RESEARCH PRIVATE SECTOR ENGAGEMENT IN COMMUNITY DEVELOPMENT
Kramatorsk, 2019 Author:
Valerii Kokot This research was prepared as part of the United Nations Recovery and Peacebuilding Programme (UN RPP) under the financial support Master of Public of the European Union. Administration
UNDP Advisor The content of this publication is the sole responsibility of its author and in no way reflects the views of the United Nations Recovery and Peacebuilding Programme or the European Union.
The United Nations Recovery and Peacebuilding Programme (UN RPP) is being implemented by four United Nations agencies: the United Nations Development Programme (UNDP), the UN Entity for Gender Equality and the Empowerment of Women (UN Women), the United Nations Population Fund (UNFPA) and the Food and Agriculture Organisation of the United Nations (FAO).
Twelve international partners support the Programme: the European Union (EU), the European Investment Bank (EIB) and the governments of Canada, Denmark, Germany, Japan, the Netherlands, Norway, Poland, Sweden, Switzerland & the UK. Table of Contents
Summary 5
Introduction 8
1. The private sector and its engagement in community development 9
2. Models for private sector engagement in community development 10
2.1. Charitable support 10
2.2. Pro Bono 13
2.3. Corporate Social Responsibility 14
2.4. Social entrepreneurship 21
2.5. Impact Investment 31
2.6. Cooperation 34
3. Status of private sector engagement in individual communities in Donetsk and Luhansk Oblasts 38
3.1. Donetsk Oblast 39
3.1.1. Novhorodske 39
3.1.2. Druzhkivka 41
3.1.3. Velyka Novosilka 42
3.2. Luhansk Oblast 43
3.2.1. Sievierodonetsk 43
3.2.2. Bilovodsk 44
3.2.3. Shchastia 45
Conclusion 47 List of Abbreviations: AIC — Agro-Industrial Complex NPE — Natural Person- APCS — Automated Process Entrepreneur Control System NPK — Nitrogen-Phosphorus- ATC — Amalgamated Territorial Potassium Fertiliser Community NPP — Nuclear Power Plant ATO — Anti-Terrorist Operation OJSC — Open Joint-Stock CBO — Community-Based Company Organisation PCF — Production and CC — Cultural Centre Commercial Firm CE — European Compliance PFE — Private Farming Label Enterprise CHPP — Central Heating and PJSC — Public Joint Stock Power Plant Company CSO — Civil Society Organisation PR — Public Relations CSR — Corporate Social PR&DE — Private Research and Responsibility Development Enterprise DTEK — Donbas Fuel and PrJSC — Private Joint Stock Energy Company Company EC&I — Electrical Control & R&DE — Research and Instrumentation Development Enterprise EPR — Extended Producer R&DI — Research and Design Responsibility Institute EU — European Union RSA — Regional State Administration FAO — Food and Agriculture Organisation of the United SE — Social Enterprise Nations SFRD — State Fund for Regional HEE — Higher Educational Development Establishment SME — Small and Medium-Size HR — Human Resources Enterprises IDP — Internally Displaced SPA — Scientific Production Person Association ISO — International Organisation SPE — Small Private Enterprise for Standardisation UN — United Nations JFO — Joint Forces Operation UNDP — United Nations LLC — Limited Liability Company Development Programme M&CS — Monitoring and Control USIF — Ukrainian Social System Investment Fund NGO — Non-Governmental WNISEF — Western NIS Organisation Enterprise Fund Summary
The armed conflict in eastern Ukraine has radically changed the life of local communities on the 'contact line'. In addition to serious issues of public security and social cohesion, local communities are acutely lacking new approaches, expertise and resources for the reconstruction and development of their territories.
Effective collaboration with the private sector is a prerequisite for the success of most communities. Private firms often bring innovation, experience and financial resources into a community. This is particularly important for the reconstruction of communities in eastern Ukraine.
This study highlights the main trends, barriers and prospects for socially responsible business development in Ukraine, with an emphasis on the eastern regions. It examines private sector engagement in the development of three communities in Donetsk Oblast (Velyka Novosilka, Druzhkivka, Novhorodske) and three in Luhansk Oblast (Bilovodsk, Sievierodonetsk, Shchastia).
This research was carried out based on the analysis of information from open sources, interviews with business representatives, local authorities and civil society organisations in communities on the 'contact line'.
While the study confirmed the existence of successful local development experiences involving the private sector, it also identified a number of limiting factors that make it impossible for local communities to interact effectively with the private sector.
In communities where large businesses operate, the most common model for collaboration with the private sector is corporate social responsibility programmes. In particular, the communities of Shchastia and Novhorodske cooperate with DTEK and Metinvest Group respectively. Large enterprises also contribute to corporate social responsibility programmes by providing charitable assistance and pro bono services.
Small and medium businesses are mainly involved in the development of host communities by providing charitable assistance based on requests from those in need or local authorities. Small businesses sometimes address social and other important issues in the community on their own initiative and at their own expense.
Social entrepreneurship is relatively weak both in Ukraine as a whole and in the eastern regions in particular. In most cases, non-profit civil society organisations engage in social entrepreneurship, while local businesses only examine the possibility.
Practically the only example of impact investment in Ukraine that meets the majority of applicable criteria is the 'Promprylad. Renovation' project in Ivano-Frankivsk. So far, no such project exists in eastern Ukraine.
In most cases, the cooperative model of private sector engagement in community development in eastern Ukraine is represented by a small number of agricultural cooperatives. The potential to develop both rural and urban communities (industrial cooperatives) is barely utilised compared to other countries.
5 Summary
The research identified a number of limiting factors that hinder — and sometimes even preclude — greater private sector engagement in the development of host communities. This is primarily due to a lack of understanding by both businesses and local authorities of the shared value of economic and social improvements in the community, which increase the competitiveness of both business and the community as a whole in the long run.
The research also revealed a lack of awareness among local entrepreneurs and local government officials regarding effective models of cooperation with the private sector in Ukraine, which can be successfully applied to restore territories on the 'contact line'. There is an element of distrust, and often a bias, among local government representatives towards business structures and vice versa. In many cases, this requires external mediation and/or leadership to develop positive experiences in implementing joint projects.
In eastern Ukraine, local development institutions capable of providing service support to engage the private sector in cooperation with the community are poorly represented. These services include (but are not limited to) identifying problems in community, generating ideas to overcome them jointly, attracting additional resources, developing and implementing projects, promoting success stories, etc.
An important factor limiting more effective private sector engagement in community life is the lack of human and financial resources, both in local businesses and local authorities. Despite rather strong representation of international organisations in eastern Ukraine, their technical assistance could be more focused on enhancing private sector engagement in affected communities (management and financial consulting, grant support, exchange programmes, etc.).
The research resulted in number of recommendations to improve private sector engagement in local development, in particular:
• To develop a methodology for involving the private sector in the local development of communities affected by the armed conflict in eastern Ukraine (based on established and effective models of private sector engagement in the development of host communities).
• To develop and conduct an applied training course on private sector engagement in local development for owners/managers of business structures, local government officials, and representatives of civil society organisations.
• To develop a programme and conduct study visits on the application of different models of private sector engagement in local development in successful communities in eastern and other regions of Ukraine and abroad.
6 Summary
• To develop an online course on involving the private sector in local development based on materials from training and study visits to successful communities.
• To introduce a grant support programme in communities affected by the armed conflict in eastern Ukraine to implement joint projects involving local socially responsible businesses (co-financing).
• To organise and conduct a Socially Responsible Business Forum to demonstrate successful models of private sector engagement in community development.
This research can be of use to representatives of local government, businesses, civil society organisations, and international organisations focused on involving the private sector in local community development.
7 Introduction
On August 19, 2019, the management of 180 global corporations from the Business Roundtable network (including Apple, Boeing, FedEx, and General Motors) issued a statement claiming that profit is no longer their ultimate goal. From now on, their corporate goal will be to satisfy the interests of all stakeholders — consumers, employees, suppliers, local communities and their shareholders1. The basis of this public statement on the revision of the corporate giants' approaches to doing business was a public inquiry. According to the Cone Communications Millennial CSR survey conducted in the U.S. in 2015, nine out of ten residents under the age of 34 are willing to change their consumer preferences in favour of brands pursuing a certain social goal. More than 60% of respondents want to work for responsible businesses, even if they offer a lower salary. Around 80% of consumers want to buy products whose production promotes positive social or environmental change2. A clear example that illustrates the spread of responsible business around the world is the rate of growth in the number of member companies in the Global Compact network, an initiative that promotes the ideas of corporate social responsibility (CSR). Since its inception in 2000, more than 12,000 companies around the world have joined the initiative — about 3,000 of which joined within the last three years. Ukraine has not missed out on this trend. As of October 2019, 35 representatives of the private sector are members of the Global Compact initiative3. Out of the 400 Ukrainian enterprises and organisations surveyed by the Kyiv International Institute of Sociology in February–March 2018, 83% implement a policy of social responsibility. The majority of respondents (75%) understand social responsibility as a policy for the development and improvement of staff working conditions. One third of respondents view it as investment in the development of a region, along with consumer protection and support. Just over a quarter of respondents understand it to be assistance for participants of the anti-terrorist operation (ATO) in eastern Ukraine and residents of conflict-affected regions, as well as charitable assistance and environmental protection4.
The purpose of this research is to examine the state of Ukrainian private sector engagement in community development using the most common models of such activities — charitable aid, pro bono, corporate social responsibility, social entrepreneurship, impact investment, cooperation. This study highlights the main trends, barriers and prospects for socially responsible business development in Ukraine, with an emphasis on the eastern regions.
1 https://opportunity.businessroundtable.org/wp-content/uploads/2019/09/BRT-Statement-on-the-Purpose- of-a-Corporation-with-Signatures-1.pdf 2 http://www.conecomm.com/research-blog/2015-cone-communications-millennial-csr-study 3 https://globalcompact.org.ua/members/ 4 http://csr-ua.info/csr-ukraine/library/дослідження-розвиток-ксв-в-україні-201/
8 01 THE PRIVATE SECTOR AND ITS ENGAGEMENT IN COMMUNITY DEVELOPMENT
While different stakeholders have different understandings of the private sector and its engagement in community development, this research proposes the following definitions.
The private sector includes all organisations whose main purpose is to make a profit through both the production of goods or services and/or the commercialisation of existing products. These organisations include financial institutions and intermediaries, small and medium-sized enterprises (SMEs), private entrepreneurs, farmers, cooperatives and large corporations operating in the formal and informal sectors. For the purposes of this research, independent foundations, non-governmental organisations, civil society organisations, and business associations in particular are also included in the private sector.
The engagement of the private sector in community development occurs when community members go beyond traditional business activities and contribute to sustainable community development, including:
• implementing community development projects. • using inclusive business models, creating inclusive value chains. • adopting and supporting common responsible business practices. • integrating environmental issues into their business activities. • translating human rights principles into business activities. • promoting gender equality. • improving the accountability and transparency of their business activities. Training on private sector engagement Kramatorsk (by Artem Hetman) • bringing modern technologies to host communities, etc.
9 02 MODELS FOR PRIVATE SECTOR ENGAGEMENT IN COMMUNITY DEVELOPMENT
02.1 Charitable support Charitable support is one of the most common models of private sector engagement in community development in Ukraine. It consists of businesses providing funds, material non-monetary aid or services and other resources to the community and is an important factor in involving businesses in the solution of local problems.
Charitable support is provided both directly to those who need it and through the growing number of charitable organisations. As of April 2019, 18,557 charitable organisations were registered in Ukraine (17,897 as of April 2018, 17,062 as of April 2017)5.
According to a survey conducted by the Zagoriy Foundation, 17% of the funds of charitable organisations comprise donations from businesses, while 19% of fundraising is carried out by charitable organisations in eastern Ukraine6.
Since 2015, the tax burden on business benefactors has been somewhat reduced. Businesses making charitable donations to civil society organisations can receive a tax deduction of up to 4% of the previous year's income. In addition, since 2017, corporate donors supporting community-based sports organisations can apply for tax deduction of up to 8% of the previous year's income.
Factors influencing the course and form of a business's charitable 5 http://www.ukrstat.gov.ua/edrpoy/ukr/ EDRPU 2019/ks opfg/ks opfg 0119.htm activity may include the personal values of the company founder, the 6 https://zagoriy.foundation/charity funds conditions and level of the company's development, its corporate report.pdf social responsibility, public relations quality, and the level of 7 https://ufb.org.ua/sektor-blagodijnosti/ development and professionalism of the civil society organisations blagodijnist-biznesu/jak-kompanii- zapochatkuvati-programu-z- cooperating with the company (in particular community-based and korporativnoi-filantropii.htm charitable organisations). 7
10 02. MODELS FOR PRIVATE SECTOR PARTICIPATION IN COMMUNITY DEVELOPMENT 02.1 Charitable support
8 http://ufb.org.ua/rating/blago- The distribution of charitable support in 2018 according to the charts?currentYear=2018 Ukrainian Philanthropists Forum is presented in Chart 1.8
Chart 1
Types of charitable 39% | Targeted support to support, 2018 individuals 37% | Support to institutions and organizations 13% | Support to territorial communities 11% | Grants
Businesses choose the most convenient way to perform charitable activities: via financial resources, goods and property, time, professional skills of employees, etc. Both the form of charitable support and the corresponding charity instruments influence this choice. Financial donations may take the form of targeted charitable support for particular community members (e.g. for treatment), implementing in-house charitable programmes (e.g. supporting a village sports team), implementing grant programmes or establishing a corporate foundation.
9 http://ufb.org.ua/rating/blago- Chart 2 shows trends in charity expenditure for 2017–2018 according charts?currentYear=2018 to the Ukrainian Philanthropists Forum.9
Chart 2
Trends in charity less than UAH 1 million expenditure, 2017–2018 13 269 776 10 087 015 from UAH 1 to 10 million 174 619 188 150 596 692 from UAH 10 to 100 million 552 413 935 573 148 789 Expenditure for 2017 more than UAH 100 million 1 086 340 976 Expenditure for 2018 1 081 408 951
11 02.1 Charitable support 02. MODELS FOR PRIVATE SECTOR PARTICIPATION IN COMMUNITY DEVELOPMENT
The most common non-financial instrument for private sector charitable giving is the provision of goods or services, namely:
• Products/goods produced by the company (clothes and shoes, food, medicines, books, etc.).
• Equipment produced/sold or owned by the company (computers, washing machines, vacuum cleaners, wheelchairs, tractors, medical equipment, etc.).
• Premises or land belonging to the company (conference or seminar rooms, gymnasiums, canteens, event rooms, accommodation and office space)
There are many examples of businesses providing monetary and non-cash charitable support directly to community residents or organisations that need it.
This is particularly important in rural areas, where virtually all agricultural enterprises provide at least some degree of charitable support to their communities. For example, since the beginning of 2016, the 'Agro-business KPP' farming enterprise (in Makiivka, Kreminna Raion, Luhansk Oblast) has provided charitable support for improving the village (repairing the bridge and pedestrian crossings over the Zherebets river), financed the repairs of the Petro-Pavlivskyi Church, and provided material support to Makiivka secondary school (repairing a school classroom where children from the zone of ATO/ JFO will study, arranging free trips for children to concerts and the circus).10
In most cases, businesses give charitable support to organisations by providing goods or services: school repairs, buying uniforms, arranging buses for trips, organising and running festivals, etc. For example, the Rud company (Zhytomyr) does the lion's share of its charitable support by transferring funds to those who need them, though its donations of products and services are also significant. For example, on May 18, 2019 in Sloviansk, Donetsk Oblast, specialists from Rud held an Ice Cream Festival for children, with free refreshments and entertainment11.
Owners of large businesses often create charitable organisations through which they help communities. An example of this is the Rinat Akhmetov Foundation, which is active in eastern Ukraine. Since the outbreak of the armed conflict in eastern Ukraine, the Foundation's activities have intensified in 37 localities along the 'contact line'. In particular, almost 19,000 people received food packages in September 2019, including children, pensioners, and people with disabilities. Since 10 http://old2.niss.gov.ua/content/ the beginning of the armed conflict, the Foundation has distributed articles/files/111Zapiska-Hodgson-Sots- pdprimnitstvo-zatverdzhene-4cef0.pdf more than 12.3 million food packages in the east of the country.12 11 https://rud.ua/press-center/news/ peremozhets-konkursu-blagodiyna- ukraina/ 12 https://fund.fdu.org.ua/ua/news/18617
12 02. MODELS FOR PRIVATE SECTOR PARTICIPATION IN COMMUNITY DEVELOPMENT
02.2 Pro Bono Under generally accepted rules, the term pro bono (Latin: Pro bono publico, literally — for the public good) is understood to refer to professional services provided voluntarily and free of charge for the benefit of society, particularly for those who are unable to pay for such services themselvesю.13 The concept of pro bono was first promoted in Ukraine duringAll- Ukrainian Pro Bono Day, organised by the Ukrainian Bar Association in 2011. The pro bono movement is becoming more and more popular in the Ukrainian business community. This is matched by a significant increase in the number of public initiatives and the amount of public involvement in the development of civil society. In 2010, Ukraine ranked 150th in the World Giving Index, with only 5% of the population involved in volunteer work. Within 8 years, that number had increased to 29%. As of 2018, Ukraine had moved up the ranking to 81st place.
The Pro Bono Club Ukraine organisation was established in early 2018.14 The founder of the organisation is Odesa philanthropist Yehor Hrebennikov. Within a year, the Club's activities attracted the equivalent of USD 44,000 in intellectual support.15 The European Pro Bono Summit 16 was held in Kiev in September 2019. It provided an opportunity to examine models of corporate pro bono activity in Great Britain, Germany, Belgium and Hungary, as well as the successful experiences of Ukrainian companies.
Today, Ukrainian companies of different profiles have many opportunities to carry out their activities, for example:
• A company specialising in human resources management can audit the HR system of a community-based organisation.
• A company specialising in financial management can develop a financial and accounting system for a charity foundation.
• A construction company can make repairs to an orphanage.
• A PR-agency can prepare an annual report for a local environmental foundation.
• An IT company can develop software to provide accounting, planning and service delivery for older people in need of assistance.
• A beauty salon can give haircuts to children with disabilities once a month, etc. 13 http://yur-gazeta.com/publications/ practice/inshe/pro-bono-poukrayinski- Representatives of the private sector who provide pro bono services pro-shcho-govorit-reyting-lideri- may not always classify them as such, but free professional services rinku--2017.html are becoming increasingly popular in Ukraine due to the armed 14 https://probono.org.ua conflict in the east. These services mainly cover internally displaced 15 https://biz.liga.net/all/all/cards/chto- takoe-rro-bono-i-pochemu-eto-vajno- persons and veterans of ATO/JFO from Donetsk, Luhansk and other dlya-ukrainy-kartochki-4196149 oblasts adjacent to the conflict zone, as well as other community 16 https://probonosummit.eu/ua representatives in need.
13 02. MODELS FOR PRIVATE SECTOR PARTICIPATION IN COMMUNITY DEVELOPMENT
02.3 Corporate Social One of the most common types of socially responsible Responsibility business is corporate social responsibility (CSR). The definition of CSR was proposed in an EU Green Paper in 2001: 'a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis'.
Despite the fact that CSR in Ukraine has been developing for over 15 years, the level of understanding of the essence and principles of social responsibility is quite low. According to the research 'CSR Development in Ukraine 2010–2018' 18, only half of companies with CSR policies have a social responsibility strategy, and only a quarter of companies have a budget for implementing social responsibility programmes and activities. In most companies, coming up with ideas for programmes and developing plans to implement them is the responsibility of management.
There are widespread stereotypes about the relatively large financial resources required to implement CSR programmes and activities. Additionally, research evidence shows that some Ukrainian companies lack information and positive examples of the implementation of social responsibility. Only a small fraction of companies are aware of organisations that can help implement CSR.19
In contrast to Ukrainian companies, American and British Fortune Global 500 firms spend over USD 15 billion annually on corporate social responsibility development. The management of 40% of these companies strongly believe that solving social problems should be a main component of their organisation's business strategy.20
According to the Concept of the National Strategy of Social Responsibility of Business 21, three main aspects of business social responsibility in Ukraine can be outlined:
• Compliance with legally defined obligations to the state and society (payment of taxes, health and safety at work, observance of employees' rights, consumer rights, environmental norms) and industry standards.
• Minimisation or elimination of the negative impact of business 17 https://ec.europa.eu/transparency/ on society and risk management (e.g., human rights violations or regdoc/rep/1/2001/EN/1-2001-366-EN-1-0. environmental pollution). Pdf 18 http://csr-ua.info/csr-ukraine/wp- • Enhancing the positive impact of business on society and value content/uploads/2018/10/CSR 2017 creation through innovation, investment and partnerships aimed reserch-1.pdf at social and environmental well-being (e.g. job creation, social and 19 http://csr-ua.info/csr-ukraine/wp- content/uploads/2018/10/CSR 2017 economic development, conflict resolution). reserch-1.pdf 20 https://www.ft.com/content/95239a6e- According to Tetiana Sakharuk, Head of the UN Global Compact in 4fe0-11e4-a0a4-00144feab7de Ukraine, there are several stages of development to CSR in Ukraine:
14 02. MODELS FOR PRIVATE SECTOR PARTICIPATION IN COMMUNITY DEVELOPMENT 02.3 Corporate Social Responsibility
21 http://svb.ua/sites/default/files/201108 "It usually all starts with charity/sponsorship. A company is asked koncepciya nacionalnoyi strategiyi svb. to provide material assistance. But unfortunately, charity does not pdf lead to sustainable development. Having realised this, companies 22 https://tsn.ua/groshi/scho-take- korporativno-socialna-vidpovidalnist- move to a new level — short-term partnerships (e.g. annual projects). rozpovidayemo-na-prikladi-uspishnih- Only much later do businesses conclude that it's necessary to ukrayinskih-kompaniy-1267650.html build long-term strategies to develop the territories in which they 23 https://pdfs.semanticscholar.org/53c 0/606a0d6f7d01434039bf7039f8e48f95 operate. When a company strives to improve living standards in the fd06.pdf community and find points of growth together with the community, 24 https://bit.ly/33nuem2 it creates maximum economic benefit. This partnership involves the 25 https://bit.ly/32s3Aap development of local communities, whose active participation is essential in promoting reform and investment".22
Ukrainian companies do not yet fully understand the benefits of creating shared values with the community to develop their business. The importance of this approach was outlined in the Concept of Common Value proposed by Harvard researchers Michael Porter and Mark Kramer in 2011. The Concept is defined as"the policy and practice of simultaneously promoting economic and social improvements in the communities in which a firm operates, thereby enhancing its competitiveness".23
A dispute in Novhorodske (Donetsk Oblast) in autumn 2019 demonstrates this lack of understanding of common value. Representatives of Inkor & Co LLC, member of the Metinvest Group (the only large enterprise in the settlement), and the Novohorodske village council see different priorities in the implementation of an already-signed agreement on social partnership. External mediation is required to find a common language to progress with projects for 2020.24
There have been a number of activities promoting corporate social responsibility in Ukraine for several years running. In particular, the Centre for CSR Development holds annual contests in CSR best Discussion of existing social partnership practices (cases). The 2018 contest was devoted to implementing programmes in Novhorodske township of 7 (out of 17) Sustainable Development Goals by Ukrainian (by Oksana Trehubchak) companies. The competition resulted in a compilation of 19 cases on good health (Goal 3), quality education (Goal 4), decent work (Goal 8), reducing inequalities (Goal 10), sustainable development of cities and communities (Goal 11), responsible consumption and production (Goal 12) and partnerships for sustainable development (Goal 17). These cases demonstrate the diversity of approaches to CSR development in Ukrainian companies (see Table 1).25
15 02.3 Corporate Social Responsibility 02. MODELS FOR PRIVATE SECTOR PARTICIPATION IN COMMUNITY DEVELOPMENT
Table 1 Sustainable Development Goals
Examples of CSR 01. GOOD HEALTH AND WELL-BEING (GOAL 3) practices in Ukraine Company Name Best Practice Description M.C.JI Lotteries as a Supporting a children's football team, Foundation for the involving company employees in football Development of Children's Football in Ukraine
WATSONS Let's Overcome Raising funds for the treatment of UKRAINE Cancer Together — children with cancer in Ukraine Dopomishka. NEBESNA Nebesna Krynytsia Involvement of corporate sector KRYNYTSIA CUP corporate football employees in active recreation, tournament establishing their own football teams
02. QUALITY EDUCATION (GOAL 4)
Company Name Best Practice Description
1+1 Right to Education Restoration of the education system for children undergoing long-term hospital treatment
UKRGAS On guard for Energy Establishment of an educational project VYDOBUVANNYA Independence for schools and HEE that familiarises students with gas production in Ukraine. АСТАРТА IT Education in Rural Introduction of a computer literacy Areas course for schoolchildren and adults in rural areas ІТ-ІNTEGRATOR National Competitions Popularisation of scientific and technical for Schoolchildren specialties, holding a competition to on Modeling STEAM attract media and the public House Smart Devices
ЕРАМ The eKidis project – Familiarising children with the IT field Social Investment in in the form of a game, holding themed Career Guidance for events around forming ecological the Future Generation awareness in children and parents.
PRYKARPATTIA- Children and Youth Creation of a leadership school for the OBLENERGO Studio of Power children of workers, helping them to Engineers — Making discover their potential as individuals in Teenagers More Active their personal and social lives
KYIVSTAR Joint Kyivstar and Providing high-quality modern Gocamp educational knowledge to students in schools in rural project areas in order to reveal key concepts of innovative development, globalisation of English language learning processes and entrepreneurial culture
03. DECENT WORK AND ECONOMIC GROWTH (GOAL 8)
Company Name Best Practice Description
DELOITTE Building a Values- Introduction of a system of company driven Organisation values, uniting employees around common priorities based on corporate culture of values
16 02. MODELS FOR PRIVATE SECTOR PARTICIPATION IN COMMUNITY DEVELOPMENT 02.3 Corporate Social Responsibility
Sustainable Development Goals
03. DECENT WORK AND ECONOMIC GROWTH (GOAL 8)
Company Name Best Practice Description SOFTSERVE HealthMatters Implementation of a set of measures corporate and initiatives designed to create programme more comfortable working, leisure and recreational conditions for the company's employees
04. REDUCING INEQUALITIES (GOAL 10)
Company Name Best Practice Description
AUCHAN How Digital Implementation of company applications Technologies Make the to provide affordable communication for World Accessible to people with hearing impairments Deaf People
OSCHADBANK Ramps for Society Programme to ensure equal access to banking services for people with disabilities, opening of inclusive branches
05. SUSTAINABLE DEVELOPMENT OF CITIES AND COMMUNITIES (GOAL 11)
Company Name Best Practice Description ENERGOATOM Support for Local Territory development programmes, Communities assistance for local communities, development of social infrastructure in NPP satellite towns
ОККО Please Buckle Up! Improving driving culture and road safety Road safety
06. RESPONSIBLE CONSUMPTION AND PRODUCTION (GOAL 12)
Company Name Best Practice Description
The Ukrainian Introducing Encouraging producers and consumers Packaging and Extended Producer to collect packaging waste separately Environment Responsibility (EPR) Coalition
GOODVALLEY Zerowaste project Creation of a programme and (implementation arrangement of sites for separate waste of a modern waste collection, popularisation of waste sorting management system) among the population
07. PARTNERSHIPS FOR SUSTAINABLE DEVELOPMENT (GOAL 17)
Company Name Best Practice Description
DTEK Project 'CityFEST: A project aimed at changing values Open Space' – through self-organisation and organising city experiencing joint action. Project festivals values: eco-friendly thinking and action, openness to innovation and experimentation, equality of opportunities
17 02.3 Corporate Social Responsibility 02. MODELS FOR PRIVATE SECTOR PARTICIPATION IN COMMUNITY DEVELOPMENT
One example of CSR development is the activity of DTEK, which implemented the 'Social Partnership 2018' Programme.26 The programme applies to all communities where DTEK facilities operate, including in the east of Ukraine. The main areas and priorities of the programme are energy efficiency in the communal sector, health care, development of the business environment, development of socially important infrastructure and increasing community activity.
According to the social partnership programme, DTEK believes that a systematic approach to solving problems alongside other stakeholders (authorities, civil society, other businesses) is the most effective method, so it relies on partnership projects.
Figure 1
COMMUNITY SUPPORT 90 | Social infrastructure IS THE FUTURE OF 51 | Energy efficiency UKRAINE 27 182 37 | Increasing community projects activity implemented by 3 | Healthcare DTEK in 2018 1 | Business environment development
55 territories | Project coverage
The main goal of social partnership strategies is to increase the comfort level of living and improve the living environment and conditions for comprehensive development for residents of the territories. This is achieved through a system of goals and objectives defined in each of the selected social partnership priorities. These activities by DTEK in 55 territories of business activity enabled the implementation of 182 diverse projects in 2018 alone (see Fig. 1).
CSR is particularly important in rural areas, where the need for infrastructure changes and various kinds of community amenities is highest. Table 2 presents the areas of implementation of socially responsible programmes by successful domestic agricultural holdings.
26 https://spp-dtek.com.ua/uk/o- programme/ 27 https://spp-dtek.com.ua/uk/o- programme/
18 02. MODELS FOR PRIVATE SECTOR PARTICIPATION IN COMMUNITY DEVELOPMENT 02.3 Corporate Social Responsibility
Table 2
Areas of corporate Company name Key CSR areas social responsibility of UkrLandFarming • industrial safety Group • personnel development companies in Ukraine's • environmental protection 28 • regional cooperation AIC • social policy • charity Kernel Group • environmental preservation • responsibility for staff • local community support • product responsibility
Myronivsky • personnel care Hliboproduct • animal care PrJSC • sustainable development • environmental protection • biosafety • quality control • modern technologies • care for consumers of products
ROSTOK-HOLDING • employee care Group • environmental protection • social projects
AgroGeneration • environmental management • new technologies • personnel training • charity • social improvement in regions where present NIBULON, LLC • providing conditions for obtaining basic secondary education • improving the level of medical services • developing village infrastructure • protecting and preserving the environment • implementing new energy-saving technologies in production • equal opportunities and better working conditions Astarta-Kyiv • personnel development • territory development • sustainable agriculture development • environmental protection • transparency and openness of operations • charity • work with suppliers Mriya Agro • personnel development and training Holding • cooperation with specialised educational institutions • introduction of innovations and modern technologies • development of rural communities and infrastructure in areas where the company operates • formation of corporate culture
To ensure successful development of CSR, it is important to identify stakeholders in community cooperation. For example, Myronivsky 28 http://www.economyandsociety.in.ua/ journal/18 ukr/55.pdf Hliboproduct PrJSC defines stakeholders as "people or groups of 29 https://www.mhp.com.ua/library/file/ people who influence the company and who are influenced by the procedury-mhp-2019-ukr-2.pdf company" (see Table 3).29
19 02.3 Corporate Social Responsibility 02. MODELS FOR PRIVATE SECTOR PARTICIPATION IN COMMUNITY DEVELOPMENT
Table 3
Community development Key stakeholders Stakeholder interests in community development stakeholders Employees of Myronivsky Hliboproduct Decent, comfortable and safe PrJSC and their families working conditions, motivation, training and development of employees
Landlords and their families Mutually beneficial terms of cooperation: rent, financial and non- financial support of lessors, etc. Residents of territories where Mutually beneficial cooperation in Mironivsky Hliboproduct PrJSC social, environmental, cultural and operates other areas Local authorities in regions where Mutually beneficial socio-economic present cooperation
Charity foundations and community- Implementation of common social, based organisations environmental, cultural and other projects Educational institutions, including Providing decent educational schools, vocational institutions, conditions, excursions and universities internships for students with employment prospects
Business associations and small and Mutually beneficial partnership, medium-sized businesses experience exchange, infrastructure development
Media Dissemination of information about the holding companies' activities, communication of actual and reliable information through mass media to all stakeholder groups
As a rule, each company that implements CSR programmes has its own focuses. For example, Mriya Agro Holding became a pioneer in popularising the cooperative movement in Ukraine. With the company's assistance, dozens of diversified cooperatives are now operating quite successfully in the country, which allows villagers to come together to produce, sell and even process products, forming large batches and setting more favourable prices. Mriya has allocated a separate budget for developing its cooperative movement. In 2017, this amounted to UAH 1.3 million, which is UAH 430,000 more 2016's budget. The funds were allocated to support and expand existing cooperatives and create 10 new ones, including dairy, berry, beekeeping and tillage cooperatives. 30
Since 2016, HarvEast agricultural holding has been implementing a large-scale social partnership programme in rural areas of Donetsk Oblast where it has a presence. Based on the signed seven-year 30 http://ucab.ua/ua/pres sluzhba/ novosti/u 2017 rotsi agrokholding mriya memorandums of cooperation, 50 projects worth UAH 10 million spryamuvav 215 mln grn na sotsialni were implemented in 2017 alone. These include the reconstruction proekti i splativ 4438 mln grn podatkiv of water pipes in villages, the provision of street lighting, repair and 31 http://agroportal.ua/publishing/ analitika/sotsialnaya-kukhnya-retsepty- construction work in educational institutions, the installation of agrokholdingov/# playgrounds, etc.
20 02. MODELS FOR PRIVATE SECTOR PARTICIPATION IN COMMUNITY DEVELOPMENT 02.3 Corporate Social Responsibility
Social initiatives by local people are supported financially through the 'My Village — Let's Make it Better Together' mini-grants competition conducted by the HarvEast company. This led to the establishment of the 'Oriana' youth innovation centre in Soniachne (Volnovakha Raion), and the provision of new professional uniforms and equipment for a sports and cultural club in Vilne and a bicycle team from Manhush Raion.
An important objective of HarvEast is to help create new jobs through the development of utility companies and agricultural cooperatives.
02.4 Social entrepreneurship Social Entrepreneurship (SE) is a three-pronged business that unites commercial, social and environmental goals. Social entrepreneurs solve social and/or environmental problems in communities. Their focus is on using the income generated from their business activities to achieve economic and social benefits.
The legislation of Ukraine does not define social enterprises and does not contain any specific regulations governing the activities of such enterprises. However, the activities of enterprises of community- based organisations for persons with disabilities (which can be termed as social) are regulated additionally. In particular, legislation provides for specific tax incentives for such enterprises in article 14-1 of the Law of Ukraine 'On the Fundamentals of Social Security for Persons with Disabilities in Ukraine'. Such enterprises must obtain permission to take advantage of tax exemptions.
To obtain a permit, a company must meet the following criteria:
• The average number of people with disabilities who worked at the enterprise during the previous reporting (tax) period (usually a calendar quarter) must be at least 50% of full-time employees.
• The salaries of persons with disabilities who work in the enterprise must be at least 25% of the total wage fund.
• The amount of expenditures of processing enterprises (machining and other activities) on raw materials, components, parts and other purchased goods (services) that are used for the production of goods (services) must be at least 8% of the sale price of such goods (services).
• The average monthly wage of workers with disabilities in the 32 http://n-auditor.com.ua/uk/component/ equivalent of full-time work must be at least the minimum wage 32. na archive/75?view=material 33 http://zakon3.rada.gov.ua/laws/ • Products of enterprises of community-based organisations for show/875-12 people with disabilities may be included in public procurement.33
21 02.4 Social entrepreneurship 02. MODELS FOR PRIVATE SECTOR PARTICIPATION IN COMMUNITY DEVELOPMENT
34 http://zakon 3.rada.gov.ua/laws/ Under the Law of Ukraine 'On the Fundamentals of Social Security show/875-12 of Persons with Disabilities', employment quotas for persons with 35 http://zakon4.rada.gov.ua disabilities are mandatory in the private and public sectors (as well 36 http://search.liga zakon.ua/l doc2.nsf/ as for individuals who hire employees) and must constitute 4% of the link1/JH3JZ00A.html total number of personnel. If the number of employees is between 37 https://www.ukrinform.ua/rubric- society/2621339-rada-uhvalila-zakon-pro- 8 and 25, the enterprise must employ at least one person with a socialni-poslugi.html disability (Article 19) 34.
Facilitating the employment of internally displaced persons (IDPs) to ensure sustainable income is an important task for host communities. Law of Ukraine No. 245-VIII 'On Amendments to Certain Acts of Ukraine on Strengthening the Social Protection of Internally Displaced Persons' of 2015 is aimed at solving the problem of IDP employment. It provides for the following: 35
• Employers who hire IDPs receive compensation for salary expenses for up to 6 months or 12 months depending on the situation on the regional labour market.
• Registered unemployed persons are reimbursed for the costs of relocation to their place of employment, as well as the costs of medical and drug examinations should the conditions of employment require them.
• A list of persons entitled to a voucher to maintain competitiveness through retraining, specialisation and advanced training in professions and specialties in priority categories of economic activity.
In January 2019, a new Law 'On Social Services' 36, was adopted, under which non-governmental organisations are regarded as providers of social services (Article 14). This Law will come into force on 1 January 2020. The Act provides a mechanism to allow community-based Training for Active Women held in organisations to access the sphere of the provision of social services. Sievierodonetsk in cooperation with the private sector (by Alina It defines the criteria under which an NGO can be recognised Lebedieva) as a service provider (Article 16). This segment of the law creates opportunities for NGOs to provide social services.
The Law also defines the basic organisational and legal framework for the provision of social services to prevent and overcome difficult life circumstances and minimise the consequences for people facing them. "Social services will be provided to persons belonging to vulnerable groups as well as those in difficult life circumstances. Social services will be provided based only on the results of an individual needs assessment. The Law defines basic social services, the provision of which is guaranteed by local administrations, executive bodies of city councils, oblast-level cities and the executive bodies of united communities" 37.
22 02. MODELS FOR PRIVATE SECTOR PARTICIPATION IN COMMUNITY DEVELOPMENT 02.4 Social entrepreneurship
The adopted Law introduces a new term: 'system of social services provision'. The term unites entities that form state policy on the provision of said services. It includes authorised bodies, providers, recipients of social services, professional associations of employees of the social services system and associations of recipients of social services. Volunteers may also be involved in this activity. The Law stipulates that each social service shall have its own social standard to be approved by the Ministry of Social Policy.
Social services will be funded from the budget, i.e. free for recipients. In particular, these are social services for informing, consulting, granting asylum, interest intermediation, sign interpreting, tactile interpreting, and urgent social services provided in critical situations.
Needs assessment of individuals/families for social services is performed at least once every three years by collecting, summarising and analysing information. This takes into account gender, age and place of residence.
The needs of an individual for social services are assessed by a social work specialist, a social worker and a social manager. If necessary, physicians, teachers, psychologists, rehabilitators and ergotherapists are involved in the assessment. The assessment is carried out within five working days of the date of receipt of an application, request, or notification on the provision of social services.
Since the definitions of social entrepreneurship are not legally formalised in Ukraine, laws that apply to business entities in regard to their form of business organisation also regulate the activities of social enterprises.
Out of 150 social enterprises (SEs) in the Catalogue of Social Enterprises of Ukraine 2016–2017 38, 112 SEs were established between 2008–2017 and 66 SEs were registered in 2015–2016. 78 SEs had up to 5 employees, 26 had 6–10 employees, and 15 had 11–20 officially 38 socialbusiness.in.ua employed persons. Only four SEs had more than 100 employees. 10 39 https://socialbusiness.in.ua/ knowledge_base/kataloh-sotsial-nykh- social enterprises operated only with the support of volunteers. The pidpryiemstv-ukrainy-2016-2017-rr/ main SE activities in Ukraine are shown in Figure 2.
Figure 2 91 | Employment of vulnerable Main types of SE activity groups in Ukraine, 2016 – 2017 39 79 | Generating profits for the organization 150 60 | Generating profits enterprises for service delivery in the Catalogue of SEs* 40 | Financing certain types of services
* One SE can undertake several types of 5 | Solving environmental activities problems
23 02.4 Social entrepreneurship 02. MODELS FOR PRIVATE SECTOR PARTICIPATION IN COMMUNITY DEVELOPMENT
It should be noted that the Catalogue contains self-proclaimed entrepreneurial initiatives that consider themselves to be social enterprises, so it is not exhaustive in terms of the number and geography of SE activities in Ukraine.
The main forms of business organisation for social enterprises in Ukraine include: natural person-entrepreneur, community-based organisation, community-based union, charity organisation, private enterprise, private organisation, limited liability company (see Table 4.). Such cooperation is mutually beneficial. NGOs receive a source of funding to achieve their statutory objectives. At the same time, individual entrepreneurs can receive grants for business development, which they would not otherwise receive without working with NGOs. Enterprises work to achieve economic results (profit) while NGOs work towards social goals.
Table 4 Document approving SE's mission
Number in Cooperation Charter Minutes of Not specified Other Legal status of business 2016 – 2017 agreement with the General in any entities catalogue NPE/NGO Meeting document
NATURAL PERSON-ENTREPRENEUR
38 15 1 3 9 10
PRIVATE ENTERPRISE/PRIVATE ORGANISATION
22/1 3/0 8/0 0 0/1 11/0
COMMUNITY-BASED ORGANISATION
20 3 13 2 0 2
LIMITED LIABILITY COMPANY
18 1 9 4 1 3
AGRICULTURAL COOPERATIVE
15 1 12 2 0 0
BUSINESS ASSOCIATION OF CIVIL SOCIETY ENTERPRISES
12/3 0 11/2 1/1 0 0
CHARITABLE ORGANISATION
8 1 5 0 1 1
PUBLIC ASSOCIATION
5/2 1/0 3/2 0 0 1/0
OTHER FORMS
6 1 4 0 1 0
24 02. MODELS FOR PRIVATE SECTOR PARTICIPATION IN COMMUNITY DEVELOPMENT 02.4 Social entrepreneurship
At present, Ukraine lacks experience, practice and understanding in terms of social entrepreneurship. Above all, it lacks a sufficient number of social entrepreneurs who could work together to protect their interests and develop social entrepreneurship.
Unlike government efforts to address social and environmental issues, social entrepreneurship ideas originate at the local level and move upwards. They typically grow out of an individual's interaction with a problem and their attempt to find solutions to it — through reflection, learning from experience and finding resources. In contrast to the authorities, social entrepreneurs do not have management authority or access to large resources. They set goals and inspire others to bring about significant social change, and they are able to influence those with resources and power.
Social entrepreneurship differs from social activity. The main difference is that public figures tend to seek to induce change by influencing the decision-making of authorities or other institutions or by changing public attitudes towards a problem. Social entrepreneurs take direct action to promote social change using business approaches.
Interest in social entrepreneurship arose in Ukraine in the early 2000s. The term 'social enterprise' was first used by Counterpart International in the late 1990s. In1999, the global partnership organisation Counterpart International, Inc. introduced the term "social enterprise" for non-governmental organisations (NGOs) in Ukraine through a training and grant programme that lasted until 2002 40.
Over the last decade, the topic of social entrepreneurship has become more prevalent in public life and research. It is discussed at various events and attracts many initiative groups and active people. However, such enterprises are still not well known in Ukraine.
Figure 2 shows the geography of social enterprises based on data from the abovementioned Catalogue. One example of social enterprise activities in eastern Ukraine is the 'Zdorovia' Medical Rehabilitation 40 https://www.counterpart.org/ Centre (Novoazovsk, Donetsk Oblast), which provides treatment and 41 http://www.socialbusiness.in.ua/index. rehabilitation at a substantial discount for patients from low-income php/sotsialni-pidpryiemstva/katalog/82- population groups 41. Another example is the social shop established medychnyi-reabilitatsiinyi-tsentr-zdorov- ia-ta-tov-spektr-plius-novoazoavsk- by two employees of the community-based organisation 'Insha donetska-oblast Osvita' (Kramatorsk, Donetsk Oblast) using their own funds.42 42 https://business.vchasnoua.com/ news/205-na-donechchini-z-yavivsya- So far, there are no special state programmes to support social pershij- magazin-sotsialnogo- entrepreneurship. Ukrainian social enterprises are mainly financed pidpriemnitstva-yakij-vidilyatime-80- pributku-na- nekomertsiji by private entrepreneurs and foreign donors (75–85%). The annual 43 http://www.osce.org/ budget of a typical Ukrainian civil society organisation is about EUR ukraine/86185?download=true 1,500–2,000, with only 2–3% of the budget funded by the state 43.
25 02.4 Social entrepreneurship 02. MODELS FOR PRIVATE SECTOR PARTICIPATION IN COMMUNITY DEVELOPMENT
Figure 3
Geography of social 5 enterprise activities 44 1 0 2 5 30
15 8 9 7 3 3 6 Number of social 6 4 enterprises, units 2 3 2 6 9 0 5 1-2 2 5 8 3-4 4 5-6 7-8 9-10 11-30
The right to state funding for CSOs is established by the Law of Ukraine 'On Public Associations' and the Budget Code of Ukraine45. There is already a system for the state to provide financial support to Ukrainian CSOs through a number of mechanisms 46 :
• Subsidies are a form of public funding aimed at supporting CSO activities in general, rather than specific projects. In Ukraine, subsidies are only granted to certain civil society organisations, such as veterans' organisations.
• State grants are the allocation of public funds by means of competition centred around specific priorities.
• Social contracts are used in social policy, for example for NGOs for people with disabilities.
Public procurement of works and services is carried out in accordance with current legislation. The provision of grants by state, regional and local authorities and local self-governments is a tool for engaging CSOs in the development of social entrepreneurship. The Budget Code of Ukraine defines three types of CSOs eligible for state funding, namely:
• Civil society organisations for persons with disabilities and veterans. 44 https://socialbusiness.in.ua/ knowledge_base/kataloh-sotsial-nykh- • Youth civil society organisations that receive support to implement pidpryiemstv-ukrainy-2016-2017-rr/ national programmes and activities focused on children, youth, 45 http://zakon.rada.gov.ua/ women and families. 46 http://zakon0.rada.gov.ua/laws/ show/1049-2011-%D0%BF ] • Public associations supporting cultural interests.
26 02. MODELS FOR PRIVATE SECTOR PARTICIPATION IN COMMUNITY DEVELOPMENT 02.4 Social entrepreneurship
However, there are no targeted government programmes for developing or supporting social entrepreneurship among IDPs and combatants, young people, people aged over 50, etc. Unemployed citizens can obtain a lump-sum unemployment allowance to start their own business.
At the local level, NGOs receive budgetary funding to implement social contracts, social and socio-cultural projects and other projects of civil society organisations and charitable and non-profit organisations.
It should be noted that close cooperation between CSOs, and local authorities requires political will from local authorities and adequate support from society. For example,47 Kyiv City Council earmarked approximately EUR 1.8 million for projects developed by CSOs in 2016– 2018.
Crowdfunding and investment in social projects gained momentum after the 2014 revolution and became fundraising tools for providing humanitarian aid to conflict-affected people. In particular, this has been facilitated by social investment platforms such as 'Assistance to Families of Deceased ATO Participants' 48 and 'People's Project' 49. Community development and social innovation have been promoted by the Ukrainian Social Investment Fund (USIF) 50, the K.Fund 51 and the WNISEF Social Investment Programme 52.
The social entrepreneurship sector in Ukraine is still heavily dependent on foreign support. The largest donors in this area are the USA, Canada and Germany. One example is the Western NIS Enterprise Fund (WNISEF) Social Investment Programme and its activities. In cooperation with OshchadBank and Kredobank, WNISEF is implementing a low interest rate credit programme for social enterprises.
Loans are granted to enterprises where more than 50% of employees come from vulnerable groups, where a significant portion of profits is reinvested in company development and the creation of new jobs. In enterprises where less than 50% of employees come from vulnerable groups, at least 10% of profits should be allocated towards social goals. Credits can also be obtained by enterprises that do not have employees from vulnerable groups, but which allocate at least 20% of their profits towards social goals. 47 http://kmr.ligazakon.ua/SITE2/l docki2. nsf/alldocWWW/287C58A33FDACB41C22 57F7F0072B005?OpenDocument Social enterprises can get credit from WNISEF in amounts from 48 http://families.org.ua/ USD 10–100 thousand. (in UAH) for 36 months with an interest rate of 53 49 http://www.peoplesproject.com/ 5–10% . WNISEF had received over 170 applications as of September 50 http://www.usif.org.ua/en.html 2019, of which 29 were accepted and 18 were funded. In particular, 51 http://kfund.ua/en/fund eng/ social credit was granted to the 'Drukarskyi Dim' Centre for the Labour 52 http://wnisef.org/impact-investing Rehabilitation of Persons with Disabilities (Kramatorsk) to purchase 53 http://wnisef.org/impact-investing printing equipment in 2018. The enterprise's refitting will promote 54 https://www.oschadbank.ua/ua/press- the employment of 6 to 12 people with disabilities and facilitate an service/news/4344577/ increase in their salaries.54
27 02.4 Social entrepreneurship 02. MODELS FOR PRIVATE SECTOR PARTICIPATION IN COMMUNITY DEVELOPMENT
The 'Social Entrepreneurship: Achieving Social Changes by the Community Initiative' project is the largest social business development project in Ukraine. It is run by a consortium of seven civil society organisations from Ukraine, Lithuania and Latvia and headed by the Ukrainian Philanthropists Forum with financial support from the European Union (March 2018–August 2020)55. The project is aimed at developing professional potential, shaping public opinion, developing an ecosystem for development and advocating for favourable legislation for the development of social entrepreneurship in Ukraine.
The overall level of entrepreneurship development in Ukraine, including social entrepreneurship, is quite low. The overwhelming majority of enterprises in Ukraine are focused on hired labour. Self- employment is an underdeveloped area. Statistical data for SMEs demonstrates the existence of pseudo-entrepreneurs who are actually employees of other companies. Today, there is still a negative perception of entrepreneurship and business in society, which is partly due to the legacy of the former Soviet economy and the influence of oligarchs.
Ukrainian social economic entities are notable by their lack of:
• Developed skills for social integration, in particular social interaction skills and appropriate skills for integrating into the labour market.
• Entrepreneurship and management skills, in particular knowledge of marketing, finance, business planning, development and forecasting.
• Skills concerning compliance with regulations, reporting requirements and negotiating skills.
• Skills for developing social enterprises that ensure the sustainable development of the sector.
In Ukraine, social enterprises operate within the market on the same terms as commercial ones. There is no equal access to resources or procurement opportunities for cooperatives, social enterprises and NGOs and large firms alike. Despite these numerous problems, there is significant potential in the Ukrainian social entrepreneurship sector. Two groups of prerequisites drive the development of the social economy sector and social enterprises.
The first group combines potential prerequisites, namely: the impact of social and political changes; the existence of a large number of social needs that are not being met by the authorities or the private sector; the need to improve the quality of social services; limited employment opportunities; the need for new approaches to job creation and the integration of certain vulnerable social groups into the labour market; the creation of additional pressure on the social security sector (in particular in the field of social protection and 55 https://socialbusiness.in.ua/about/ social services for the elderly) due to the ageing population and the
28 02. MODELS FOR PRIVATE SECTOR PARTICIPATION IN COMMUNITY DEVELOPMENT 02.4 Social entrepreneurship
increasing number of pensioners in following decades; the challenges of migration and living conditions of temporarily displaced persons.
The second group of driving forces for the development of the social economy sector and social enterprises includes: the high potential of human capital and NGOs that promote the employment of vulnerable and privileged categories; the availability of successful social entrepreneurship practice and experience throughout Ukraine; the availability of international financing; the large number of experienced organisations in the non-governmental sector with years of practice and potential, ensuring autonomy from external donors and long-term stability; the availability of legal norms which enable the implementation of partnership relations between NGOs and other business entities in order to create social enterprises.
The National Institute for Strategic Studies concludes that social entrepreneurship acquires a special importance in the context of reintegrating the non-government controlled areas of Donetsk and Luhansk oblasts. "First, it should be noted that the use of entrepreneurial approaches to solve social problems facilitates the consolidation of economic development trends in the affected territories and frees up state and local budgets to address other pressing issues".56
Social enterprises can meet the needs of community members that 56 http://old2.niss.gov.ua/content/ are underfunded by the State and ignored by the private sector due to articles/files/111Zapiska-Hodgson-Sots- low returns. According to the National Institute for Strategic Studies, pdprimnitstvo-zatverdzhene-4cef0.pdf "Those categories of the population most affected by the conflict may 57 http://old2.niss.gov.ua/content/ articles/files/111Zapiska-Hodgson-Sots- become a significant internal resource for the development of social pdprimnitstvo-zatverdzhene-4cef0.pdf entrepreneurship in Donbas" (see Table 5)57.
Table 5 Categories of citizens
Characteristics of PEOPLE WITH DISABILITIES citizen categories — Category characteristics Range of possible social Role of the business consumers of products, enterprise services organisation, purpose of joint participation works, social enterprise The number of people Employment of people Financing as part services in eastern with disabilities in Ukraine with disabilities. In the of collective social as of 01.01.2018 is 2.6 USA, 29% of citizens responsibility. Involving such Ukraine million people, or almost with health issues are citizens makes it possible 6% of the total population. employed, with 40% in to achieve both economic This includes 211,000 the UK, 55% in Italy, 60%* and social effects. Their people in Donetsk and in Sweden, and 80% in solvency grows, they are Luhansk oblasts. China. This figure is only integrated into society and 4% in Donbas. self-develop.
29 02.4 Social entrepreneurship 02. MODELS FOR PRIVATE SECTOR PARTICIPATION IN COMMUNITY DEVELOPMENT
Categories of citizens
VETERANS OF ATO/JFO
Category characteristics Range of possible social Role of the business enterprise services organisation, purpose of joint participation As of 27.04.2018, the Rehabilitation, Financing as part Unified Register of employment, of collective social Participants of Anti- requalification, responsibility. Consulting terrorist Organisations training, psychological on legal, financial issues, had entries on 329,400 assistance training. people.
INTERNALLY DISPLACED PERSONS
Category characteristics Range of possible social Role of the business enterprise services organisation, purpose of joint participation According to the Ministry Rehabilitation, Financing as part of Social Policy, the employment, of collective social number of internally requalification, responsibility. Consulting displaced persons in training, psychological on legal, financial issues, Ukraine as of July 2018 assistance. training was 1,515,000 people, including 846,000 in Donetsk and Luhansk oblasts (or 56%).
Donetsk RSA58 considers enterprises in Donetsk Oblast to be social ones if they belong to community-based organisations and if their activities are related to socially vulnerable population groups. In particular: the 'Kramatorsk Educational-Industrial Enterprise of the Ukrainian Society of Blind'; the 'Bakhmut Industrial Enterprise of the Ukrainian Society of Deaf'; the 'Vladislava' enterprise of the 'Union of Organisations of Disabled People in Ukraine'; the 'Barvinok' enterprise of the 'National Assembly of Persons with Disabilities of Ukraine'; 'The Centre of Labour Rehabilitation of People with Disabilities — 'Drukarskyi Dim', based on the property of the Donetsk regional organisation 'The Union of Organisations of Disabled People in Ukraine', etc.
In Luhansk Oblast, there are social entrepreneurship entities supported by local authorities.59 In particular, the 'Kapitoshka' children's cafe and playroom operating in Lysychansk. It allocates 10% of its profits from economic activities to help internally displaced persons and their families adapt and integrate into host communities. 58 Про соціальне підприємництво. Лист Донецької ОДА від 03.10.2018р., The 'Zelena Kreminna' information and tourist centre in the town №6/6-1171/1227/0/41-18/03-2 of Kreminna provides recreation services, with 50% of its profits 59 Про надання інформації щодо going towards the development of green tourism in Kreminna Raion, суб’єктів соціального підприємництва в області. Лист Луганської ОДА від supporting institutions for vulnerable groups, and financing social, 12.10.2018.№22-09/02-2147. cultural and sports programmes.
30 02. MODELS FOR PRIVATE SECTOR PARTICIPATION IN COMMUNITY DEVELOPMENT 02.4 Social entrepreneurship
The town of Rubizhne is home to the Ukrainian Society for the Blind's Rubizhne Training and Production Enterprise No. 1, which allocates 30% of its profits to support vulnerable groups.
In the cities of Sievierodonetsk and Lysychansk, the natural person- entrepreneur A. Serbin has organised systematic training sessions for 13 teams from the 'Dragon and Tiger' kung fu sports school. 25% of the profits from his activities goes to support social or sports projects.
In Sievierodonetsk, the 'Vikonechko' Children's Development Studio operates as a public association providing comprehensive developmental training for children, with 50% of the profits allocated for the activities of the public association, cultural projects and programmes.
By order of the founder of the 'Agro-business KPP' farming enterprise (Makiivka, Kreminna Raion, Luhansk Oblast), 10% of profits are directed towards social programmes in the Makiivka rural community and Kreminna Raion.
02.5 Impact Investment According to an Oxford University survey, 92% of institutional investors and 46% of individual investors would like to consider the environmental and social impact of the company when making investment decisions 60. For this reason, increasing numbers of businesspeople (mainly in the USA, Canada and the EU) prefer social investments. Social investments are also called impact investments.
An impact investment is an investment in companies, organisations and foundations with the intention of having a measurable social and/or environmental impact along with a financial return 61.
According to a survey from the Global Impact Investors Network's at the beginning of 2019, global impact investment assets amounted to USD 229 billion — roughly twice the previous year's total.62
UNDP 63 research identifies three main principles that distinguish social investment from other types of investment: 60 http://www.ox.ac.uk/news/2017-04- 06-better-data-needed-measures- • First, impact investors expect a financial return on invested capital sustainability-business below the prevailing market rate, at market rate or even higher. 61 https://www.undp.org/content/ dam/sdfinance/doc/Impact%20 Second, in addition to financial profitability, impact investors seek Investment%20%20UNDP.pdf • to have a positive impact on society and/or the environment. 62 https://thegiin.org/research/ publication/impinv-survey-2019 • Third, impact investors use standardised indicators to measure 63 https://www.undp.org/content/ performance and report on the social and/or environmental impact dam/sdfinance/doc/Impact%20 Investment%20%20UNDP.pdf of investments made.
31 02.5 Impact Investment 02. MODELS FOR PRIVATE SECTOR PARTICIPATION IN COMMUNITY DEVELOPMENT
Taking the above principles into account, there has so far been only one impact investment object in Ukraine that meets the above definitions —'Promprylad. Renovation' impact investment facility.64
The main sources of profitability of its shares will be:
• Lease of office premises and special purpose areas (37.8 thousand sq. m).
• Hotel complex activities.
• Sale of tickets to events.
• Short-term rent of exhibition and conference complexes.
• Revenue from the sale of the franchise project to other cities and countries.
The project applied a methodology for measuring social impact. According to the methodology proposed by PACT, it was calculated that each dollar invested will create five dollars of social impact 65. A portion of the profits will be spent developing projects in four developmental areas for the region, and 30% of the area will be leased at a reduced rate for cultural, educational and urban initiatives.
Figures 3–5 show the management structure, investment structure and income payment scheme of for the 'Promprylad. Renovation' impact investment facility. The figures show the establishment of an effective system of impact investment based on sound expertise and 64 https://promprylad.ua/wp-content/ uploads/2019/10/Promprylad.Renovation- multi-stakeholder engagement in the community and beyond. This, Invest-present-03.10.19ukr.pdf in turn, will promote social cohesion and private sector engagement 65 https://probono.org.ua/promprylad in local development.
Figure 4
Management structure MITOST CBO 'Teple Misto' of "Promprylad. LvBS Renovation" impact CBO 'Insha Osvita' investment object Investors CBO PAKT
AMC CIF CO Promprylad Корпор. угода
The project management Promprylad structure at 'Promprylad. Supervisory board Holding LLC (real estate owner) Renovation' is as balanced as possible, ensuring returns on Promprylad investment and the realization Holding LLC of its social functions. (real estate operator)
32 02. MODELS FOR PRIVATE SECTOR PARTICIPATION IN COMMUNITY DEVELOPMENT 02.5 Impact Investment
Figure 5
Grants for Structure and the implementation of direct social functions (Incubator, impact investment art center, makerspace) Private investors — Private Investors — of 'Promprylad. up to UAH 1.8 million over UAH 1.8 million and legal entities Donors Renovation' Входження Buying до складу CIF shares учасників
Promprylad
CIF CO Promprylad USD 5 million Investments LLC
Investments
The minimum investment USD 25 million Promprylad amount is the equivalent Holding LLC of USD 1,000. (real estate owner)
Figure 6
Income payment Investors Investors scheme from impact investment "Promprylad. Payment Earning of LLC dividends per share Renovation'
Promprylad CIF CO Promprylad Investments LLC Corporate Agreemen Financing of social development programmes Operating income
Leased areas Promprylad Event management Holding LLC Hotel and event complex (real estate owner)
As of October 2019, 17 organisations and donors (almost USD 1.6 million) and 149 private investors (almost USD 1.8 million) have become impact investors of 'Promprylad. Renovation'. The total investment amounts to USD 3.4 million.
Other entities often referred to as impact investments can only be called such with certain qualifications. These areUrban Space 100 (Ivano-Frankivsk), Urban Space 500 (Kyiv), '4 City' (Odesa), Impact Hub Odesa etc. Investments in these facilities do not provide dividends to investors. Their contributions can more accurately be termed charity donations.
33 02.5 Impact Investment 02. MODELS FOR PRIVATE SECTOR PARTICIPATION IN COMMUNITY DEVELOPMENT
Several Ukrainian cities are considering implementing impact investment projects under the 'Warm City' (Urban Space 100) franchise. The Urban Space project closest to launching is in Mariupol, Donetsk Oblast. The local partner is Beetroot, a non-profit division of the Swedish-Ukrainian IT company.
02.6 Cooperation The generally accepted understanding of the term cooperation (lat. cooperatio) is as a form of organisation of economic activities by people and organisations to jointly achieve common goals or meet needs.
A cooperative is a self-governing association of individuals who voluntarily cooperate for their mutual social, economic and cultural development.66 A cooperative may be both a non-profit community-based organisation and an enterprise owned and operated by those who use its services (consumer cooperative) and/or the people who work there (production cooperative).
Cooperative principles are defined in theStatement on the Cooperative Identity 67, namely:
• Voluntary and open membership. • Democratic membership control (one member = one vote). • Economic participation of members. • Autonomy and independence. • Education, training, information. • Cooperation between cooperatives. • Care for the community.
All cooperative principles directly or indirectly affect the development of local communities. The principle of care for the community is particularly important and is defined as activities for the sustainable development of the community by implementing policies approved by the members of the cooperative.
Employee stock ownership plans are becoming more and more common in developed countries around the world. In fact, this is a form of cooperative in which all employees are simultaneous owners. They are exposed to all the risks, responsibilities and benefits that this 66 http://www.coop-academy.com.ua/ category/types-of-cooperatives/ ownership entails. 67 https://www.ica.coop/en/cooperatives/ cooperative-identity
34 02. MODELS FOR PRIVATE SECTOR PARTICIPATION IN COMMUNITY DEVELOPMENT 02.6 Cooperation
The best-known example of joint participation is probably the Mondragon Corporation 68 in Spain, which is made up of cooperatives. Employees of these cooperatives are co-owners of the companies, sharing in their profits/losses and democratically selecting their management. Industrial production is the company's main area of activity. It produces equipment for world famous companies such as Siemens and General Electric. The Mondragon Corporation is comprised of 289 companies and cooperatives, and its 80,000+ employees (of which 80% are cooperative members and real co- owners) have a combined annual income of more than EUR 14 billion. It has offices in 41 countries, sells to more than 150 countries, and has 15 technology centres.
An important outcome of the Mondragon cooperative corporation is its engagement in local community development. Cooperatives allocate a portion of their profits towards the creation of new jobs and the development of city infrastructure. As a result, the city of Mondragon has an unemployment rate of 9%, which is 2 times lower than the average unemployment rate in Spain. All cooperative workers have extra pension and life insurance policies. Upon termination of their employment, members of the cooperative can receive severance pay, the amount of which depends on the profitability of the company, but which often exceeds EUR 100,000. Retirees prefer not to take the money earned, instead reinvesting it in production that their children and grandchildren can continue to work in.
68 http://www.creatorsociety.org.ua/ In many countries, cooperatives are important players in economic index.php/uk/home-ua/about-the- movement-ua development. Canada has over 9,000 cooperatives with combined 69 http://www.tbs-sct.gc.ca/hidb-bdih/ assets valued at USD 370 billion and 18 million members 69. initiative-eng.aspx?Hi=81 70 70 http://www.ukrstat.gov.ua/edrpoy/ukr/ According to the State Statistics Service of Ukraine , as of October 1, EDRPU2019/ksopfg/ksopfg0819.htm 2019, there are almost 28,000 cooperatives in Ukraine (see Table 6).
Table 6
Cooperatives in Ukraine Types of cooperatives Ukraine Donetsk Oblast Luhansk Oblast
Total number: 27 951 2 202 555 industrial 2 209 216 60 service 19 438 1 159 322 consumer 758 299 3 agricultural production 1 007 16 11 agricultural service 1 260 33 48
35 02.6 Cooperation 02. MODELS FOR PRIVATE SECTOR PARTICIPATION IN COMMUNITY DEVELOPMENT
It is important to note that Table 6 shows the total number of registered cooperatives, not the number that are actually operating. No publicly available summary information on existing cooperatives is available.
The activities of cooperatives in Ukraine are regulated by two Laws: 'On Cooperation' 71 and 'On Agricultural Cooperation' 72. Under the Law 'On Cooperation', cooperatives may be established by natural and legal persons (Article 7). Under article 23, cooperatives are entitled to conduct any economic activity specified in the statute that is not prohibited by law. Cooperatives meet the needs of their members and contribute to their well-being.
A consumer cooperative is an enterprise owned and democratically managed by consumers, operating in the form of mutual assistance for the sake of quality services rather than profit. Consumer cooperatives mainly operate in the fields of trade, health care, insurance and housing services.
A credit union is a financial cooperative owned by its members. It is democratically controlled, operating to preserve their savings, provide loans on favourable terms, and provide other financial services to its members. Quite often, credit unions provide services to support sustainable community development – they serve the role of financial institutions in promoting community development.
A production cooperative is an enterprise that is jointly owned and managed by its employees. Joint management can take various forms.
A housing and construction cooperative are an association of individuals or families for building their own housing.
The most common in Ukraine are agricultural cooperatives, which are divided into:
• Service providers (provide various services to their members, mainly individual farms).
• Production (land, machinery, livestock are combined into a common household).
• Sales (product sales). • Purchasing (joint procurement). 71 http://zakon3.rada.gov.ua/laws/ show/1087-15?lang=en • Credit (attracting financial resources and lending activities). 72 http://zakon3.rada.gov.ua/laws/ show/469/97-%D0%B2%D1%80?lang=en • Multiprofile (combining several functions).
36 02. MODELS FOR PRIVATE SECTOR PARTICIPATION IN COMMUNITY DEVELOPMENT 02.6 Cooperation
Examples of successful activities in the cooperative farmers' movement in eastern Ukraine include cooperatives working with the Food and Agriculture Organisation of the United Nations (FAO)73 pilot project in government-controlled areas close to the contact line in Donetsk and Luhansk oblasts, namely:
• 'Universal' in Kostiantynivka Raion, Donetsk Oblast (about 30 farmers with several units of agricultural machinery jointly cultivating their land).
• 'Strytsivka Nova' in Milove Raion, Luhansk Oblast (about 30 farmers jointly cultivating land).
• Dairy cooperative in the village of Mistky, Svatove Raion, Luhansk Oblast (employing 200 people who obtain services to form and sell milk in commercial batches).
• The cooperative in the settlement of Stanytsia Luhanska, Luhansk Oblast (providing services for aggregating products, collecting total yields and forming commercial batches, with plans to introduce a soil analysis service).
The FAO project raises awareness among the local population of the possibilities of establishing a cooperative. It organises training tours, invites external experts and provides technical assistance in the form
73 https://kurkul.com/interview/198- ruslan-markov-fao-dopomagaye- kooperativam-gospodaryuvati- efektivnishe
37 03 STATUS OF PRIVATE SECTOR ENGAGEMENT IN INDIVIDUAL COMMUNITIES IN DONETSK AND LUHANSK OBLASTS
The state of private sector engagement in the development of individual communities (Novhorodske, Druzhkivka, Velyka Novosilka, Sievierodonetsk, Shchastia, Bilovodsk) was studied by analysing available information from open sources and conducting interviews with business representatives, local authorities and civil society organisations in October 2019.
Under Law of Ukraine 'On Temporary Measures for the Period of the Anti-terrorist Operation' 74 the State has created additional conditions for the economic promotion of activities of business entities in the zone of ATO operations, namely:
• Enhancing economic motivations for business entities (exemption from payment for the use of land plots of state and municipal property, abolition of rent for the use of state and municipal property and concession payments for the right to create (build) and/or manage (operate) state and municipal property; prohibition of the accrual of penalties and/or fines on the principal amount of debt on obligations under loan and credit agreements, measures to preserve mortgaged property, etc.).
• Deregulation of business activity (automatic renewal of licenses and permits that expire during the period of ATO, and a moratorium
74 https://zakon.rada.gov.ua/laws/ on inspections by bodies and officials authorised by laws to carry show/1669-18 out state supervision (control) in the sphere of economic activity).
38 03. STATUS OF PRIVATE SECTOR INVOLVEMENT IN INDIVIDUAL COMMUNITIES IN DONETSK AND LUHANSK OBLASTS
Measures introduced by the legislator to deregulate the activities of business entities in the ATO zone and the positive consequences for business entities can have certain socially negative consequences for local communities, namely:
• Between 01.09.2014–01.01.2017, wage arrears increased from UAH 1,424.4 thousand to UAH 2,069.8 thousand in Donetsk and Luhansk oblasts75 ;
• Lack of revenue from land use fees for the local budgets of communities along the 'contact line', which is one of the main sources of local budget funds.
• The desire of individual large businesses to determine the amounts of social partnership agreements with local communities in the amount of unpaid payments for the use of land plots.
The state has not offered any compensatory mechanisms to counter the negative social impact on communities along the 'contact line'
75 http://apir.org.ua/wp-content/ from the benefits granted to business entities. It is for this reason that uploads/2018/06/Georgiievskyi 10.pdf private sector engagement in local development is important.
03.1 Donetsk Oblast The issue of security places the highest priority for development on 03.1.1. Novhorodske Novhorodske, as the community is located close to the 'contact line of the area of the Joint Forces Operation. Additionally, the community has a number of issues that require substantial funding, including:
• Overhaul of the Novhorodske-2 water supply system. • Construction of 2 reserve wells for drinking water. • Reconstruction of Novhorodske sewage treatment facilities. • Construction of sewage treatment facilities in the village of Sukha Balka.
• Installation of drinking water disinfection system. • Reconstruction of a gas boiler house. • Reconstruction of the lighting system in remote areas of the settlement.
Due to the lack of funds in the local budget, these problems are practically impossible to solve without the engagement of the private sector and/or other potential partners.
The settlement of Novhorodske currently has a Social Partnership Agreement with NPO Inkor and K LLC of Metinvest Group. The implementation of this agreement is a corporate social responsibility of the company. However, as noted above, there has recently been
39 03.1 Donetsk Oblast 03. STATUS OF PRIVATE SECTOR INVOLVEMENT IN INDIVIDUAL 3.1.1. Novhorodske COMMUNITIES IN DONETSK AND LUHANSK OBLASTS
some misunderstanding between the settlement's council and the company's management regarding the priority of social projects under the signed agreement for 2019.
According to the council, the amount of financing of social projects by Inkor and K in 2019 amounted to UAH 7 million. This amount is practically equal to the annual land use fee that the enterprise would be paying into the local budget if there were currently no benefit.
This has provoked debate in the community. Representatives of the village council and the public have questioned the expediency of the public discussion around the priorities of Inkor and K social programmes for the next year. As a result of the dialogue, the Coordinating Council for Cooperation between Government, Business 76 https://www.facebook.com/ and Society was established.76 Novgorodske/?tn=kC-R&eid=ARAIzg fhjz66qm1ABTGGMiG4jcwawvBxMX QpDRrapWynDpTdLJO-gQ73NLasw In addition to the CSR model implemented by Inkor and K LLC, the 5CfwKRH6OyZ9bP71k&hcref=ARToP private sector in the Novhorodske community provides charitable k1Eaw8bTMVntAmzRxHMZMbZWiq support to those who need it. But this charity is not systematic, which N3sI9yGWFfPzwVZnQnCD-oA110qn- HedlE&fref=nf&xts[0]=68.ARDCFNXjwPd makes it difficult to assess its effectiveness. olQFbteRnMlkKy4yohalFUZ9TspoBcZL8 pfIfZSPRx2Fg8Cgi5SgZ9u4x2WPSUk9oO There is insufficient awareness among community members of the ZsrKAQpbs52Uc9Pk4p920qLqH4jwexAv possibility of social entrepreneurship, pro bono, cooperatives, and Aa9CC90KoaAvXyIWc04T4iXzRneFcIHHb tBjz7zR3bMRulamvAhkVJwaFf2csXYR3C impact investment to attract the private sector to local development. B6jABnsieLccAnnHSPZYjPgPB3cumk5Q However, these models of private sector engagement have attracted 3UsxhBFi7MhawlDQiF3JvhrZuZVwRKvw considerable interest in the community. Ks79nSFbeGEhAibxgpxLwRFIb8KZuJjBu GaOav7k7ltkc9ZE6xo36Pu9II7CmITkOef MvmSaHwxL6rqFChG7bojjnY5iVVNzkAT Other stakeholders can also be potential partners in the local Ori8fmsPJYvsWnsWH-q6W0pjifH3kTnaQ development of the society (see Table 7).
Table 7 Company name, manager
Potential participants in REMTEKHSERVIS LLC, the partnership for the Anna Viktorivna Bobrikhina local development of the Contacts details of the Business profile Number of employees Novhorodske community company, contact person Novhorodske township, Mining equipment repair 44 1g Hobrusieva Str. Oleksii Starus 0957493338
NOVHORODSKE HYDROMECHANICAL PLANT LLC, Mierkushev Yurii Saveliiovych
Contacts details of the Business profile Number of employees company, contact person
Novhorodske township, Repair, equipment 46 12 Hobrusieva Str. manufacturing Mierkushev Yurii Saveliiovych 0506579067
40
40 03. STATUS OF PRIVATE SECTOR INVOLVEMENT IN INDIVIDUAL 03.1 Donetsk Oblast COMMUNITIES IN DONETSK AND LUHANSK OBLASTS 3.1.1. Novhorodske
Назва підприємства, керівник
BETA-AGRO-INVEST LLC, Ishchenko-Hiller Yevhen Volodymyrovych
Contacts details of the Business profile Number of employees company, contact person
Novhorodske township Reception, storage, 24 51 Zarichna, Str. cleaning, delivery of agricultural products Hnennyi Vitalii Anatoliiovych 0504705242
BETA-AGRO-INVEST LLC, Ishchenko-Hiller Yevhen Volodymyrovych
Contacts details of the Business profile Number of employees company, contact person Novhorodske township Cultivation of cereals, 47 51 Zarichna, Str. oilseeds and industrial crops Hnennyi Vitalii Anatoliiovych 0504705242
STATE ENTERPRISE "EXPERIMENTAL FARM "DONETSKE" OF THE 'SOKOLOVSKYI INSTITUTE FOR SOIL SCIENCE AND AGROCHEMISTRY RESEARCH' NATIONAL SCIENTIFIC CENTRE, Chernenko Leontii Andriiovych
Contacts details of the Business profile Number of employees company, contact person
Chernenko Leontii A leading scientific and 54 Andriiovych, methodological centre 0958584154 that conducts and coordinates research Anisimov Viktor work on soil science, Ivanovych 0501060265 agrochemistry and soil protection.
03.1.2. Druzhkivka An important tool in involving the private sector in the development of the Druzhkivka community is the Board of Directors of the largest enterprises in the city, which includes the heads of PJSC Druzhkovka Harware Plant, Corum Druzhkovka Machine-Building Plant, OJSC Vesco, OJSC GRETA, Druzhkivka Porcelain Factory LLC, Druzhkivka Refractories Plant LLC, Hidropnevmoaparat LLC and other enterprises.
Individual enterprises have signed social contracts with the Druzhkivka community. In particular, in 2018 the amount of Vesco investments for the development of Druzhkivka amounted to UAH 800,000, of which UAH 500,000 was allocated to project implementation for the winners of the "City with Your Own Hands" social contest. Projects include:
41 03.1 Donetsk Oblast 03. STATUS OF PRIVATE SECTOR INVOLVEMENT IN INDIVIDUAL 3.1.1. Druzhkivka COMMUNITIES IN DONETSK AND LUHANSK OBLASTS
CBO 'Your Format' Project — 'Invest in • Purchasing equipment for the maternity hospital. the Druzhkivka Community', fundraising campaign to provide educational • Fitting out an inclusive group at the Dolphin kindergarten. institutions with necessary equipment (by Serhii Pronkin) • Purchasing sports equipment for the 'Red Ridinghood' kindergarten.
• Funding the construction of a workout sports ground.
The remaining funds were used to purchase chairs for CC 'Etude', provide assistance to the city's municipal enterprises, implement corporate volunteering projects for cleaning up the city, and prepare kindergartens for the spring-summer period. In April 2019, Vesco signed a new social partnership agreement with Druzhkivka City Council to the amount of UAH 950,000.
Over the past four years, several public associations have emerged in Druzhkivka which actively introduce new approaches to community development. In particular, CBO 'Nova Druzhkivka' and CBO 'Ukraine of Possibilities' have implemented a number of infrastructure projects in the fields of education and health care by raising funds from the community.
Public activists from the CBOs 'Ukraine of Possibilities', 'New Druzhkivka' and 'Your Format' are interested in using the social entrepreneurship model to develop the Druzhkivka community. The following activities have been proposed:
• Initiating the development of the City Social Entrepreneurship Development Programme with the necessary support tools.
• Running an educational campaign for representatives of existing businesses regarding the benefits and opportunities of social entrepreneurship.
• Enabling the promotion of socially oriented businesses. • Creating a consulting system for entrepreneurs wishing to become socially responsible.
03.1.3. Velyka Novosilka Currently, the most common model for involving the private sector in local development is the provision of charitable donations by local businesses to individuals and legal entities in the Velyka Novosilka community. The presence of a large number of vulnerable groups is due to, among other things, the proximity of the 'contact line'. Thus, as of January 1, 2019, the number of internally displaced persons in Velyka Novosilka Raion amounted to more than 13,500 people – including more than 2,500 persons of working age, 2,200 children, 465 persons with disabilities and 8,300 retired persons.77 77 https://dn.gov.ua/storage/app/sites/1/ uploaded-files/%20звіт%20голови%20 Individual private entrepreneurs and small companies provide РДА.pdf charitable support at the request of those who need it to overcome 78 Ibid difficult life circumstances or to implement certain social initiatives.
42 03. STATUS OF PRIVATE SECTOR INVOLVEMENT IN INDIVIDUAL 03.1 Donetsk Oblast COMMUNITIES IN DONETSK AND LUHANSK OBLASTS 03.1.3. Velyka Novosilka
In most cases, such activities are one-off arrangements. For example, in December 2018, the 'It's Easy to Do Good' charity event was organised to collect clothes, shoes, personal hygiene products, stationery and toys for families in difficult circumstances. Private entrepreneurs also joined the campaign, which made it possible to provide humanitarian assistance to 23 families raising 31 children with disabilities and 34 families with 88 children who found themselves in difficult circumstances.78
One example of charitable activity in the interest of individual organisations in the community is the co-financing of repair work in Velyka Novosilka Professional Lyceum to the amount of approx. UAH 2 million from the institution's partners: Yuzhnoye LLC, Makstroi OJSC, PE Farming Enterprise 'Yasna Poliana', Veles ALLC, Novomaiorske ALLC, Prohres ALLC, Ukraine ALLC, AGRO-PUT LLC, Farming Enterprises 'Kolos', 'Chernov Y.M.' and 'Perebudova'.
The lack of large enterprises in the Velyka Novosilka community makes it almost impossible to use the CSR model for community development. The level of awareness among stakeholders of the model of social entrepreneurship, pro bono and impact investment is insignificant.
The greatest interest is generated by the establishment of agricultural cooperatives as an important tool for creating new jobs and improving welfare in the community.
While there are no agricultural cooperatives in Velyka Novosilka at present, local farmers at a personal meeting expressed their intention to establish an agricultural service cooperative (from farmer Supenko Heorhii Yevhenovych). Training on involving the private sector in community development (in Sviatohirsk, 10.10.2019) elaborated upon, among other things, the establishment of an agricultural cooperative using the 'Kanva' business model.
03.2 Luhansk Oblast Now, almost 5,000 private sector business entities operate in Sievierodonetsk. The number of entrepreneurs in the city has 03.2.1. Sievierodonetsk increased since the beginning of the armed conflict due to the transfer of business activities from the non-government controlled areas of Luhansk Oblast.
The city's major enterprises mainly operate in mining industry. Medium-sized enterprises operate in the transport, warehousing, communication, construction and processing industries, and small sized business operate mainly in the wholesale and retail trade.
The presence of a sufficiently large number of private sector entities is a favourable factor for its engagement in local development under various models: CSR, social entrepreneurship, impact investment, pro bono, charity, etc.
43 03.2. Luhansk Oblast 03. STATUS OF PRIVATE SECTOR INVOLVEMENT IN INDIVIDUAL 03.2.1. Sievierodonetsk COMMUNITIES IN DONETSK AND LUHANSK OBLASTS
A meeting with representatives of Sievierodonetsk City Council demonstrates that the city does not yet have systematic private sector engagement in community development. This is especially true for medium and small sized businesses.
Some large enterprises have CSR programmes. In particular, this model of cooperation with the community is practiced by Meeting of Sievierodonetsk private Sievierodonetsk Association 'Azot' PrJSC. 10 trolleybuses have been sector representatives with local authorities (by Alina Lebedieva) purchased for the city, UAH 17 million has been allocated for financial assistance to the city's trolleybus department, and a training centre licensed by the Ministry of Education has been established based on a personnel-training enterprise.79 However, for most large and medium-sized enterprises, cooperation with the community consists of providing financial or material assistance to individuals and entities when they apply for it.
There is an interest in social entrepreneurship in the city. Sievierodonetsk, as the administrative centre of Luhansk Oblast, often serves as the host city for activities promoting the ideas of social entrepreneurship and impact investment. For example, the public discussion 'Entrepreneurs — Agents of Change. How to Earn More?' was held in April 2018. It focused on the fight against poverty and social issues. Speakers at the event included Ukrainian and foreign experts.80
There are some examples of activities that can be considered social entrepreneurship. In particular, the activities of the Arena and Skimen sports clubs, as well as the private enterprise Systema, were cited as cases of socially responsible business development by British researcher Christine Forrester.81 79 http://www.ostchem.com/uk 80 https://re-start.org.ua/podiyi/ From time to time, there are various charity initiatives in the city. Local pidpryyemtsi-agenty-zmin-yak- businessman Mykhailo Ivonin financed the foundation of a exotic zaroblyaty-bilshe/ plant park at a local site. Local volunteers were actively involved in 81 http://www.level.in.ua/web/sesp/ 82 sesp-RU.nsf/da9433496b1d6f5bc225 preparing the park. 6d670032fc69/e40a79e42f3f7ce7c22 5791100508536/$FILE/Культура%20 Given the existing business potential in the city, there are quite соцпредпринимательства.%20 significant opportunities for wider private sector engagement in Северодонецк.pdf developing the Sievierodonetsk community. Lack of awareness and 82 http://vchaspik.ua/region/467307- oazis-posredi-goroda-v-severodonecke- limited experience with different models of cooperation between sozdali-skver-dlya-relaksa business and society remain major obstacles.
03.2.2. Bilovodsk In total, there are more than 800 business entities in the Bilovodsk ATC. The largest of them are the industrial enterprise Bilovodsk Butter Factory PrJSC and the agricultural enterprises AFE Agroton PrJSC, 'Demetra C' LLC, Pluhatar PFE, SPE Agro, the farming enterprise 'Zelykivske', the stud farm 'Bilovodskyi' LLC and the farming enterprise 'Nibulon'. Some of them operate in Bilovodsk, while the others are active in other settlements in the ATC.
44 03. STATUS OF PRIVATE SECTOR INVOLVEMENT IN INDIVIDUAL 03.2 Luhansk Oblast COMMUNITIES IN DONETSK AND LUHANSK OBLASTS 03.2.2. Bilovodsk
Mostly, private sector entities provide charitable support to individuals and legal entities at their request. In particular, they support the implementation of social projects initiated by local community-based organisations in partnership with local governments.
In 2018-2019, on public initiative and in tandem with the executive committee of the Bilovodsk Village Council, 46 projects with a combined worth of UAH 11.2 million were introduced. 40% of the total funds raised are local budget funds allocated on co-financing terms.83 83 http://belovodsk-rada.gov.ua/v- oblderzhadministratsii-rozghlianuly- pozytyvnyy-dosvid-zaluchennia- Examples of private sector participation in the implementation of investytsiy-u-bilovods-ku-oth/ social projects important for the community are provided in Table 8.
Table 8 Project name
Socially important 'WARMTH AND COMFORT IN THE SCHOOLHOUSE' projects in Bilovodsk Project purpose Initiator Funding Replacement of the CBO "Bilovodsk Total: UAH 705,300, including: heating system in the Horizon' • oblast budget — Bilovodsk secondary UAH 200,000. education institution • community budget — UAH 427,688. • public and business funds — UAH 77,580.
MAJOR REPAIR OF THE READING ROOM OF THE CENTRAL LIBRARY
Project purpose Initiator Funding Repair and rearrangement Bilovodsk initiative Total: UAH 398,800, including: of the hall with specialised group • oblast budget — furniture, room zoning UAH 199,400. • community budget — UAH 155,500. • public and business funds — UAH 43,900.
03.2.3. Shchastia According to the Programme of Social and Economic Development of Shchastia for 2017-2020,84 business plays a decisive role in economic development and welfare growth in the city. More than 570 business entities are registered in the city, of which 34 are legal entities and the rest are natural persons-entrepreneurs.
84 http://www.schastye-rada.gov.ua/ The largest (city-forming) enterprise in Shchastia is Luhansk thermal programa-sots-alno-ekonom-chnogo- rozvitku-mista-shchastya-na-2017-2020- power plant, which is a part of DTEK. In recent years, the enterprise's roki-u-nov-i-redakts-z-zm-n-0 share in product sales in the city as a whole has been over 99%.
45 03.2. Luhansk Oblast 03. STATUS OF PRIVATE SECTOR INVOLVEMENT IN INDIVIDUAL 03.2.3. Shchastia COMMUNITIES IN DONETSK AND LUHANSK OBLASTS
The main model of involving business in the development of the Shchastia community is CSR, which is implemented under the social partnership programme of DTEK and Shchastia. Trends in the implementation of projects in Shchastia under the social partnership programme are presented in Table 9.
Table 9
Trends in the implementation of DTEK 8 2 14 15 19 social partnership projects in Shchastia
4,3 3,3 6,6 6,0 7,1
Number of projects, units Volume of financing by DTEK, UAH million 2017 2016 2014 2013 2007-2012
There is interest in continued cooperation with DTEK under the CSR programme and the implementation of other models of private sector engagement in community development – namely social entrepreneurship and agricultural cooperation. This interest was expressed at a meeting between representatives of the Shchastia City Council, Luhansk TPP, business entities and community-based organisations in the city.
DTEK and certain private enterprises in Shchastia are interested in implementing promising and socially important projects for the city, namely:
• Establishing safe and compliant medical services by conducting major repairs of the children's polyclinic in Shchastia — DTEK.
• Employing socially vulnerable segments of the population (internally displaced persons, veterans of ATO/JFO, disabled persons) — natural person-entrepreneur S. Tkachenko.
• Establishing an agricultural cooperative — natural person- entrepreneur O. Onishchenko.
46 Conclusion
The armed conflict in eastern Ukraine has radically changed the life of local communities along the 'contact line'. In addition to serious issues of public security and social cohesion, local communities are acutely lacking new approaches, expertise and resources for the reconstruction and development of their territories.
The private sector is a key partner in achieving sustainable development results at all levels of successful communities. It is well known that private firms often bring innovation, experience and financing into a community, both to solve everyday local problems and to effectively overcome the challenges the community faces.
One of the main objectives of this study was to identify and describe the main models of successful interaction between local communities and the private sector, with a focus on communities in eastern Ukraine. A major aspect of this was highlighting selected examples of charitable support, pro bono, corporate social responsibility, social entrepreneurship, impact investment and cooperation.
Firstly, while the study confirmed the existence of successful local development experiences involving the private sector in eastern Ukraine, it also identified a number of limiting factors that make it impossible for local communities to interact effectively with the private sector.
This is primarily due to a lack of understanding by both businesses and local authorities of the shared value of economic and social improvements in the community, which will increase the overall competitiveness of both in the long run.
Secondly, there is also a lack of awareness among local businesses and governments in Ukraine of effective models of cooperation between them. In most cases, this makes it impossible to take full advantage of such interaction for the development of their cities and villages.
Thirdly, existing distrust and/or bias between local authorities and business structures often requires external mediation and/or leadership to develop positive experiences in implementing joint projects.
Fourthly, there is a lack of local territorial development institutions capable of providing service support to involve the private sector in local development (identifying problems in the community, generating ideas to jointly overcome them, attracting additional resources, developing and implementing projects, promoting success stories, etc.).
In conclusion, the lack of human and financial resources both in local businesses and communities requires a concerted approach to cooperation with international donor organisations to attract their technical assistance (consulting, grant support, exchange programmes, etc.).
47 Conclusion
Research has resulted in recommendations for improving private sector engagement in local development, in particular:
• To develop a methodology for involving the private sector in the local development of communities affected by the armed conflict in eastern Ukraine (based on established and effective models of private sector engagement in the development of the host community).
• To develop an applied training course on engaging the private sector in local community development in communities affected by the armed conflict in eastern Ukraine.
• To conduct a series of training sessions in specific communities on private sector engagement in local development for local business owners/managers, local government officials, and representatives of civil society organisations.
• To develop a programme of study visits on the application of various models of private sector engagement in local development in successful communities in eastern and other regions of Ukraine.
• To conduct a series of study visits to successful communities with the participation of business representatives, local authorities and civil society organisations from specific communities.
• To develop an online course on involving the private sector in local development based on materials from training and study visits to successful communities.
• To introduce a grant support programme in communities affected by the armed conflict in eastern Ukraine to implement joint projects involving local socially responsible businesses (co-financing).
• To organise and conduct a Socially Responsible Business Forum to demonstrate selected successful models of private sector engagement in community development.
48