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Climate crisis, environmental degradation, social inequality, emerging nationalism and racism, demographic change. As a society we have many problems to cope with. We are aware of this not only since the COVID-19 crisis. However, the crisis has clearly changed one thing in particular: it has shown how connected our world really is. And this insight applies not only to the pandemic: more and more problems are of a cross-border or even global nature, and fewer challenges are locally restricted.

Social innovations represent a powerful means of solving such social problems. They are often embedded locally and at the same time unfold wide ranging impacts. However, there is currently a lack of both a common understanding of the phenomenon and concrete approaches to promoting social innovations. This article identifies the building blocks for promoting social innovation and formulates principles that decision makers need to embrace for progressive policy making.

Dr. Gorgi Krlev works at the Center for Social Investment and Innovations (CSI) at Heidelberg University. His main research interests include organizational and institutional theory, entrepreneurship and innovation. He is also on the Board of Directors of Euclid Network. 

What are and who “makes” social innovations?

Social innovations are essentially a reconfiguration of social practices in order to better meet social or societal needs. These needs are different from individual needs. Only if a majority in society recognizes that certain economic or social conditions need to be changed—for example that homeless people need our support or that we need to promote social equality or that we need to fight racism—do these issues become a realm for social innovations. The UN Sustainable Development Goals provide a framework for such innovations. Social innovations contribute for instance to the goal of “Affordable and Clean Energy” or “Reduced Inequalities” by reshaping social practices, that is, how we act on or how we think about certain issues.

Examples of social innovations are manifold. They range from hospices, to community energy cooperatives, to microcredits, to the employment of people with autism as software testers. As a consequence, we for example perceive disability in a different way, or think differently about people in poverty and what makes and keeps them poor. The European Commission emphasizes this trait of social innovations in highlighting that they enhance society’s capacity to act. Social innovation therefore usually refers to the result of the work of organizations and not necessarily their activity itself. In contrast to many commercial innovations, social innovations are usually not a single product or service, but a new principle of action. This does not rule out commercial interests, but they are usually not the driving force.

Social innovations may take a long time to become self-sufficient and bring about actual social change. Social innovations mostly arise when diverse actors from civil society, the market or public administration start collaborating and are often triggered by external factors, which makes them difficult to plan and steer. Besides, cause and effect are often hard to distinguish. For example, nobody will claim that the UN Convention on the Rights of Persons with Disabilities was passed because the Danish company Specialisterne was founded back in 2003 with the aim of employing people with autism as software testers. However, such larger transformations may have been inspired by small-scale experiments and exemplary activities, in the same way as policy initiatives may continue to shape the organizational behavior of socially innovative entrepreneurs.

 In fact social innovation is often connected to social entrepreneurship, and we see many examples of social entrepreneurs who create large-scale impact through their innovations. At the same time, other actors point out that innovations arise close to the problems they are addressing and that many established organizations, for example welfare associations performing social work, may exhibit a high degree of social innovativeness. Social entrepreneurship is therefore not limited to certain forms of organization, but rather a principle of flexible, creative and effective problem solving. In order to strengthen this principle, we need to have more concerted cooperation between the various actors from civil society, business and public administration.

Social innovation in the political debate

In Germany, social innovations found their place on the policy agenda relatively late. Their prominence was pushed through interest groups such as the Social Entrepreneurship Network Germany, which was established in 2017. Social innovations were the subject of parliamentary debate for the first time on May 29, 2020, and this year saw dedicated budgets for promoting social innovations in two ministries—the Ministry of Education and Research (BMBF, 6 million euros of budget for 2020–2023) and the Ministry of the Economy (7.5 million euros for 2020). Considering that the federal government contributed 240 million euros to the high-tech start-up fund back in 2005, the current commitment seems like a drop in the ocean. That social innovation policy in Germany is lagging behind others countries can also be seen in that the discussion about a “social impact fund” is only just beginning. Such an instrument, which is supposed to pool assets, for example from dormant bank accounts, to promote social innovation and impact, has been around in other industrialized nations for years.

The parliamentary debate is a clear sign that social innovations are a future issue. However, it also showed that there are many open questions, especially about the actors, mechanisms and the process of social innovation. In part, this lack of concrete ideas has its origins in the continued ignorance of the subject. However, it also needs to be highlighted that we have a massive data problem across Europe. There are no established indicators for social innovations, and social innovators are much more difficult to identify than their commercial counterparts. Because of this, we are still far away from a harmonized European Policy approach to social innovation.

Anchor points for a European strategy for social innovation

Social innovations succeed when actors of different types, including social movements, work together in a collaboratively designed process. To enable this, policy makers should implement changes on four levels.

Opening up scope for innovation in the provision of services – making public procurement more innovation-friendly: Public procurement could play an important role in strengthening social innovations. The current “Social Procurement” or “Buying for Social Impact” principles in the EU help prioritize sustainable, fair and responsible products and services in public procurement. This could also help boost innovation in the relevant organizations. In practice however, these principles are too rarely applied. One reason is that so far the principles have the character of recommendations rather than binding standards, another reason is that public procurement is otherwise clearly focused on cost minimization. While this policy focus comes with the positive effect of preventing abuse and (excessive) profit skimming by the contractors, it also means that there is no scope for innovation. Even when innovations arise, they often disappear again when funding expires. Therefore, we require financing mechanisms that do not only promote responsible service provision, but also innovations. At the European level, instead of guidelines, there should be specific regulations for public procurement that prioritize responsible and innovation-oriented procurement (after the example of “Regulation on European Social Entrepreneurship Funds” for instance). In addition, social innovators are in need of financial support that is promptly available. Such support could be provided in the context of the Employment and Social Innovation“ programme (EaSI). In Germany, service provision on public quasi-markets following the social security code, should foresee dedicated innovation budgets and grant some freedom to service providers in developing new approaches to meeting social needs.

Promoting a work culture that embraces continuous innovation: The COVID-19 crisis has pushed organizations and government to test new ways of stimulating social innovations. The #WirVsVirus hackathon, supported by the federal government, was unique in bringing more than 26,000 people together in order to work jointly on solutions to the challenges caused by the crisis. Another example of a new format for generating innovation is the “Society of Ideas” competition launched by the German Ministry of Education and Research (BMBF) in May 2020. However, although these tools for generating ideas are welcome additions to the policy repertoire for stimulating social innovations, we are in need of a shift in work culture that encourages steady and persistent work with the topic. Such a shift would require breaking down the small worlds of individual occupations to embrace flexibility, proactivity and the initiation of collaborations that are open-ended. Social entrepreneurs, company employees, volunteers, social activists and scientists should be able to meet in open foraoutside of a clearly defined project context. What we need are bridges to overcome the mere coexistence of innovators in the different sectors. We also need more meeting and dialogue forums for social innovations. Decentralized budgets of a relatively small scale would be enough to initiate collaboration. Innovation vouchers for small and medium-sized companies, which were introduced in the federal state of Baden-Württemberg in 2008, enable them to increase their innovation competence by for example contracting exchange and cooperation with science. Similar instruments should be available at the European level to join social innovators from different areas.

Developing innovative financing instruments: Because social innovations cost money, but often take a long time to sustain themselves, or continue to be based on hybrid income streams, including for example donations, we need new and innovative financing instruments. First, funding partnerships, for example between foundations, venture capitalists and a national state (or the EU) would ensure that social innovations are adequately supported throughout their different phases. Foundations usually have an explicit mandate to invest socially, low or no expectations of financial returns and a high willingness to take risks. Venture capitals have a high level of expertise in organizational development. And the state, or a supranational actor such as the EU, can be a risk embracing co-investor with the ability to support promising new approaches with beneficial legislation in the future. Second, structured finance products could enable more social investment by combining and hedging different profiles of risk, financial return and social impact. Thereby, projects that have a high potential for impact but promise low financial returns or involve a high level of risk could be realized, while they would otherwise be disregarded. The aforementioned German Social Impact Fund or a similar instrument at European level should explicitly aim to find a balanced mix between so-called “Finance First” and “Impact First” projects.

Increasing the problem orientation in European innovation policy: Social innovations, just as the social problems they seek to address, usually spread across different policy areas. The transformation of cities towards a bike-friendly mobility structure and culture, for example, is a complex process that affects various policy areas: urban planning in terms of infrastructure, local public transport with regard to the mobility mix, economic development because of the effects on inner-city business and the social policy with regard to citizen engagement and participation. Therefore, we need a political coordination structure for social innovations that lies above established policy areas and ministries. Some Directorates-General of the EU do already embrace this principle (for example DG REGIO). However, competencies overlap also at the EU level with the effect of unwelcome interaction effects. For a coordinated strategy, we would therefore require a shared understanding and a central positioning of social innovation. This approach is in line with previous suggestions of making policy focus more on problem solving rather than on a division by areas of specialization. The economist Mariana Mazzucato has had a major influence on the EU’s innovation strategy with her mission-oriented innovation framework, in which policy is linked directly to specific challenges such as working towards “a plastic-free ocean” and therefore inevitably involves wide variety of actors.

 Conclusion: Crafting a progressive European social innovation policy

The four prompts just outlined, stress that European social innovation policy must aim to join policy levels, actors and issues in unprecedented ways. This need is underscored by further traits of social innovation. First, a social innovation may be overlooked because the product or service is missing. Social innovation can also come in the form of shifts in societal discourse, as we are witnessing in the international Black Lives Matter movement for example. Second, national and supranational policies can set the framework for social innovations, but they can also be an integral part of the social innovation process. Third, the highest level of social innovation is reached when it is mainstreamed, for example through new legislation.

Overall, this leads to two key principles for a progressive European social innovation policy: It must be agile and it must be integrative. Agile means that European policies need to be oriented at the process of social innovation rather than the intended outcomes, and engage in this processes in flexible ways. The World Economic Forum has articulated a similar suggestion in the context of the “fourth industrial revolution”. Integrative means that European policy makers must work together with diverse types of actors and bring together different policy areas, even those that have nothing to do with innovation. Taken to an extreme, this argument suggests restructuring policy areas altogether. The feasibility of trespassing established policy borders and drafting cross-ministry policies has been demonstrated by the new gender equality strategy that was recently adopted in Germany. Only if both principles are taken to heart, can policy makers become successful co-creators of social innovations and at the same time design beneficial framework conditions for more social innovations to emerge.

This article was first published in German by Friedrich-Ebert-Stiftung as part of a blog series on progressive economic policy in Europe and is forthcoming as a book chapter.

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