The report is a summary of 7,600 quantitative interviews and more than 230 meetings with representatives from private, public and social sectors in these countries. The main topics addressed in the report include the nature of social engagement of particular groups, their motivations and barriers, and recommendations as to what activities should be prioritized to increase the flow of private capital toward impactful solutions or enhance its effectiveness. The accumulated knowledge was described from a number of perspectives:
Country Perspective: country by country, this section includes key macroeconomic and social data, description of tax and legal environment, basic data on donations and volunteering, a list of barriers to unlocking private capital for social good, and expectations towards business, public administration and the social sector (SDGs). This section covers 11 CEE countries: Bulgaria, Czech Republic, Estonia, Croatia, Hungary, Lithuania, Latvia, Poland, Romania, Slovenia, and Slovakia.
Target Group Perspective: this section is an analysis of key insights related to 10 specific target groups: Family Businesses, Small and Medium Enterprises (SMEs), Corporations, Investors, General Public, NextGen, Nonprofit Organizations, Social Enterprises, Public Administration, and Academia. It includes a summary of activities, barriers and motivators for each particular group to get more socially engaged, and key findings and recommendations.
Knowledge Area Perspective: this section features descriptions and data compiled from a thematic perspective, for example Sustainable Development Goals (SDGs), tax schemes, employee volunteering and pro bono services, crisis giving, education, cooperation, and capacity building. The section illustrates the phenomena, providing information on the situation in the region and quantitative data.
Ukraine: the war in Ukraine, which had a significant impact on giving in the CEE region, an additional quantitative study was conducted with the residents of the country. This section contains an analysis and assessment of foreign aid provided to Ukraine from the perspective of its inhabitants – who currently supports Ukraine, who, according to Ukrainians should, if the needs are well understood and supported, will the commitment of Western countries remain stable or decrease in the context of the protracted war?
Social impact ecosystem in the CEE region
In most countries of the region, after 30 years of a free market economy, both individuals and companies have more and more resources and willingness to contribute. The steady economic growth of the region results in a growing wealth of society. Most CEE countries are Member States of the European Union, which guides their social development. The recent crises – the COVID-19 pandemics and the war in Ukraine, laid a good ground for changes; many CEE citizens started giving, which they had never done before.
Now is the time for the CEE region to take concrete action to sustain this engagement and grow openness to collaboration and discussion. Building a resilient social impact ecosystem, capable of dealing with threats to media independence, democracy and the rule of law, must consist of three strong pillars:
- committed individuals, companies, and investors,
- strong and independent civil society organizations,
- supportive and transparent legislation.
Committed individuals, companies, and investors
Most individuals and companies operating in the CEE region do not perceive social engagement as an integral part of their lifestyle or business operations. It is still a rather spontaneous and reactive activity, driven mainly by emotions. As the region’s economies are relatively young, the pursuit of profit remains a central priority for businesses and investors, hindering the adoption of a more socially responsible approach.
However, there is a significant potential to increase their engagement. With the right motivation, CEE citizens would be willing to donate nearly twice as much as they donate today (from EUR 2.7 billion to EUR 5.5 billion). Among individuals, there is a growing group of so-called mid-size donors, who come from the young middle class demographic and have the means to contribute larger sums of money, in a more impact-oriented way. Regrettably there is no offer addressed to them and no effective outreach.
Companies are currently motivated mainly by external factors (regulations, parent company expectations, emerging pressure from customers and employees), and lack the knowledge and skills on how to act strategically and consistently. They do not see the business benefits of such an approach yet. Smaller businesses fear unnecessary fiscal risks and, faced with increasing costs of day-to-day operations, focus on survival rather than social engagement.
Impact investing is a new theme in the region. The first initiatives are just beginning to emerge but the criteria for making investment decisions remain unchanged – viable business first. Most investors perceive impact investing as a separate part of their investment portfolio, often associating it with traditional philanthropy. However, regardless of the country, there are claims that this area will grow but the market offer and an access to support and experts must be improved.
Strong and independent civil society organizations
Recent crises have shown how important civil society organizations are to building a strong social impact ecosystem in the region. Their stable development, which translates directly into tackling social and environmental challenges, should become a priority for the private and public sectors.
There are more than 800,000 nonprofit organizations registered in the CEE region, but many of them operate on a very small scale, or are registered but not active at all. They are heavily dependent on public funding, which is closely linked to dispersed, reactive and emotional private giving. The vast majority is operating on a project-to-project basis, which makes it difficult to plan long-term and focus on delivering impact.
Increasing resilience also comes with financial independence. The commercial activity and thus the self-sustainability of nonprofit organizations is currently relatively scarce in the region and, in many CEE countries, limited by law. The concept of social enterprise is gaining increasing attention in the CEE region but the provisions of law regulating it feature many obligations and restrictions, virtually non-existent in regular business practice, leading to low competitiveness of social enterprises on the market.
In addition to external factors, there are also internal limitation – lack of skills to professionally manage the organization, prepare good offer, communicate and fundraise, provide transparent reporting. Attracting and retaining good staff is a challenge. Burnout among nonprofit leaders and their exodus from the social sector to business is visible.
Supportive and transparent legislationy
The state has a key role in setting an enabling (or at least neutral) environment for the social impact ecosystem players – capital owners and impact providers. Public administration affects not only the regulatory side, but also the general atmosphere around social engagement.
Strategies and degree of openness to collaboration of public administration vary in the region. Some countries have already established dedicated strategies and bodies to engage in dialogue with stakeholders, while others still lack regulations and structures that would guide and outline priorities for other sectors. Topics related to broadly understood social responsibility and investments are not high on the agenda and are often handled by various ministries and small units.
The report also shows that the legal systems in most CEE countries do not incentivize private capital owners to share their wealth. Tax breaks that are particularly motivating for large donors are small or non-existent. Bureaucracy, lack of transparency and legal barriers such as VAT on pro bono services continue to impede businesses, investors, and individuals from becoming more socially engaged.
While the social impact ecosystem in the CEE region is maturing, with EU regulations nurturing this domain, CEE Member States implement EU policies in different ways, which results in a lack of consistency in legislation between countries. In practice, there is no single market nor freedom of capital in the region in regards to philanthropy and other forms of social engagement yet.
Key role of academia
In the face of numerous challenges related to the lack of awareness, knowledge, tools, and experts, the education system plays a key role in preparing the ecosystem for imminent changes. Its role involves mainly raising awareness among children and teenagers from an early age, as well as training specialists and experts in the areas of ESG and sustainability, increasingly sought after in the labor market.
The key role of education in the region is recognized – SDG4: Quality education is ranked as the third most important Sustainable Development Goal, but social responsibility is still largely absent from the curricula, both in schools and universities.