Social Innovation (or Why We Need the Civil Society)

Abstract

Activities enacted by economic and governmental actors at various levels will not be sufficient to achieve the necessary turnaround of our consumption patterns and economic systems. What is needed instead are orchestrated, multilevel, and possibly cross-sectoral approaches that offer new solutions to the grand challenges we currently face. There is growing recognition among scholars that civil society plays an important role in addressing so-called "wicked" social, economic, and environmental problems. In this chapter, we discuss the concept of social innovation, how it can be put into practice, and how it can be scaled.

FormalPara This Chapter’s Learning Goals

• You know what social innovation is, why it matters and how you can measure it.

• You know how social innovation can be implemented in practice, specifically through social entrepreneurship and self-organization.

• You know what differentiates a social enterprise from other organizations, and can apply the social business model canvas.

• You know that social innovation can be scaled and replicated using certain models.

Activities enacted by economic and governmental actors at various levels will not be sufficient to achieve the necessary turnaround of our consumption patterns and economic systems. What is needed instead are orchestrated, multilevel, and possibly cross-sectoral approaches that offer new solutions to the grand challenges we are currently confronted with (Ferraro et al., 2015). There is growing recognition among scholars that civil society plays an important role in addressing so-called "wicked" social, economic, and environmental problems.

For instance, Schneidewind (2019, 208ff.) from the Wuppertal Institute therefore points out that, in addition to the state and private enterprise, civil society will have three central tasks in this change:

• Serving a warning function in which civil society actors point to and create public awareness for ecological dangers and inequalities. Recent examples comprise the “Fridays for Future” or “Black Lives Matter” activists.

• Mediating society initiatives, such as anti-racism, development, and environmental organizations, stand up and fight for superior values and concerns of society.

• And finally, the driving function, where civil society actors create new solutions and structures that fundamentally drive change processes.

In this chapter, we are particularly interested in the driving function of civil society and particularly in its relationship with social innovation, conceived of as innovation explicitly geared towards creating value for society by “stimulating transformational processes to advance societal well-being” (Stephan et al., 2016, p. 1250).

5.1 Social Innovation: What Is It and How Can It Be Measured?

Although social innovation might be driven by actors other than those in civil society, it is widely acknowledged that existing social innovation is often closely linked to, or even emerges from civil society actors. Societal or social innovation has thus become a guiding concept in modern or post-industrial societies.

Social Innovation as a Guiding Concept of Modern Society

For some time, technological innovation has been the main driver of social change. Thus, governments have been promoting cutting-edge technologies as a way of making our (working) lives more convenient, productive, and efficient. However, technological innovation will not be sufficient to meet major societal challenges such as climate change, nor to solve social problems at local and regional level. This is reflected in recent pleas for a “social turn” in innovation that “creates space for a multidisciplinary and multi-actor discussion of innovation that significantly extends beyond economics and management studies, and that highlights human creativity from the proposition of ideas to their diffusion beyond a focus on products and services for markets” (Ziegler, 2017, p. 389).

Consequently, the understanding of innovation processes in the literature has been adapted to societal challenges and defined more comprehensively (see, e.g., Howaldt, 2019, 17f.):

• The focus of innovation changes: whereas in industrial society it was still entirely focused on technology, the focus is now shifting to social practices of how we live, work, and consume together. The potential of new technologies can only be unlocked if consumer habits can be adapted or innovated by new practices.

• Social actors are not only seen as suppliers of ideas but also as co-designers in the development of new products and processes. An important keyword here is “open innovation,” i.e. the involvement and feedback of citizens in (business) innovation activities.

• In addition, the focus on major societal challenges, as reflected in the EU’s major funding programs, is also important.

Although there is no consensually agreed definition of social innovation, we suggest the following definition:

Social innovation aims to generate or revive sustainable solutions for major social and ecological challenges. The inclusion of civil society as an actor increases the chances of innovation to be widely adopted in society (Kissling & Mettler, 2019).

Social innovation can be broadly thought of as an innovative problem-solving approach that introduces new ideas (in the form of new products, services, or business models; see European Commission, 2013) to (1) satisfy human needs that are presently unmet, (2) change existing social (power) relations, and (3) empower people by increasing their capacity to access resources (Moulaert et al., 2005).

As intimated above, a key feature of many social innovation definitions is that in addition to state and corporate activities, the active participation of civil society in solving grand challenges is paramount (Ferraro et al., 2015). Indeed, scholars have suggested that social innovations trying to tackle specific problems often require multisector collaborations where civil society, market and state actors pool their resources and capabilities to solve pressing environmental and societal concerns (Nicholls & Murdock, 2012).

While the term social innovation always implies the active involvement of civil society, it remains an umbrella term and leaves room for various practical ways of implementing these innovations. Social innovations can unfold in the form of social businesses, social enterprises, or social movements, among others. Later in this chapter, we will take a closer look at two of the many possible implementation formats of social innovation: social entrepreneurship and social self-organization.

Real-World Examples: Social Innovations (Ashoka, 2021)

“Ackerdemia”

Problem: Food waste, unhealthy nutrition, health problems, climate change, loss of biodiversity

Goal: To anchor applied sustainability in the education system.

With new teaching practices, experiential learning, and green learning places, a new generation would grow up that would perceive nature better—and thus also learn to appreciate it.

Innovation: Nature learning sites in all schools. The social innovators are working to ensure that every school in Germany has a green learning space outdoors to grow vegetables. Children can regularly experience and learn about sustainability there. Key to this is the educational program “GemüseAckerdemie,” which can be integrated into any timetable.

“Irrsinnig Menschlich”

Problem: Up to 80% of all mental illnesses begin in childhood, adolescence, or early adulthood. Reason: Stigmatization of mental crises and difficult access to help.

Goal: Youth services, mental health providers, and schools work together on mental health at the community level.

The interaction of these systems and prevention measures at school lead to students knowing where and how to get help.

Innovation: Mental fitness instead of mental illness. The social innovators carry out preventive work on mental health for pupils and students and dispel prejudices and fears. The exchange with people who have mastered mental crises promotes understanding and removes taboos from the subject.

Theoretical Approaches

In this section, we present three different theoretical approaches each with a different interpretation of social innovation and the role of civil society action. While Schneidewind, as a representative of the sustainability discourse and the limits to growth, pleads for the great transformation and argues on the macroeconomic and political level, Ostrom, as a representative of institutional economics, sees the solution for local and regional resource problems in the self-organization of communities. A more entrepreneurial perspective is taken by management-orientated research and teaching in social entrepreneurship.

• Approach 1. Schneidewind (2019) and the Wuppertal Institute see themselves in the tradition of the Meadows report Limits to Growth and the WBGU report, in which great transformation is viewed as a “future art” and a project of civilization for the twenty-first century. In this context, the SDGs represent the central compass for the sustainability turnaround and the planetary boundaries. The actual transformation needs to take place in seven arenas, supported by central actors who share responsibility for them (see Fig. 5.1). As described above, civil society has a key role in this. In this perspective, economic, technological, cultural, and institutional dimensions are brought together and seen as a whole that can initiate the necessary turnaround.

• Approach 2. The perspective of institutional economics (see also Chap. 2, “tragedy of the commons”) especially that of Elinor Ostrom (Governing the Commons) sees the solution to major social problems in self-organization and the combination of institutional mechanisms. Ostrom called this the third way. Based on the idea, that problems within a community are being solved best by themselves and therefore have to define and enforce rules collectively, the principle of self-organization is used as a coordination principle. It is not the market or the state that provides the central solutions for the decarbonization of society, but local and regional self-restraints, as they can be shaped by communities themselves. Classical examples of this are self-managed fish stocks, alpine management regimes or water regimes. Self-organization is particularly suitable for local and regional problems and represents an alternative management of public goods. It is not the state that ensures their preservation with environmental regulations, but rather jointly defined rules that the communities set themselves. Civil society initiatives contribute self-organized solutions to decarbonization. Whether it is the opening of a local Repair café or the establishment of a new clothes exchange, these can reduce resource throughput.

• Approach 3. As pointed out on the homepage of Stanford University, innovation and especially social innovation does not only happen in entrepreneurship, even if social entrepreneurship in particular focuses on it (Tortia et al., 2020). Since the eighties, there has been significant research interest from the fields of management, sociology, political science, etc., in non-profit organizations and non-profit management (Dees et al., 2001). Millner et al. (2013) point out that the original research interest among social entrepreneurship scholars was driven by the question of what distinguishes this so-called third sector, i.e., NPOs (non-profit organizations) from the private sector. As the figure below illustrates, the boundaries between the public, private, and third sectors are increasingly blurred or even disappearing (adoption of management principles by the state in New Public Management (NPM), the third sector), the third sector is committed to and oriented towards the market (Maier et al., 2016), and private companies are increasingly engaging in the “common good” through CSR and social innovation (Mirvis et al., 2016). These variegated tendencies give rise to different kinds of hybrid organizations which combine principles, practices, and models from the private, public, and the third sector (Doherty et al., 2014).

Fig. 5.1

The seven transitions for the great transformation (source: own representation based on Schneidewind, 2019)

5.2 Implementing Social Innovation in Practice

Implementation Through Social Entrepreneurship

In practice, social innovation can be implemented in various ways. Social entrepreneurship is one of these ways and has received increasing attention in research and practice alike. Social entrepreneurship describes an entrepreneurial approach to addressing societal challenges (e.g., Jähnke et al., 2011; Müller et al., 2019). Social entrepreneurship is characterized by two traits in particular (Jähnke et al., 2011):

• 1. In contrast to civic engagement, which is often carried out on a voluntary and unpaid basis, social entrepreneurship also pursues economic goals, i.e. it aims to generate income or profit.

• 2. In contrast to the sustainability efforts of conventional companies, social entrepreneurship prioritizes the maximization of its social gains over economic ones.

Figure 5.2 illustrates the classification of enterprises along their goals and thereby highlights the balance of economic and social returns that is characteristic for social enterprises. On the left-hand side, we find NPOs that are clearly socially oriented and are not allowed to redistribute profits (redistribution constraint). NPOs differ from social enterprises in the sense that they are exclusively financed by donations and third-party funds. This is contrasted by commercial companies for which profit orientation is the focus. As social enterprises combine social and financial returns, they are positioned in the middle. The concept of a social enterprise overlaps with that of a social business in that both alleviate social problems while generating profits in the market (Müller et al., 2019). However, social entrepreneurship can be understood as a special form of organization as it refers to starting up new social businesses in particular.

Fig. 5.2

Range of social and financial targets (source: own representation based on Brozek, 2009, S.8)

Publications on social entrepreneurship and social entrepreneurs as a practical implementation of social innovation have increased significantly over the past 15 years. There has been a lively debate on public–private partnership and CSR in the past, and more recently on social entrepreneurship and innovation in particular. A specific strand of such literature, for example, is trying to consider how positive social value can be created in addition to the production of products and services by a company, which is the actual economic basis (Gurtner & Hietschold, 2020). In practice, the idea of social entrepreneurship received attention from the broader public when the social entrepreneur Muhammad Yunus was awarded the Nobel Peace Prize in 2006 for his work on promoting microfinance. Today, social entrepreneurship has not yet reached the mainstream, but it is no longer an exception. This is, for example, reflected in the results of the “Special Topic Report Social Entrepreneurship” of the Global Entrepreneurship Monitor project from 2015/2016, which includes data from people who are either in the start-up phase or already own a business that is no older than 3.5 years (Bosma et al., 2015/2016). According to the results, 3.2% of all people aged 16–64 are trying to start a social entrepreneurial project (smaller social and voluntary initiatives included)—already half as many as the 7.6% trying to start a commercial business. More and more people dedicate their energy to creating new businesses that help fight poverty, prevent food waste, strengthen the rights of minorities, fight climate change and much more (Müller et al., 2019). These efforts all begin with the recognition of entrepreneurial opportunities in our social problems. This ability to recognize opportunities, as well as the way they address them and mobilize resources, not only distinguishes social entrepreneurs, but also allows their classification into three categories (Zahra et al., 2009):

• Social Bricoleurs use immediately available resources to address local social challenges they are directly confronted with on a small scale. Even if their solutions are not created with the intention of scaling them or increasing the impact beyond the local problem, social bricoleurs contribute to the local solutions through their specialized knowledge.

• Social constructors introduce innovations in response to market failures and unmet social needs. The problems are usually broader than those addressed by social bricoleurs and are tackled through scalable solutions. Social constructors can also be industry outsiders and fulfill an important role in society through their awareness of opportunities since for-profit companies may not see the incentive to address social needs.

• Social engineers generate the greatest impact through their solutions because they address systemic problems with revolutionary solutions. These problems can be very complex and require completely new structures, such as new financial systems. Social engineers are particularly important for social change because their actions are significant at the national and international levels.

Real-World Example: The Social Benefits of Social Entrepreneurship Are Multiple

Popular examples are the Grameen microfinance institution founded by Muhammad Yunus, and, locally, “Ässbar.” Both business models create an additional social value. Grameen grants loans to the poor and especially women so that they can build up an economic existence and Ässbar reduces food waste through the sale of not quite fresh but still edible food. Another very illustrative example is Sunraising. This Berne-based association enables tenants to produce solar power—even if they do not have access to their own roof. The social benefits of this type of entrepreneurship are multiple, and the associated business model varies greatly depending on the purpose, ecosystem, and business model. For the Bern area, further examples can be found under SIBA/SNSI (www.siba-bern.ch).

Business models are considered a key success factor of any enterprise (Teece, 2007). Business models encompass the assumptions or hypotheses about how—i.e., based on which key resources, activities, cost structure, and revenue streams—a corporation creates value for its customers and for itself (in the form of profits) (Osterwalder, 2004).

Initially scholars dealing with hybrid organizations took their theoretical cues from Osterwalder and Pigneur’s (2010) business model canvas (see Fig. 5.3), which offers a very practical, hands-on methodology for identifying a firm’s value propositions, target customers, distribution channels, market relationships, value configuration, core competency, partner network, cost structures, and revenue model. Adapting the nine elements of the original business model canvas to the realm of hybrid organizations has allowed scholars to offer practical insights into how successful business models work to create sustainable value capture. Indicative in this regard is the research by Davies and Doherty (2019) which used an adapted version of the business model canvas (see Fig. 5.3) to explore the fair trade social enterprise Cafédirect. Their longitudinal study showed how Cafédirect had to change its business model to effectively balance its commercial objectives and to address changes in its intended environmental and societal value capture.

Fig. 5.3

Business model canvas (source: own representation based on Bocken et al., 2014; Davies & Doherty, 2019; Osterwalder & Pigneur, 2010)

Implementation Through Self-Organization

How do we succeed in solving the collective dilemma in favor of a sustainable use of natural resources? Elinor Ostrom’s approach to common resources is based on self-organization and rules defined by communities. She was inspired, for example, by the classical alpine farming (pasture) in Törbel (Switzerland) and water management all over the world; common pool institutions that have existed for centuries and have survived events such as floods, drought, wars, or plague and still operate consistently and generate social capital. The following design principles are striking in such resource management schemes:

• 1. Clearly defined boundaries

  Individuals and households that extract resources must be defined as well as the regime boundaries. A clear definition of boundaries is often the first organizational step towards collective action.

• 2. A congruent set of rules that coordinates use, provision, and local conditions

  The use of resources requires rules regarding time, place, and technology. In other words, the quantity of resource usage depends on local conditions and rules of use, and its use requires labor, material, and money.

• 3. Rules for collective and not only operational action

  Operational rules refer to day-to-day operations. Their development is very often an evolutionary process. They can be informal rules that can be adapted, for example, at a meeting of users or without formalities in the village pub.

• 4. Monitoring

  There has to be someone who takes over monitoring functions supervises compliance with the specified conditions. This function is often performed by participants in the scheme.

• 5. Sanctions

  In institutions that have survived, monitoring and sanctions are mostly carried out by participants in the scheme. The penalties are often small. Such an institutional design means that the costs of monitoring are relatively low. In addition, there are rotating monitoring units, e.g., in fisheries and irrigation systems, where inspectors and appropriators can swap roles and direct contact exists.

• 6. Conflict management mechanisms

  The interpretation of even very simple rules is difficult. A clear regulation of procedural issues helps to avoid conflicts.

• 7. Governmental recognition of self-organization

  Governmental recognition of common property rights can, under certain circumstances, protect and legitimize them.

• 8. Different levels of regulation (“nested enterprise”)

  Rules that are fair to all local communities can hardly be designed. It is therefore likely that different levels of regulation may coexist.

However, it is possible that the self-organized local approach may not work or be insufficient. Government action is then necessary. The state has a wide range of instruments at its disposal. Depending on the type of good (see Fig. 3.1), different solutions can be found to overcome the collective dilemma. Public goods such as roads, schooling, and the regulation of markets can be provided by the state either directly by taking over production or indirectly by internalizing external costs through taxes. If communities fail to define common rules in a self-organized way for the so-called common goods such as fish stocks, pasture use, etc., the state may step in and create a system of rules that enables sustainable management. Once rights are clearly defined, they can be traded on markets. Emission certificates are a good example of this; the state first has to define the rights before they could be traded on markets. The various policy instruments will be discussed in more detail in the next chapter.

5.3 Scaling and Replicating Social Innovations

While scholars have pointed out that social value can be generated by all kinds of organizations—for-profit, hybrid, or non-profit (Mair, 2010), social value is conceived of by many as a defining feature of social entrepreneurial organizations. Social value thus includes the “fulfillment of basic and long-standing needs such as providing food, water, shelter, education, and medical services to those members of society who are in need” (Certo & Miller, 2008, p. 267; cited in Morris et al., 2020, p. 4). As expressed in this definition, social value reflects the achievement of a desired outcome or, as Santos (2012) puts it, an increase in the utility of the members of a given community or collective.

On the other hand, and more positively, the increasing interest in organizations creating social value has elicited calls to put forward appropriate methodologies for qualifying, quantifying, and comparing social value creation (Bagnoli & Megali, 2011; Grimes, 2010). There are hence some good examples of how social value can be measured. Arguably the most commonly used measurement system is the Social Return on Investment (SROI) indicator (Rotheroe & Richards, 2007), which measures the net present value of benefits divided by the net present value of investments. Alternative measurements systems include the Social Accounting and Audit (SAA) system which tries to document social enterprises’ activities and measure their social performance to make those accessible to external stakeholders. Further, there is the Social Cost–Benefit Analysis (SCBA) which supports organizations in planning and evaluating their social change-oriented projects and ventures. What is more, the Social Enterprise Balanced Scorecard (SEBS) supports social enterprises in assessing their mission accomplishment (for an overview of available measurement systems and the complexities pertaining to the assessment of social value, see Kroeger & Weber, 2014).