Georgi Lossmann-Iliev, Head of Magdas Recycling, Austria Video: https://youtu.be/R9KGnkZIeWo Social Entrepreneurship Foruma 2015 http://sefriga.lv/ Georgi Lossmann-Iliev is head of magdas recycling and in charge of social business development at magdas, the social business company founded by Caritas Vienna. Magdas, an 100 percent affiliate of Caritas Vienna, was founded in 2012 with the aim of creating new job opportunities for people living in poverty with no or lower chances of getting a job. Run as a social business, magdas tries to solve social and economic problems with entrepreneurial tools. Magdas social business comprises projects from a design hotel run by former refugees in co-operation with hotel experts to a recycling enterprise recycling yearly almost half a million mobile phones.

1. 26.11.2015
Georgi Lossmann-Iliev
magdas Social Business Development

2. magdas Mandate
• Foundation of social enterprises
by transforming existing
projects into a social business
• Social Business definition by
Caritas Vienna standards
– Prime objective is to (partially) solve
social problems.
– Self-financed by economic success.
• Demand is generated through
quality of services
• Additional social value serves as
surplus [facilitates purchase
decisions]

3. The Idea
Visionaries like Muhammad Yunus argue for the idea, to combine the conventional entrepreneurship with solving
existing problems of our society. In accordance, Caritas Vienna is convinced, the so called Social Business
Concept will greatly add to the already existing portfolio of services.
Main objective is the partial solution of social problems. Funding is generated by economic success, without
drawing on public subsidies, which wouldn’t be available to competitors.
magdas is a potential response to present challenges of the welfare state on the one hand and to the profit
oriented market system on the other.

4. magdas‘ Mission
magdas likes Social Business.
With magdas we prove, there is no contradiction between
economic success and socially responsible behaviour.
With our Social Business enterprises we create meaningful
employment for people, who would otherwise have only limited
chances, sometimes even none at all, to get a job.
Even our customers benefit. While consuming high-quality
products & services they simultaneously fulfil their need for
being socially responsible.
With magdas we show: It’s possible to make a difference.

5. magdas‘ Structure
• 2 entities, working together under the umbrella of
magdas:
– Association:
magdas – Social Business by Caritas of archdiocese Vienna
– Limited liability company:
Caritas Services GmbH
• By now 115 employees (including 45 people with
limited job perspectives)
• 5 business segments

6. magdas business segments
magdas
CEO:
Michael Kleinbichler, Gabriela Sonnleitner
magdas RECYCLING
magdas SERVICES
magdas ESSEN
magdas HOTEL
magdas CANTEEN

7. magdas RECYCLING
• Mobile Phone collection
– „Ö3 Wundertüte“
(~OE3 Lucky Bag)
– since 11 years
– In 2014:
• 470.000 mobiles
• € 800 000.- contribution
to families in distress
– wunderbox @ carla
• New project:
business mobiles

8. magdas SERVICES
• Facility Management for
Caritas buildings
• 180 real estates with over
200.000 m²
• mobile teams
• In buildup: cleaning project

9. magdas ESSEN
• 2 large scale kitchens –
many distribution kitchens
• In 2014: 500.000 meal
servings to clients in 14
Caritas-facilities
• Forecast: 1 additional
canteen kitchen
• Variety of served menus
– Seasonal
– Regional
– Special themes
– Elaborated in cooperation
with nutritionists, clients and
professionals of social
services

10. magdas CANTEEN
• Operated by professionals
and people soon-to-be
professionals
(disadvantaged employees)
• Opened in september 2014
• Located in the old bread
factory of Ankerbrot AG in
Vienna‘s 10th district
• Canteen and Catering
• Regional, seasonal, near to
nature products
• Objective: Create
opportunities for the
neighbourhood

11. magdas HOTEL
• Since 14.2.2015 operated by
professionals and refugees
• Temporary use of the former
Caritas retirement and nursing
home
• 78 double bedrooms, apartments
and suites (using upcycling-
products)
• Crowdfunding-campaign during
retrofitting (over € 50.000
generated)
• Target group: urban tourists,
families, business travellers and
globetrotters
• Wide variety of services and
features (rental bikes, garden,

12. magdas HOTEL
Standard Room

13. magdas HOTEL
Suites

14. magdas HOTEL
Public Space/Social areas

15. magdas HOTEL
Events, Seminars and Conferences

16. Social Challenges
Basics
• All employees are deployed and remunerated according to the relevant collective bargaining
agreement
• Potential placement obstacles of an employee will not be disclosed to colleagues– in contrast to
projects where disclosure is required
• Termination management is a component of the concept as well.
• Both limited and open-ended job contracts are available
• Executives are recruited from professionals of the respective line of business (whether with or without
placement obstacles)
• Impact measurement will be and social advisory board is already established

17. Social Challenges
Lessons learned
• Training phase of unskilled employees should be as long as possible– favourably by means of
internships in other companies
• Executives need training and guidance in respect of the social business concept
• Extensive supervision/mentoring of the executives to master the social challenges of certain employees
and teams
• Recruiting processes of employees (with placement obstacles) shall not be influenced by
“recommendations” of employment agencies or other job centres
• Notice of termination and appropriate outplacement is to be considered as an option right form the start
of an employment and organized if necessary. Social business requires consequences to be fair but
swift alike.

18. Social Challenges
Perspectives
• Professional education and training of the executives is part of the requirements of social business
• Employees and managers receive support via external and internal coaching and internal social
assistance
• Employment-mix of professionals (without placement obstacles) and semi-professionals or untrained
employees (with placement obstacles) shall not exceed 50:50
• Objective is to meet the predefined quarterly results and noncompliance need to entail consequences
in order not to risk impairment of the social business model.
• Establish impact measurement

19. Economic Challenges
Basics
• Return on Equity (ROE) of max 3.5% – potentially exceeding profits are used to establish new projects
• Max. 3 years of start-up phase – break-even point must be achieved by then (including preproduction
costs)
• Make use of possible tax benefits, provided charitable(value-added tax, corporate income tax,
municipal tax…)
• Utilization of alternative methods of financing (crowd funding, economic promotion programs, social
investment funds, social impact bonds …)
• Involvement of industry insiders welcome
• Internal services (catering, cleaning) organized as social business as well

20. Economic Challenges
Lessons learned I
• For investments by alternative investment funds, (social) business angels, venture capitalists and industry
insiders the limited return of 3.5% is unsatisfactory – discussions start at 6%
• Charitable corporations are not eligible (at least so far) to receive start-up financing from the business
agency as they don’t meet the current criteria.
• Don’t bite off more than you can chew (too many business segments, projects, contradicting objectives, too
diverse target groups etc.) – if necessary, the creation of new corporate entity is advisable
• Potential partners (Investors, banks, public sector) are reluctant to expose themselves to the stat-up risks
• Crowd funding is a learned trade – benefit from well established systems

21. Economic Challenges
Lessons learned II
• Taking over enterprises and operations from previous owners into a legal entity for social business
sparks fierce resistance from employee representatives
• Lots of convincing is necessary to communicate the advantages of social business
• Labour-intensive industries (gastronomy, cleaning) often benefit from exploiting or even circumventing
relevant obligations stipulated in (collective) contracts or legal standards– such practices violate the
core-principles of Caritas, leading to higher labour costs compared to the industry benchmark
• Advantages due to non-distribution of profits don’t cover the additional cots of reduced performance &
training requirements of employees

22. Economic Challengens
Perspectives
• If the core business is charitable from both legal and tax perspective, the potential advantage shall be
utilized
• Outsourcing additionalcosts of social busines ( trainings, qualifications, team supervisions, job
coaching, social work,…) to an entity that is not market financed (e.g. foundations, state programs) =>
magdas ACADEMY
• Cost management as good as it gets
• Social Franchising?

23. magdas_ACADEMY
• Additional demand driven
trainings/HR development
• Goal:
– optimal and sustainable inclusion
of people with low job chances in
working life
– development of special-,
communication- and social skills
– job-related training
– tailor-made support of people
under consideration of their
respective needs and personal
challenges

24. Follow us
• www.magdas.at
• www.magdas-kantine.at
• www.facebook.com/magdasKANTINE
• www.magdas-hotel.at
• www.facebook.com/magdasHOTEL