Individuals and businesses have more and more resources and willingness to tackle the most pressing social and environmental challenges. Companies are starting to operate in a responsible and sustainable manner, motivated by increasingly conscious employees, investors, and consumers. As many as 34% of Estonians are already willing to pay more for products and services offered by socially responsible brands.
Understanding what stands in the way to a greater social engagement of business and individuals, what barriers do they face, including tax and legal aspects, and what are the potential incentives that could positively impact their engagement and overcoming these barriers is in the best interest of us all.
It is our hope that the barriers and recommendations, prepared in collaboration with organizations that are shaping the Estonian social impact ecosystem, will be helpful in establishing priorities and directing further action.
To change the language:
To change the country:
Estonia is a fast-developing country that is already known throughout Europe for its startup and new technology environment. Over the past 30 years, Estonia has succeeded in building a culture of entrepreneurship, and is now strengthening a culture of social engagement. More and more people and representatives of various sectors are aware of the importance of this topic, but the consultations showed that there are still many challenges and areas for further development. There are currently around 27,000 non-profit organizations in Estonia, but most of them are very small. Another major challenge is that the organizations are dependent on public funding and there is a lack of sustained, continuous, and long-term support from private donors.To read more, download the report
Barriers & Recommendations
Recommendation: The law establishes specific numerical limits, the interpretation of which is rigid in the interpretation practice of the tax authority. As a natural person, a donation can be made out of taxable income without incurring additional tax liability. It is important to support social engagement with tax incentives, certainly efforts should be made to avoid the loss of tax incentives in such an area.To read more, download the report
Recommendation: The solution could be the introduction of a hybrid model that somehow merges both legal forms (nonprofit and LLC) and allows access to both sources of funding – grants and subsidies. It would be important not to lose the current benefit for investors – the possibility to pay dividends – when opening access to this source of funding for social entrepreneurs.To read more, download the report
Recommendation: Promote the usage of social criteria in public procurement and educate contracting authorities on how to use the criteria to their advantage.To read more, download the report
Recommendation: Introduce an impact assessment criteria in public funding to make sure the funded companies and initiatives are at least neutral.To read more, download the report
Barriers & Recommendations
Recommendation: It is worth creating a single source of knowledge and information on social engagement. There is a need to have more knowledge and experience sharing initiatives that would provide an opportunity to learn best practices and apply them to one’s own organization. Education and training in the area as well as cooperation with representatives of other groups are also necessary.To read more, download the report
Recommendation: More data, inspirations, and analyses are needed on what impact means to different groups and sectors. Impact measurement tools and methods should be further developed.To read more, download the report
Recommendation: Various forms of activity should be promoted. Social engagement may be related to the transfer of funds, but also volunteering or pro bono activities. The tax scheme should provide greater incentives to companies that support impact providers despite the growing costs of operating activities. In cooperation with the social sector, it is necessary to develop clear standards and a code of conduct.To read more, download the report
Recommendation: It is necessary to prepare and educate startups for talks with investors. Among young companies interested in social impact, it is worth putting more emphasis on the business side, so that they can generate the expected profit. On the investors’ side, it is worth raising interest in the area of social impact due to changing regulations and pointing out that it is a new opportunity.To read more, download the report
Recommendation: Funding for building capacity in organizations should be increased through responsible planning of project budgets. At the same time, it is worth expanding the teams dealing with social engagement issues in the private and public sectors. These activities should be carried out on an international scale, as many organizations operate not only in Estonia, but in a wider area, for example in the Baltic countries.To read more, download the report
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