Why the social economy is key to rebuilding Ukraine

When Russian aggression in Ukraine turned into a full-scale invasion earlier this year, millions were displaced and businesses were disrupted. The situation prompted social entrepreneur Kateryna Tarasenko, herself a refugee from the 2014 Russian invasion of the country, to do something to help.

Together with her partner, Tarasenko rapidly repurposed their small dairy farm and petting zoo – that had become one of the most popular tourist attractions in the region – into an agricultural cooperative to provide a refuge for people fleeing the war. Many of those now sheltering at Carpathian Farmers volunteer in the fields, ensuring that they can grow healthy food to feed themselves and others in need as the war continues.

Tarasenko is one of countless social entrepreneurs working behind the frontlines in Ukraine to keep people safe while also helping to keep the economy afloat. A diverse set of businesses including social enterprises, cooperatives, foundations and mutual benefit organizations have swung into action across the country, boosting what’s often called the “social economy”, because these organizations are focussed on addressing societal and environmental challenges in creative and sustainable ways, actively prioritising people over profit.

In times of crisis, the social economy – which the UN estimates accounts for around 7% of GDP globally – has shown itself to be more resilient than many traditional economic sectors, proving both agile and effective in sustaining employment and economic growth. As such, it holds significant potential to drive revival in war-torn Kyiv and Ukraine.

The Ukrainian economy has taken a severe hit as a result of the war, although banks have stayed open – largely as a result of digital acceleration during the COVID-19 pandemic and central bank reforms – and businesses continue to operate at significantly reduced capacity. Now, as Russian forces retreat, the economy is showing signs of recovery.

To nurture this growth, the seeds of opportunity sown by social innovators in recent months, must be tended to. With the right support, social innovation and entrepreneurs like Tarasenko or Sergey Kostin, founder of Way Home which started addressing the homelessness crisis, later re-focusing its efforts on providing comprehensive services for socially vulnerable families and prevention of domestic violence, could play a vital role in building a more sustainable, innovative, and inclusive model for the Ukrainian economy, helping to pave the way to growth and prosperity.

Accordingly, at the Kyiv Investment Forum in Brussels on 28 November 2022, the role of the social economy as a driver for economic development in the context of Ukraine is a key focus for the first time. A special session on the topic will be chaired by the World Economic Forum's Schwab Foundation and Global Alliance for Social Entrepreneurship.

Mayors of leading European cities and top public and private sector officials from Europe and Ukraine meet to develop a shared vision of Ukraine’s future beyond the current conflict, discussing effective solutions to the social and economic challenges the country faces, and developing an extensive programme to support the social economy – specifically social entrepreneurship – in Ukraine.

The event has been jointly organized by the Kyiv City State Administration, Brussels Town Hall and Impact Force, a Ukrainian Nogle that focuses on social behavioural change and social impact that, in partnership with MovingWorlds and Moving Transform hub, is also in the process of building a unique technology infrastructure to accelerate the growth of tech and innovation startups and the enterprise ecosystem in Ukraine.

At the same time, Catalyst 2030, a member of the Global Alliance for Social Entrepreneurs, is mobilising to support social entrepreneurs in Ukraine by working to facilitate communication and provide practical assistance to social innovators on the ground for example, by helping them to draft grant applications, and by connecting them with funders and fundraising specialists.

Capital infusion and wider non-financial support, including partnership building, mentorship, and acceleration, will be crucial to help social enterprises in Ukraine to scale and compete for global development financing. However, private investors are understandably reluctant to invest in a country that still finds itself in the middle of a hot war; foreign investment has dried up to less than 1% of what it was a year ago. Furthermore, attracting investors to social entrepreneurship projects can be challenging.

Despite their potential, social enterprises the world over report difficulties when it comes to accessing capital and gaining access to markets. Investors and larger corporates thus need to be helped to understand why it is worth investing in and partnering with these enterprises; and experience is showing us that there is no shortage of good reasons.

We’ve seen during COVID-19 how social entrepreneurs punch above their weight and can make attractive partners for both governments and profit-driven businesses that may lack capacity or the innovative capabilities to service key markets. Furthermore, collaboration between commercial and social economy enterprises can bring benefits for both players. Corporations offer social enterprises much-needed access to capital and markets and help to professionalise and scale their operations; while these partnerships can open new markets, spur innovation, and develop greater supply-chain resilience for the corporations themselves.

The social economy’s non-traditional models, which challenge the norms and practices that have defined the way business is done, may also be crucial in helping to push an economic transition to a more inclusive and sustainable future. Social enterprises have been shown to foster social inclusion, economic participation and community building, and offer the chance to improve representation across gender, geographical and class lines.

In Ukraine, we see this playing out in real time on the ground, as social actors work together to protect local communities and repair natural ecosystems facing damage and loss. Their strength, unity and resilience are as inspiring as that of the armed forces fighting on the frontlines. Now we must ensure that they get the support and investment they need so that the social economy can form the basis for economic regeneration in the country.