“Socifaction” Stimulates Social Business in the Baltics

A fashion label that creates jobs for low-skilled young mothers. A cheap taxi service for disabled people. Or a second-hand shop that uses its profits to fund charitable work. If you look closely, you can see them popping up all around the Baltics: so-called social enterprises. Social businesses aim not to maximize profits for their shareholders, but rather to solve a pressing social (or environmental) problem.

Throughout 2015, the social business accelerator program “Socifaction” works to educate entrepreneurs from Lithuania and Latvia about this relatively new way of doing business. Socifaction offers workshops and mentorships for selected groups of young and aspiring entrepreneurs. One of the program’s highlights was the “Happy Happy Joy Joy Festival”, organized this Summer in Riga.

The Socifaction project leans heavily on the teachings of Dr. Muhammad Yunus, Bangladeshi entrepreneur, Nobel-laureate and founder of the Grameen Bank, one of the first institutions to provide microcredit to small businesses in developing countries. Dr. Yunus’ “Seven principles of social business” - allegedly scribbled onto a piece of paper during the 2009 World Economic Forum - sound simple enough: a social business aims to “overcome one or more problems (...) which threaten people and society”, “investors get back their investment amount only” and “profit stays with the company for expansion”.

As such, a social business is like a charity in its goals, although it uses business methods and is - at least in theory - economically sustainable and independent from donations and grants. This probably explains why Socifaction’s festival drew so many representatives from NGOs, interested in finding innovative ways of funding their cause.
There are several ways for a social business to tackle its social problem, or reach its target audience. Sometimes, the beneficiary is the customer. Selling cheap solar lamps in developing countries, for instance. Other social businesses aim to improve the lives of their employees. Latvian weaving workshop Lude employs isolated pensioners and offers them both an occupation and a steady wage. The “cause” can also be a wider societal one; such as promoting vegetarianism by mainstreaming no-meat catering services.

Although Socifaction’s festival showcased many inspiring examples, not many of the projects mentioned strictly adhere to Yunus’ definition of “social business”. A Lithuanian SEB bank representative presented some slides about Corporate Social Responsibility and the bank’s sustainability policy. Family-owned Latvian fruit brand Very Berry explained they don’t feel the need for an eco-label, since people “can just come see for themselves” how sustainable they are. And the “Young Challengers” part of the festival featured some enthusiastic pitches by aspiring entrepreneurs that sounded interesting enough (home-delivered freshly-squeezed fruit juices), but do not necessarily tackle any pressing global issues.

In fact, the most successful examples of social businesses presented at the Festival came from beyond the Baltics. Adrenaline Alley, now Europe’s largest indoor skate park, started out as a mother’s mission to create a safe leisure environment for her son in the dreary British town Corby. Equally British and successful is Pants to Poverty, an underwear brand that aims to end poverty across their entire production chain.

Socifaction certainly manages to inspire, judging from the young participants’ stories and reactions of the festival’s visitors. But one is left with questions, too. “Social business” is not a legally recognized business form, at least not in the Baltics. As such, a public or private company can claim to be more or less socially responsible, but there is no legislation in place to control or enforce any social claims. Further, like in traditional charity work, impact is very hard to measure.
At the very least, the Socifaction project helps to encourage a new generation of Lithuanian and Latvian entrepreneurs to follow their dreams of selling eco chewing gum or opening people-friendly day centers for the elderly. Only time will tell if these entrepreneurs will indeed help overcome the world’s problems.