homeland Development Initiative Foundation (HDIF), one of the first social businesses in the country, used to sell traditional toys and souvenirs handcrafted by local village women in order to provide them with much needed income and economic opportunity. In March, they quickly switched to mask production. After selling over 20,000 masks, HDIF braced itself for a new wave of demand with rising COVID-19 infection rates. But instead, production has had to stop, at least temporarily, as the villages cope with the deprivations of war.
“Every day is a challenge,” says founder and director Timothy Straight, who normally exports the handmade items to the U.S., Germany, and China, dividing the proceeds among the craftswomen and the organization. Luckily, HDIF has several other projects running in parallel that are faring much better. One is selling jam and honey produced by a small eco center in the town of Berd. HDIF sells them to the Armenian Progressive Youth, a dynamic new NGO, which distributes them to the elderly, disabled, and evacuees from the Nagorno-Karabakh war zone.
Other small, socially oriented businesses surviving in the crisis are Kangaroo Delivery, which calls itself Armenia’s first online delivery platform and serves small businesses lacking delivery services while offering jobs to the socially disadvantaged. The Berqahavaq (Harvest) Project helps small farmers sell their produce in “harvest boxes,” which come in various sizes with reusable packaging. For each box purchased, the Harvest Project donates one box to refugees arriving from Nagorno-Karabakh.
Timothy Straight from HDIF says the war is doing even more than the pandemic to create a much-needed sense of community solidarity. “Young people are getting invaluable experience of what it means to work for society at large. When the war is over, there will be a new generation of socially engaged Armenians.”
In Belarus, classic social businesses like Inclusive Barista, a charity café that employs disabled people and raises money to support them, remain an exception. But because of the pandemic and the protest movement in opposition to President Lukashenka that has swept the country in recent months, regular commercial enterprises have been propelled into the broad wave of solidarity and social engagement.
By donating to hospitals and medical staff during the pandemic and, more recently, by supporting protesters, businesses have formed new allegiances and have been inadvertently drawn into public activism. In central Minsk, one café saw a surge of customers after it offered refuge to a group of protesters and then had its windows smashed by riot police. Similarly, people formed long queues at Little First Flowery Shop after the owner was detained and severely beaten by police, allegedly because white flowers carried by protesters had been purchased from his shop.
By comparison, social entrepreneurs seem privileged in Ukraine, where Western support and a business-friendly environment has spawned not only one of Europe’s most vibrant start-up scenes, but also the region’s richest ecosystem for social enterprises. “Ukrainians had their mobilizing moment back in 2014,” explains Artem Kornetsky, director of the School of Mindful Entrepreneurship.
While only 150 initiatives qualified as social businesses in 2017, there are now as many as 1000 businesses that fit the criteria of “social,” he estimates. This means that they invest part of their profit in a social cause, employ disadvantaged groups, promote social innovation, or work on solutions to social problems. “The crisis is speeding things up,” Kornetsky says, “weak business models are forced to close and those ready to move on are doing so faster.”
Successes range from a small bakery plus charity room set up in the village of Marinka near the war zone in Eastern Ukraine to the sleek and popular crowdfunding platform Big Idea. Launched by the small NGO Garage Gang, which promotes innovators in small Ukrainian cities, as a platform for its new partners, it is now the biggest crowdfunding site in the country — and a vibrant social innovation platform itself. Apart from empowering a colorful range of projects, startups, charities, and social businesses to find their own funding, it also offers an online space for deeper debate about issues in small communities and opportunities for residents. Big Idea has just added a new workshop site for social innovators to share ideas, trainings, and partnerships to boost collaborative, social change in Ukraine.
“For social business, crisis is always also opportunity,” Kornetsky says, pointing to increased interest in a wide range of accelerator programs, seminars, and conferences offered in many parts of the country. His own school has set up courses for social businesses with several universities, and even 15 high schools, to spread information about and understanding of social entrepreneurship.
As always, Kornetsky and his colleagues have their eyes firmly set on the next challenge. For all the favorable domestic conditions supporting it, social entrepreneurship in Ukraine remains largely dependent on Western donor support. To make social business more sustainable, Kornetsky and other experts are setting up the first Ukrainian Social Venture Fund to target home-grown investment in Ukrainian social business.
“The hope is that all of the seeds we are planting now will come to life after the crisis.”
Barbara von Ow-Freytag is a Berlin-based journalist, political scientist, and adviser to the Prague Civil Society Centre, an international NGO supporting and empowering civil society in Eastern Europe and Central Asia.