Social innovation in local development: Lessons from the Nordic countries and Scotland

Andrew Copus, Liisa Perjo, Anna Berlina, Leneisja Jungsberg, Linda Randall & Hjördís Sigurjónsdóttir

NORDREGIO WORKING PAPER 2017:2

NORDREGIO WORKING PAPER 2017:2 1 Social innovation in local development: Lessons from the Nordic countries and Scotland Social innovation in local development: Lessons from the Nordic countries and Scotland

Andrew Copus, Liisa Perjo, Anna Berlina, Leneisja Jungsberg, Linda Randall & Hjördís Sigurjónsdóttir Social innovation in local development: Lessons from the Nordic countries and Scotland

Nordregio Working Paper 2017:2

ISBN 978-91-87295-46-1 ISSN 1403-2511

© Nordregio 2017

Nordregio P.O. Box 1658 SE-111 86 Stockholm, Sweden [email protected] www.nordregio.se www.norden.org

Analyses and text: Andrew Copus, Liisa Perjo, Anna Berlina, Leneisja Jungsberg, Linda Randall & Hjördís Sigurjónsdóttir

Cover photo: Pipsa Salolammi Photos on page 9: Nordregio, Jim Manthorpe, Anne-Merte Lind, Reidun Aspmo and Mikhail Slavin.

Nordic co-operation Nordic co-operation is one of the world’s most extensive forms of regional collaboration, involving Denmark, Finland, Iceland, Norway, Sweden, and the Faroe Islands, Greenland, and Åland. Nordic co-operation has firm traditions in politics, the economy, and culture. It plays an important role in European and inter- national collaboration, and aims at creating a strong Nordic community in a strong Europe. Nordic co-operation seeks to safeguard Nordic and regional interests and principles in the global community. Common Nordic values help the region solidify its position as one of the world’s most innovative and competitive.

The Nordic Council is a forum for co-operation between the Nordic parliaments and governments. The Council consists of 87 parliamentarians from the Nordic countries. The Nordic Council takes policy initiatives and monitors Nordic co-operation. Founded in 1952.

The Nordic Council of Ministers is a forum of co-operation between the Nordic governments. The Nordic Council of Ministers implements Nordic co-operation. The prime ministers have the overall responsibility. Its activities are co-ordinated by the Nordic ministers for co-operation, the Nordic Committee for co-operation and portfolio ministers. Founded in 1971.

Nordregio – Nordic Centre for Spatial Development conducts strategic research in the fields of planning and regional policy. Nordregio is active in research and dissemina- tion and provides policy relevant knowledge, particularly with a Nordic and European comparative perspective. Nordregio was established in 1997 by the Nordic Council of Ministers, and is built on over 40 years of collaboration.

Stockholm, Sweden, 2017

NORDREGIO WORKING PAPER 2017:2 4 Table of Contents

Foreword...... 6

Acknowledgements...... 7

Executive Summary...... 8

Introduction...... 10

Part 1: Understanding Social Innovation in Local Development...... 11 Definitions of social innovation...... 11 Social innovation and local development...... 12 The role of the public sector...... 14 Social innovation and social enterprise...... 14 Can the preconditions for social innovation in local development be nurtured by policy?...... 15

Part 2: Social Innovation in the Nordic Context and Scotland...... 17 Supporting social innovation in local development...... 17 Social innovation responding to demographic challenges...... 19 DENMARK...... 20 FINLAND...... 24 NORWAY...... 27 SWEDEN...... 30 ICELAND...... 32 SCOTLAND...... 34

Part 3: Learning from Practice...... 38

Final remarks...... 42

References...... 43

NORDREGIO WORKING PAPER 2017:2 5 Foreword

This publication reports on the outcomes of a project cifically relates to rural and remote areas that are facing that explores the role of social innovation in local de­ demographic challenges. The second part is a review of velopment in the Nordic countries and Scotland. The the policy context of the Nordic countries and Scotland project was commissioned by the Nordic Working and describes how social innovation sits within, and is Group on Demography and Welfare under the Nordic modified by, national and local governance arrange­ Council of Ministers’ Committee of Senior Officials for ments and policy. The third part provides a brief over­ Regional Policy, and carried out by Nordregio. One view of the lessons learned from the 23 examples of aim of the project has been to develop a platform for social innovation in local development and the chan­ investigating conceptual, empirical and policy devel­ nels of financial and advisory support. opments in relation to social innovation with a focus Seen from a political perspective, it has been valuable on tackling societal problems in demographically vul­ to understand the context of social innovation in the nerable regions and municipalities across the Nordics. Nordic countries. Social innovation has been a buzz­ As part of the project, an online platform about Social word in the European Union for some time; in the Nor­ Innovation in Local Development has been developed. dic context, policymakers are becoming aware of the This report brings together the three main components relevance of supporting social innovation. It is also im­ from the web platform. To provide an understanding of portant to highlight the rural focus in this study and the concept, the first part presents a review analysing how small communities develop innovative solutions the abundant literature on social innovation that spe­ to some of their local challenges.

Sverker Lindblad Kjell Nilsson Chair of the Nordic Director of Nordregio Working Group on Demography and Welfare

NORDREGIO WORKING PAPER 2017:2 6 Acknowledgements

The authors of this report would like to thank the conducted for this report concerning both the national members of the Nordic Working Group on Demography contexts for social innovation and the local case studies. and Welfare for their valuable contributions and com­ Finally, the authors acknowledge the efforts of Åsa Minoz ments, especially on the country-specific chapters. The who contributed to the country description on Sweden. authors are grateful to the participants in interviews

NORDREGIO WORKING PAPER 2017:2 7 Executive Summary

This report presents background research on the work report provides a review of the governance and policy carried out by Nordregio in the project “Social Innova­ context for social innovation in the Nordic countries tion in Local Development in the Nordic Countries and Scotland, which is intended to inform and support and Scotland”, which was commissioned by the Nordic those interested in promoting social innovation in a Council of Ministers’ Working Group on Demography rural context in the Nordic countries. and Welfare. The main objectives of the project were to Opinions are divided regarding the role of the public investigate the concept of social innovation in relation sector in social innovation. Some see it as an attractive to local and rural development, study the governance policy tool, a hybrid phenomenon drawing different context in social innovation in rural areas in the Nor­ resources from the public, private and third sectors, dics and Scotland, conduct case studies in rural areas while others view it as evidence of a failure of public in all the Nordic countries and Scotland, as well as policies. We argue that attitudes to public sector in- study the existing support systems for social innova­ volvement are likely to be conditioned both by path tion in particular in rural areas. The case studies are dependence within different welfare regime contexts, summarised in a separate document and on the pro­ and by different forms of local governance. Thus, the ject’s website. close relationship between municipalities and local With its roots as far back as the 18th and 19th cen- communities in the Nordic countries provides a basis turies, the phenomenon of social innovation is not for active public sector involvement in social innovation. entirely new. However, the term social innovation has This background report should be considered as an been popularised by the “perfect storm” created by introduction and context for the 23 social innovation economic recession and austerity, combined with long- cases from across the five Nordic countries (including er-term demographic and social trends, which increas- one from Åland and one from the Faroe Islands) and ingly highlight the inadequacy of conventional service Scotland that are described in the accompanying docu- delivery models developed over the past 50 years. ment and on the project’s website. The cases are diverse There are a number of definitions of social innovation. – from a focus on solving single issues in a community The one favoured by the authors of this Working Paper to those that aim to regenerate a whole community for was first set out in a report from the Young Founda- its sustainability now and in the future. They also vary tion in 2010: “Social innovations are innovations that according to the communities they originate in, with are social in both their ends and their means.” (Young different policies and standpoints towards social inno- Foundation 2010) Thus, social capital is both a pre- vation, underlining the importance of understanding condition and an outcome of social innovation, which these differences and how preconditions can affect the strengthens the community’s capacity to respond to ability for social innovation to thrive. future challenges. After establishing the concept, the

NORDREGIO WORKING PAPER 2017:2 8 NORDREGIO WORKING PAPER 2017:2 9 1. Introduction

This Working Paper is part of a project commissioned ties to the Nordic countries with respect to settlement by the Nordic Working Group on Demography and patterns coupled with the highly developed nature of Welfare set up by the Nordic Council of Ministers’ social innovation as a concept in the Scottish context. Committee of Senior Officials for Regional Policy. The Comprising three interconnected parts, this report is project investigates the role of social innovation in re­ the final activity of the project and draws together the sponding to the challenges facing rural and remote re­ results of all the other project activities. gions in Nordic countries. These regions are heavily impacted by rural–urban migration, not only accentu­ Part 1: Understanding Social Innovation in Local Devel- ating sparsity but also distorting the age, gender and opment analyses the abundant literature on social inno­ socio-economic balance by depleting the population of vation that specifically relates to rural and remote areas young, well-educated and economically active people. that are facing demographic challenges. This analysis is At the same time, there is a growing push towards in­ intended to lay a firm conceptual foundation for the re­ creased efficiency in the use of constantly shrinking maining parts of the project. public resources. Taken together, these trends consti­ tute something akin to a “perfect storm” in which de­ Part 2: Social Innovation in the Nordic Context and mographic shifts are increasing the need for services, Scotland describes how social innovation sits within, while at the same time resources for services are de­ and is modified by, national and local governance ar­ creasing. This makes it incredibly difficult to maintain rangements and policy. It also explores support mecha­ acceptable levels of well-being and economic vitality in nisms for social innovation in the Nordic countries. rural communities. Social innovation has been suggested as a potential Part 3: Learning from Practice presents a concise over­ way to address these challenges and, as such, this pro­ view of the lessons learned from the 23 cases studied ject sought to act as a Nordic platform for investigating for the project. A detailed account of each case can be conceptual, empirical and policy developments in the accessed through the online resource www.nordregio. field with a focus on tackling societal problems in de­ se/socialinnovation and in the accompanying document mographically vulnerable localities across the Nordics. to this Working Paper. The inclusion of Scotland was largely due to its similari­

NORDREGIO WORKING PAPER 2017:2 10 Part 1: Understanding Social Innovation in Local Development

Several writers argue that the concept of social innova­ gether because “fuzziness contributes to discursive tion has a long history, tracing its origins back to the power”. The purpose of Part 1 of this Working Paper is work of Joseph Schumpeter in the 1930s (Mulgan and to clarify how we are using the term in our project, and Pulford 2010; Neumeier 2012; Bosworth et al. 2015a). to explore some of the theoretical implications, using Others point out that the phenomenon existed long be­ the existing academic literature as the source. fore the term was used to describe the concept (e.g., Bock (2012) takes a broad perspective, suggesting Mulgan and Pulford 2010, 20). References to social inno­ that the term social innovation is used in the following vation have been scarce in the years since Schumpeter’s three ways. work, and the concept did not crystallise into its cur­ rent form until well into the 2000s. Harris and Albury n To highlight the fact that any kind of innovation (a (2009, 17; see also Bock 2016, 8) note the association of change in technology, product or administrative prac­ this increased interest with the financial crisis, and tice) takes place within a social context; in her words, suggest that social innovation gained popularity as the they are “socially, culturally and territorially embed­ shortcomings of New Public Management, with its em­ ded” (ibid., 58). phasis on market-oriented approaches to service provi­ n To draw attention to the fact that not all innovations sion, became increasingly evident. It also coincided are “socially responsible”. with the increasing consensus about a number of serious n To describe a change in “social relations, people’s social challenges (global warming, demographic ageing, behaviour, and norms and values … social innovation etc.). At the same time, the broader concept of the “social needs innovative governance … . It should invest in economy” (Harris and Albury 2009, 18; BEPA 2011, 29) civil society and community development and support was gaining widespread acceptance. The social economy collective action, self-governance and political empow­ encompasses not only social innovation, but also many erment” (ibid., 8). other phenomena which although associated with eco­ nomic activity are not solely motivate by profit, competi­ In a review of the literature, Neumeier (2012, 49) ob­ tion and market forces; such as social enterprise, the serves that the term social innovation “can refer to the third sector, corporate responsibility and so on. In the effort, method, result or change initiated by collabora­ process of being taken as a panacea for a range of prob­ tive actions” and distils the following common charac­ lems during the dark days of the recession, it is easy to teristics of social innovation concepts (ibid., 54–55; for understand why social innovation became a rather a similar list, see Bock 2016, 10–11). flexible and ambi­guous buzzword. n They are generated by a social process, rather than invention by an individual. Definitions of social innovation n They are usually triggered by a societal need. Social innovation is a “contested concept” (Bock 2016, n They respond to immediate needs rather than a dis­ 2). The literature offers many definitions, some rather tant goal (i.e., they are “non-teleological”). vague and inclusive, others tighter and more specific. n The persons involved in the process perceive them According to Bosworth et al. (2015b), the “burgeoning to be new (within their context). literature on social innovation is replete with referenc­ n They change attitudes, behaviours and perceptions. es to the need for a sound conceptual or methodologi­ n Their practical implementation appears, to those in­ cal framework, greater clarity and more theoretical volved, to be superior to existing methods. and empirical work”. Bock (2012, 61) suggests that dif­ n They are essentially about creating social assets, ferent meanings are often intentionally “jumbled” to­ rather than material outcomes.

NORDREGIO WORKING PAPER 2017:2 11 Based on this, Neumeier (2012, 65) comes up with the and which are directed towards society as a whole and following definition: “social innovations can be gener­ involve end users” (ibid., 42); ally understood as a change in the attitudes, behaviour n They can have a wider impact upon society, creating or perceptions of a group of people joined in a network “a more participative arena where empowerment and of aligned interests that, in relation to the group’s hori­ learning are both sources and outcomes of well-being” zon of experiences, leads to new and improved ways of (ibid., 40). collaborative action in the group and beyond”. This more focused definition equates to Bock’s third An ongoing EU Framework 7 project, SIMPACT1) , de­ usage (see above). It has become the generally accepted fines social innovation as “novel combinations of ideas meaning in the European policy discourse and it is at and distinct forms of collaboration that transcend estab­ the heart of the definition that is most frequently quot­ lished institutional contexts, with the effect of empow­ ed. This definition is sometimes attributed to the ­Bu ering and (re)engaging vulnerable groups, either in the reau of European Policy Advisors (BEPA 2011, 33), or process of the innovation or as a result of it” (Terstriep to Murray et al. (2010, 3), although both sources seem et al. 2015, 10). This definition strongly underlines the to have been quoting an earlier report by the Young non-materiality of the innovation, and therefore views Foundation (Mulgan and Pulford 2010, p. 17–18). The the outcome in terms of the inclusion of vulnerable concise version is: groups, rather than more tangible impacts, such as the reinvention of service delivery arrangements. “Social innovations are innovations that are social Moulaert (2009, 19–21) emphasises the fact that in both their ends and their means.” since their novelty is subjective and defined by contex­ tual norms, social innovations can only be identified This is followed by a more explanatory version (ibid.): and understood through an understanding of their ter­ ritorial and cultural environments, together with the “…new ideas (products, services and models) that role of path dependency. simultaneously meet social needs (more effectively In this project, we feel that the Mulgan and Pulford than alternatives) and create new social relation­ definition (quoted above) is the clearest and most useful ships or collaborations. In other words they are in­ as a basis for exploring the role of social innovation in novations that are not only good for society but also generating new responses to the challenges presented by enhance society’s capacity to act.” demographic change in rural and sparsely populated areas. This is because it highlights the role played by As Mulgan and Pulford (2010, p. 16) point out: “Social social capital and community cohesion, as both the innovation describes the processes of invention, diffu­ sources and the beneficiaries of the social innovation sion and adoption of new services or organisational process. This is the key aspect picked up by a number models … . It also describes the outcome – the service of writers who have made the link between social in­ or model being developed.” Thus, social innovation has novation and bottom-up rural development – or more both a process dimension and an output dimension. precisely, “neo-endogenous” processes – thus relating With regard to the former, it is important that the so­ social innovation to a substantial literature on practical cial process is inclusive and collaborative rather than policymaking. competitive (BEPA 2011, 35). Social innovations are of­ ten generated within distributed social networks, rath­ Social innovation and local er than centralised structures (Murray et al. 2010, 5). With regard to the output dimension: development In this section, we begin to shift our view from social n Outputs are not just measurable in quantitative innovation in general to focus on research that explicitly terms (costs saved, increased efficiency) but are also connects the nature of the process with its geographical qualitative (well-being, solidarity, etc.) (ibid., 34); environment, both locally and further afield. In other n Social innovations are often “innovations that respond words, we begin our focus on social innovation in local to social demands that are traditionally not addressed by development. the market or existing institutions and are directed to­ Although every social innovation operates within wards vulnerable groups in society” (ibid., 37); n They tend to address “Societal challenges in which 1) SIMPACT: “Boosting the Impact of Social Innovation in Europe through Eco­ the boundary between ‘social’ and ‘economic’ blurs, nomic Underpinnings”.

NORDREGIO WORKING PAPER 2017:2 12 ethics and codes of practice that are constructed in rural development should not be underestimated” the local community and territorial context (Mou­ (ibid., 65). laert 2009, 7), both local territorial embeddedness and More recently, Bock (2016) has made the connection wider networks are important success factors for social between social innovation, neo-endogenous approaches innovation: “social innovation can never be analysed and the changing role of proximity in rural develop­ as belonging only to ‘its’ place, the place where it was ment, and has coined the term “nexogenous growth” generated, but as occurring within a complex web of to describe the processes of change that she observes. spatial interconnections”. Moulaert (ibid., 16–17) goes Bock points out that social innovation encompasses on to describe the role of social innovation in what he key characteristics of a number of earlier approaches terms integrated area development, which is, in es­ to rural development (exogenous, endogenous and sence, a bottom-up (endogenous) community develop­ neo-endogenous) and also has much in common with ment process. Such processes are socially innovative relational place-making approaches (ibid., 4). What is because they depend upon the creation of new social distinctive about social innovation is “the explicit im­ relationships, institutions and forms of governance, portance attached to social inclusion and the expected and also because they address inequality and social ex­ beneficial effect of social innovation for society as a clusion (ibid., 17–18). Moulaert explains (ibid., 16) that whole … policy documents on social innovation under­ such phenomena are most often associated with urban score the prominence of not only self-determination but areas in the developed world, due to the “high tangibil­ also self-help and self-reliance as components of social ity of decline and restructuring” in densely populated innovation” (ibid., 4–5). contexts, but also because “spatial density works as a Bock argues that “collaboration across space is the catalyst for revealing alternatives … proximity to insti­ sine qua non of development in the current context” tutional and economic arenas underscores the ambigu­ (2016, 2), and this is the foundation of the style of de­ ity of these neighbourhoods: they are both hearths of velopment that she describes as “nexogenous growth”. doom … and ambits of hope … and often become loci In this context, the role that social innovation plays of new types of social relations and drivers of alternative “shifts our perspective from fixed actors in separate agendas”. Not all local contexts are capable of nurtur­ rural areas towards a more fluid image of shifting actors ing social innovation. Moulaert describes those that and relations and functional networks operating across are not as “disintegrating”. places and beyond the local and rural. … Conceptually, Notwithstanding Moulaert’s arguments about social social innovation transcends the boundaries of specific innovation being more likely in urban contexts, a num­ places and even the rural space. It is evident that rural ber of writers have drawn attention to the role that social social innovation requires networking and the building innovation seems to play in rural development processes, of relations across the borders of the place in question” especially in what in recent years has become known (ibid., 18). as “neo-endogenous” growth. In very broad terms, this Just as Moulaert observed that not all urban locali­ follows the rejection of top-down (exogenous) policies ties/communities have the preconditions for social in­ that were common at the end of the 20th century, and novation, Bock argues that many marginal areas have the purely locally based “endogenous” approaches that reduced capacity due to sparsity, exacerbated by out­ followed. Neo-endogenous development requires a fine migration that “results in the loss of the most entrepre­ balance between local initiative and resources on the neurial people” (ibid., 15), and by cost savings in the one hand, and appropriate inputs of capital, expertise public sector that lead to centralisation of service provi­ and sources of innovation, which may best be accessed sion. She concludes that a reliance on social innovation by networks stretching out into the wider world (Ray as a “self-help” strategy driven by local social capital is 2006; Bosworth 2012; Bosworth et al. 2015a, 2015b; likely to result in increased spatial inequalities; areas Bock 2016). Thus, according to Bosworth et al. (2015a, that are able to respond will leave behind those that 3): “Neo-endogenous development is based on local re­ lack the preconditions. “The political-economic con­ sources and local participation but is also characterised text of rural development has changed, whether we by dynamic interactions between local areas and their like it or not. In some rural areas, the resulting prob­ wider environments.” lems mobilise engagement of citizens, NGOs, the third One of the first to see this connection was Neumeier sector and business. In others, this does not happen (2012), who affirmed that “social innovation seems to – maybe because the local asset basis is (already) too be one of the key requirements of successful rural de­ weak” (ibid., 17). For Bock, the solution for such “dis­ velopment, … the importance of social innovations for integrating” areas is “reconnection” rather than “self- the success or failure of sustainable neo-endogenous help”. Regional and national institutions and agencies

NORDREGIO WORKING PAPER 2017:2 13 have a responsibility to facilitate this: “social innovation holds that operate within it. They have a base in one still has potential if understood as a call for change at of the four sub-economies, but also operate across a higher level of development politics and not just as a its boundaries” (ibid., 143). matter for local communities” (ibid., 16). However, it is not entirely clear what a policy of “reconnection” looks Other writers argue that the increasing popularity of like in practice, and what specific measures are likely social innovation is associated with a reduced role for to be most effective in supporting nexogenous growth the public sector. Harris and Albury (2009, 17) argue processes. that the “long emergence of social innovation to its current prominence represents a growing recognition of the inherent limits of the state, the market and of The role of the public sector voluntarism as they are traditionally conceived”. Bock In this section, we address an issue that is extremely (2016, 8) asks: “Is social innovation, then, nothing other important in the Nordic context, namely the role of the than the withdrawal of the state and shifting of respon­ public sector in social innovation. As illustrated by the sibilities to the individual and the market?” For Bock, it following quotations, the early literature generally took appears that the answer is yes: “Social innovation may, the view that social innovation did not privilege the hence, also be interpreted as a result of the dismantling third sector, and could just as easily involve public or of the welfare state, and return to traditional models of private sector actors. mutual help” (ibid., 10–11). “Many [social innovation initiatives] reflect the wish to regain power and a say “…many innovations take shape within organisa­ over their community and to operate at a distance from tions – public agencies, social enterprises, mutuals, the government” (ibid., 11). co-ops, charities, companies as well as loose associa­ Although we currently have no evidence to support tions” (Murray et al. 2010, 6). this observation, it may be that such a view is not trans­ ferable between different local governance and welfare “Social innovation can take place inside or outside regime contexts. It is possible that such a disconnect public services. It can be developed by the public, between the (local-level) public sector and civil society private or third sectors, or users and communities is more likely where the structure of governance has — but equally, some innovation developed by these become more centralised, and where the effects of aus­ sectors does not qualify as social innovation because terity have been strongly felt at the local level. It seems it does not directly address major social challenges” possible that where the relationship between the local (BEPA 2011, 37). community and the local administration continues to be characterised by high levels of trust, it is more likely “…social innovation does not have fixed bounda­ that the public sector will be involved in, or indeed ries; it cuts across all sectors (the public sector, pri­ exercise leadership in, networks that carry out social vate sector, third sector and household)” (Mulgan innovation. Our review of national contexts for social and Pulford 2010, p. 14). innovation suggests that this may well be the case in the Nordic countries. “Social innovation can take place inside or outside of public services. It can be developed by the public, private or third sectors, or users and communities” Social innovation and social (Harris and Albury 2009, 16). enterprise Social innovation is often confused with social entre­ This view was associated with the concept of the social preneurship/enterprise (Mulgan and Pulford 2009, p. economy. Murray et al. (2010) explained: 15–16), which after all is not surprising since there is indeed some overlap between them. Perhaps the easiest “This social economy is the source of social innova­ way to distinguish them is to recognise that social en­ tion. However, while it already plays the key role in terprise is a business model, (associated with the activ­ developing new models and services to meet social ity of social entrepreneurship), while social innovation needs, it could play an even greater role. … The social is a process that may (or may not) lead to the formation economy is a hybrid. It cuts across the four sub- of a social enterprise. economies: the market, the state, the grant economy, Social enterprises are very much part of the social and the household. … If the social economy is a economy. They are run on commercial lines, but with hybrid, so are the firms, states, charities and house­ goals that relate to the delivery of social value rather

NORDREGIO WORKING PAPER 2017:2 14 than profit. As explained above, social innovations are ble alternative solutions to the issues they face. The lit­ distinguished by the fact that they are created by social erature is replete with advice and examples on how to interactions, and in turn, they create new social net­ stimulate a local dialogue to generate the ideas and works, stronger social capital and community capacity. networks that may become the basis for social innova­ This may or may not be manifest in the form of a new tion (see, e.g., Mulgan and Pulford 2010, Harris and business, or social enterprise. Albury 2009, Murray et al. 2010). There is also some Social enterprises may well be part of the solution social innovation analysis relating specifically to the to the challenges associated with demographic change. EU LEADER programme and the rural context (Bos­ They are also more tangible and therefore easier to worth 2015a). Various techniques including public study than social innovation. However, in this project, consultations and workshops are commonly used. we are interested in social enterprises only if they are Strengthening local networks and “bonding capital” is associated with social innovations. extremely important, although, as we will see, this is not enough on its own. Can the preconditions for social innovation in local development (2) A second approach is the transfer of good practice between rural areas that face similar issues but that are be nurtured by policy? geographically remote from each other. According to Finally, we consider the broad principles for policy that Bock (2016, 17): “social innovation does not need to be­ may be derived from the above clarification of the con­ gin locally, and it may also include the uptake of novel cept. Here, it is important to keep in mind this project’s solutions developed elsewhere”. In this approach, the focus on social innovation, as the process through focus is on making available information about suc­ which new ways of responding to demographic chal­ cessful social innovation, developed in remote or lenges are generated (rather than on the requirements sparsely populated areas, which has the potential to be for successfully maintaining social enterprises, or oth­ adapted and implemented in other similar areas. Here er kinds of solutions.) again, the EU LEADER programme has a strong track Most of the early reviews of social innovation (Mul­ record2), along with other actors that create national gan and Pulford 2010; Harris and Albury 2009; Murray and international forums for exchange of good prac­ et al. 2010) devote substantial space to discussing ways tice, such as the rural parliament movement3), or the in which national policy can create favourable condi­ PREPARE network4). Of course, this project aims to tions for and support social innovation across the full contribute to the exchange of good practice, which dif­ range of policy areas. The Nordic Council of Ministers fers from most of the examples already available by fo­ recently published an extensive report on “Social Entre­ cusing particularly on understanding the process and preneurship and Social Innovation: Initiatives to Promote characteristics of the social innovation involved. Social Entrepreneurship and Social Innovation in the Nordic Countries”. Many of their recommendations are (3) Finally, there is a need for the “reconnection” of re­ also apposite to social innovation in local development. mote rural communities with external sources of ideas, It is worth reiterating that rural areas vary in their support and funding. Bock asks (2016, 16): “Can we re­ capacity for social innovation, and therefore the poli­ ally expect social innovation to step in where the re­ cy objective should be, at least in part, to understand source base for regeneration is seriously under pressure? better and nurture the preconditions for social inno­ Based on experiences with LEADER, it may be expected vation in areas that seem less well adapted to it. The that only the most resourceful rural areas are able to conceptual framework presented above suggests some develop social innovations, as alternative models of broad guidelines as to how local policies adopted by service provision are grounded in collective action and municipalities and other local or regional actors might co-operation. If this is true, social innovation will re­ create conditions in which social innovation may be confirm existing inequality and promote further spatial nurtured. Thus, “the state should promote capacity disparity.” Bock insists that social innovation should building among citizens and the local government to not be viewed simply as a call to local communities to improve their capacity to mobilise the local commu­ take responsibility, and rely solely on their own re­ nity” (Bock 2016, 16). Three approaches are apparent in the literature. 2) http://ec.europa.eu/agriculture/rur/leaderplus/gpdb_en.htm (1) The first approach involves facilitation of the pro­ 3) http://europeanruralparliament.com/ cess through which local social networks develop via­ 4) http://www.preparenetwork.org/

NORDREGIO WORKING PAPER 2017:2 15 sources. It is also essential that “a higher level of devel­ novation require suggests a need for carefully designed opment politics” is supportive. Global forces are ulti­ support strategies from regional and national levels of mately responsible for the social and demographic governance. trends affecting marginal rural areas and “the prob­ lems they generate are too big to be locally solved” Part 2 focuses on how the Nordic countries and Scot­ (ibid., 16). It is also necessary that policy should en­ land support and promote social innovation in local hance “access to complementary external resources … development, as well as on the governance systems embedding local development in wider collaborative around social innovation and local development in relations” (ibid.). The provision of physical communi­ each country. The next sections present a summary of cations infrastructure (such as high-speed broadband) the organisations and funding that support social in­ is necessary, but not sufficient. The exogenous support novation, followed by in-depth accounts on social in­ or “bridging capital” that local actors in rural social in­ novation for each of the Nordic countries and Scotland.

NORDREGIO WORKING PAPER 2017:2 16 Part 2: Social Innovation in the Nordic Context and Scotland

Supporting social innovation in prises. In Sweden, there is a similar register, but only local development in the Nordic of social enterprises relating to integration in a labour market context (CEC 2014). To our knowledge, none countries and Scotland of the Nordic countries gives tax incentives to social In many cases, social innovation in rural areas is reli­ enterprises, as is the case in the U.K.. ant on either the financial support or advisory support We now present Nordic and Scottish organisations from outside actors. It is necessary to have sufficient and support systems for promoting social innovations support mechanisms available that also target rural ar­ in different forms, as well as funding forms currently eas and their specific challenges, not least because the in use to support social innovation particularly in rural challenges may differ from those in urban areas and contexts. because community actors may not have the required skill sets to develop their ideas or to complete complex Organisations promoting social innovation funding applications. A variety of organisations of different forms (e.g., as­ To understand how social innovation can be sup­ sociations, non-profit organisations, business incuba­ ported, it is important to have a basic understanding tors, employers’ organisations) work to promote and of the different legal or organisational forms that social support social innovations and entrepreneurship in the innovations can lead to. Indeed, social innovations can Nordic countries and Scotland with varied levels of fo­ lead to the establishment of businesses or organisations cus on rural social innovation. Organisations that pro­ that take a number of different legal forms (with varia­ mote networking between social enterprises and provide tions between countries depending upon national law), incubator services have also appeared, but rarely with a such as limited liability companies, partnerships, com­ specific sensitivity to rural challenges. This section pre­ munity development trusts, non-profit associations or sents some of the main organisations that promote co-operatives. In all these cases, it will be necessary to both social innovation and social enterprise. specify in some way that profits will be reinvested for In the U.K., social innovation and social entrepre­ the development of the business, or for other social pur­ neurship have been prioritised at government level poses (CEC 2014). In the U.K., a dedicated legal form since the early 2000s. A unit responsible for promoting for social enterprises, the Community Interest Com­ and facilitating social innovation and social enterprise pany (CIC), was introduced in 2004 in an attempt to has existed within the U.K. government department simplify administrative and reporting requirements responsible for industry since 2002. The Scottish govern­ (CEC 2014). ment has also shown itself to be strongly in favour of The legal and tax framework for social enterprises fostering the social economy, and recently published a varies considerably between countries. In recent years, 10-year strategy for social enterprise (Scottish Govern­ each of the Nordic countries has adopted a number of ment 2016). The three key priorities of this strategy are approaches to try to make the legal and business envi­ to stimulate social enterprise, develop stronger organi­ ronment more friendly to social innovation and social sations and realise market opportunities. entrepreneurship. In this respect, the U.K. has generally In Denmark, Finland, Norway and Sweden, nation­ gone further and faster. In Finland, for example, the wide associations for municipalities and regional au­ Social Enterprise Mark was introduced in 2011 to give thorities work with social innovation and, among other social enterprises greater distinctiveness in the market­ tasks, support public sector innovation in their member place. In Denmark, a law was passed in 2014 (L 148 organisations. For example, the Norwegian Association Forslag til lov om registrerede socialøkonomiske virk­ of Local and Regional Authorities has studied the chal­ somheder) to set up a national register of social enter­ lenges and potential for innovative public procure­

NORDREGIO WORKING PAPER 2017:2 17 ment; the Finnish Association of Local and Regional and social enterprises are also involved. There are also Authorities promotes social innovation in the public region-specific examples of networking organisations sector by, for example, co-ordinating projects and pro­ such as the Social Economy North Jutland networking viding knowledge on issues such as user-based service association, which primarily brings actors together for design in the public sector. In addition, the Association knowledge exchange, but also provides free assistance has worked to find new methods for service provision to entrepreneurs in the region, including both urban in rural municipalities. In Denmark, municipalities and rural areas (Nordic Council of Ministers 2015). In co-operate through the Danish Municipality Network Sweden, the SKOOPI association is a separate network­ on Social Innovation, which promotes knowledge ex­ ing organisation for work-integration social enterprises, change. In Sweden, the Swedish Village Action Move­ which are quite common in the Swedish context. It also ment has started to work with social innovation from a provides networking opportunities and training (Nordic rural development perspective. Council of Ministers 2015). In the Nordic countries and Scotland, social en­ In addition to the organisations that work to sup­ terprises are supported by organisations that provide port social entrepreneurs and social innovations, there knowledge, advice and networking opportunities. In are also organisations that focus on lobbying and chang­ particular, Norway and Sweden have business incuba­ ing the preconditions for mainly social entrepreneurs. tors for social enterprises, such as the SoCentral in­ In Sweden, the SKOOPI association aims to influence cubator in Norway, which also facilitates co-operation policies to improve the preconditions for running between the public and private sectors, voluntary work-integration social enterprises (Nordic Council of organisations and social entrepreneurs. In Sweden, Minister 2015). In Finland, ARVO works as an employ­ Coompanion provides support to co-operative compa­ ers’ association with social enterprises as its members; nies and social enterprises that focus on employment the association also works to increase knowledge about creation, with 25 regional offices across the country, social entrepreneurship and lobbies for changes in the making it an important actor also in more rural areas. policy framework and legislation related to social enter­ Sweden also has the Centre for Social Entrepre­ prises (Nordic Council of Ministers 2015). The Associa­ neurship in Sweden (CSES), which is managed by a tion for Finnish Work promotes social entrepreneurship non-profit association and has free incubator services by managing a certificate called the Social Enterprise for social enterprises. CSES provides business coach­ Mark (Association for Finnish Work 2016). ing and a free workplace for social entrepreneurs for 4–6 months (Nordic Council of Ministers 2015). In Funding for social innovation Finland, the Finnish Association of Social Enterprises Social innovation in rural areas takes place both within (ARVO) supports social entrepreneurs (Nordic Coun­ the public sector and in the private and third sectors, cil of Ministers 2015). In many cases, social enterprises and in co-operation between them; funding sources also use general business support services that are used therefore vary. A study by the Nordic Council of Min­ by other types of enterprises, especially in Finland, isters (2015) on social innovation and social entrepre­ where there is less targeted support available for social neurship in the Nordic region looks at how different enterprises (Nordic Council of Ministers 2015). initiatives have been funded, and notes that Nordic social In the U.K., public sector support is paralleled by innovation and social enterprise initiatives rely largely private sector initiatives such as the Young Founda­ on public funding, while it is also clear that many ini­ tion, the National Endowment for Science, Technology tiatives receive funding from multiple sources. This and the Arts (NESTA) and organisations such as The partly mirrors the situation where many initiatives in Melting Pot in Scotland. In a rural context, social inno­ the Nordic context stem from the public sector, and in vation in Scotland has been supported by a number of many cases, the respondents in the study also report organisations, notably the Development Trust Associa­ combining funding from public and other funds (Nordic tion Scotland and the Scottish Council for Voluntary Council of Ministers 2015). For many social enterprises, Organisations. funding comes from the public sector for the simple Various network organisations also provide support reason that they produce services for public authorities to social enterprises. Denmark has a nationwide forum who pay for those services, while social enterprises may for social entrepreneurs and many members of the net­ also create funding through their own activities, for work are based in semi-rural areas. There is also a plat­ example, by selling products. form for knowledge exchange on social innovation and Regarding public funding for rural social innova­ social enterprise called the Danish Social Innovation tion, the role of different EU funds is central in the Club (DANSIC), where some rural social innovations Nordic EU member states and Scotland, with EU Rural

NORDREGIO WORKING PAPER 2017:2 18 Development Funds, EU Regional Development Funds to attract private funding as impact investments (Koti­ and EU Social Funds being emphasised; EU Social ranta & Widgrén 2015). Funds, for example, explicitly mention supporting so­ However, there are also private funding sources cial innovation in many countries during the ongoing for social innovation and social enterprise available funding period. The importance of the LEADER pro­ in the Nordics. In Norway, the investment company gramme is also central in developing rural services in Ferd is among the forerunners in the field of social many Nordic remote and sparsely populated regions. entrepreneurship and has provided funding to social Many of the Nordic countries also have national enterprises since 2009. Ferd provides seed funding to public funding sources to support social innovation social enterprises, as well as offers business develop­ and social enterprises. For example in Norway, the ment support, advice and competence development, Norwegian Labour and Welfare Organisation (NAV) network building and incubation of social enterprises. provides funding for social enterprises in the field of The Danish private fond Realdania supports philan­ poverty and social exclusion (Hauge & Wasvik 2016). thropic initiatives and social innovations, as does the In Sweden, the Swedish Agency for Economic and Re­ Social Capital Fund that was established by the insur­ gional Growth runs a programme on social innovation ance company Tryg. In Sweden, there are, for exam­ and social entrepreneurship where rural social inno­ ple, private regional microfunds (such as Mikrofonden vation initiatives have also been funded. In 2015, the Väst) that fund social enterprises, associations, local Swedish Innovation Agency VINNOVA launched a development groups and co-operatives. In many cases, call for proposals for social innovation. In Denmark, social enterprises in the Nordic region can also receive the national public innovation fund supports social in­ funding from the same private funding sources as reg­ novation; in Finland, the Innovation Fund Sitra some­ ular enterprises. times funds initiatives that can be viewed as social in­ SoCentral in Norway is a membership-based organi­ novation. sation that acts as a social innovation incubator, facilitat­ In the U.K., in 2010, former Prime Minister David ing cross-sectoral co-operation between the private and Cameron attempted to popularise the concept of “Big public sectors, the voluntary sector and social entrepre­ Society”, which was associated with various schemes to neurs. The ideas are mainly financed through national promote social innovation, including a “Big Society Bank” funding and foundations. to make access to capital easier for social enterprises. Some regions and municipalities have also included Social innovation responding to social innovation and social enterprise in their regional demographic challenges in the strategies and provide some funding for the realisation of projects. For instance, the Growth and Develop­ Nordic countries and Scotland ment Strategy 2020 for the Västra Götaland region in All the Nordic countries and Scotland are facing demo­ Sweden prioritises social entrepreneurship and pro­ graphic challenges that are particularly severe in the vides support to projects in the field of social economy. remote and sparsely populated areas. However, the The municipality of Trondheim has been strategically approaches to meeting these challenges vary between working with social entrepreneurship since 2014 by en­ the countries. In the following sections, the framework couraging the use of the innovative services provided for social innovation in local development in each of by social entrepreneurs to supplement the municipal the Nordic countries and Scotland is presented. Al­ public services. Trondheim municipality provides sup­ though the structures of the descriptions vary, each au­ port to social entrepreneurs in the form of loans and thor has aimed to cover two broad themes. The nature of grants to create more favourable conditions for social social innovation in local development is inevitably a entrepreneurs. response to the space afforded to it by local governance Based on survey responses, the Nordic Council of structures and service provision arrangements; the Ministers report notes that the role of private inves­ first area of interest is therefore the broad policy and tors and funds investing in social innovation and so­ administrative context within which responses to de­ cial enterprise is not yet large in the Nordic countries, mographic challenges are made in the rural, remote which is in line with what our research indicates. The and sparsely populated areas of each of the countries, Research Institute of the Finnish Economy states that and how these are changing. The second theme of these societal enterprises in Finland have difficulty in attract­ national accounts focuses on a description of the recent ing private funding; their unclear position in-between development of social innovation in local development, private companies and charities is one reason for this. how it is used and the public sector efforts to support Improved impact measurement would also be needed and nurture it.

NORDREGIO WORKING PAPER 2017:2 19 The descriptions suggest that all the Nordic coun­ is, involving an increasing delivery role for the third tries are responding to demographic challenges and sector, social enterprise and the private sector, with the impacts on welfare and service delivery in broadly local/regional governance and public sector agencies two ways. The first is to try to find cost savings and­ ef acting as commissioning bodies and funders. How­ ficiencies in service delivery through the restructuring ever, these commonalities mask significant differences of governance and administration, that is, municipal in the process through which locally adapted solutions reforms and the insertion of a regional tier of govern­ evolve. ance and administration. Each of the countries is at a Subtle differences in the role of local public sector different stage. At one extreme, Scotland restructured bodies in service innovation processes, both between its local government in 1996 and now has the largest the Nordic countries and Scotland, and perhaps also local government areas in Europe (in terms of popula­ to some extent within the Nordic countries, underline tion). Unease at the degree of centralisation of power the need to avoid superficial comparisons across these has resulted in a campaign by the representative body different contexts, and for careful consideration before of local government to restore local democracy. In con­ assuming that good practice can be transferred without trast, Finland is described as the most decentralised adaptation. country in Europe. Even here, however, the govern­ ment is seeking to establish a regional tier of adminis­ tration and service delivery to benefit from economies DENMARK of scale. By Leneisja Jungsberg Each of the countries has their own story to tell about their efforts to respond to demographic challenges by The character of Danish social innovation local government and administrative restructuring. in rural areas The significance of this for the current study lies in the In Denmark, the concepts of territorial and rural are fact that it seems to affect the role of the public sector different in scope than for the other Nordic countries and the third sector in developing innovative responses as it is the country with the overall highest accessibility. to the service and welfare challenges associated with Nevertheless, challenges such as an ageing population, demographic change. Thus, in Scotland, where the outmigration of young people and families, few busi­ “Councils” have lost much of their freedom to act except nesses and lower educational attainment among the as local delivery agencies for Scottish or U.K. policy, a inhabitants exist in many small communities on the burgeoning third sector plays a very important role in outskirts of Danish municipalities. supporting local bottom-up initiatives that are often Alongside the development of the welfare state, easily identified as social innovations in local develop­ many social initiatives have been established by civil ment. It is not unusual for such social innovations to society. In the context of social innovation as a re­ turn into social enterprises, which are subsequently sponse to a local challenge, it is common to establish funded by the Councils. These social enterprises act as projects based on co-operation between the third sec­ “subcontractors” to deliver services, which are either tor and the public sector; this is also evident among the new, or have become the victims of austerity. examples from Denmark that have all received some In the Nordic countries, it seems that rural com­ type of public financing during implementation or as munities and their municipalities have a stronger re­ ongoing support. lationship, and higher levels of trust. Combined with In Denmark, there is a long tradition of people organ­ a greater independence and freedom to act, this may ising themselves to address societal challenges. In the account for the greater role of municipalities in devel­ early 19th century, collective action formed the basis for oping responses to demographic challenges. Indeed, it a number of co-operatives in rural areas, which today is conceivable that where the relationship between mu­ are referred to as “andelsbevægelsen” and constitute nicipality staff and the community they serve is strong, a co-operative business model formed by farmers to the municipality itself may be viewed as an endogenous manage the transformation of agricultural business by actor in a social process that leads to a social innova­ the collective effort of investments. tion. In this sense, a public sector actor becomes part of Around 38% of the population are engaged as volun­ the social innovation process, rather than a supporting teers and many social innovation initiatives arise from agency, providing advice or financial support. activities in local associations and organisations (Frid­ Thus, arguably, the outcome of the process of ad­ berg and Henriksen Skov 2014, 10; Rene and Lauritzen aptation to demographic challenges is broadly similar 2012, 5). Small associations are central in rural com­ across the Nordic countries and even in Scotland; that munities and they are a platform for social networking

NORDREGIO WORKING PAPER 2017:2 20 that can lead to informal exchanges between people Division of responsibilities in service in the communities. In some cases, these informal ex­ and welfare provision changes can be characterised as a type of rural social The national government provides a political frame­ innovation (Lohmann, interview 2016). work for municipalities to deliver welfare and service provisions. To make the municipalities more cost- Demographic challenges in the rural areas effective in delivering welfare services, a structural reform Many peripheral municipalities in Denmark have a took place in 2007, which merged 14 counties into five higher proportion of older people than the rest of the regions and 271 municipalities into 98 municipalities. country. One challenge for rural municipalities is to at­ The five regions have responsibility for areas such tract resources to ensure the continuation of businesses as the organisation of transport services, hospital ser­ in the area as well as to mitigate demographic imbal­ vices, health insurance and private health care insti­ ance. The island of Bornholm is a typical example of tutions, and institutions for groups with certain social rural Denmark. According to population projections, needs, for example, relating to psychiatric treatment. by 2024, one in 10 citizens will have moved from Born­ The municipalities are responsible for detecting ex­ holm and one in six of those remaining will be over 75 isting social needs, formulating appropriate solutions years old (Houlberg and Hjelmar 2014). Given this sta­ and implementing them effectively. Thereby, they be­ tistical forecast, many bottom-up initiatives are cur­ come central actors in a comprehensive welfare sys­ rently taking place on Bornholm to halt this trend. One tem of social security benefits and services. Areas of campaign that has received considerable attention is responsibilities for the municipalities include health, “Bright Green Island” as launched by Business Centre day care, public schools, social support, elderly care, Bornholm (2016). the labour market and integration efforts (Sloth 2016). The movement structures from 2003 to 2010 illustrate With shrinking budgets due to public savings ini­ a clear trend of the well-educated moving to urban areas; tiated by the government and with an expected 60% in contrast, a larger percentage of socially marginalised growth in the 65+ age group over the next 30 years, people outside the labour market tend to stay in rural many municipalities are looking for new ways to ad­ areas. To some degree, this is related to the lack of job dress social challenges. The Danish Technological In­ opportunities that match levels of higher education, stitute has initiated The Danish Municipality Network while the motivation for socially vulnerable groups re­ on Social Innovation, which provides a platform for lo­ lates to the opportunity of getting a house with space cal government representatives to receive and exchange for animals (Aner and Hansen 2014). knowledge and inspiration related to social innovation. Because of the lower income from labour taxes, the The network is formed by around 30 municipalities economy in rural municipalities is under pressure, and and represents roughly half of the Danish population the citizens in these municipalities are some of the (Hougaard 2016). first to experience the economic consequences (Kom­ munernes Landsforening 2016). In many places, this Municipalities as a platform for social has led to comprehensive financial savings in rural innovation areas resulting in the reduction of public workplaces, Responses to a 2012 survey illustrate the broad inter­ the closure of schools, kindergartens and other public face that Danish municipalities have with projects that institutions. they perceive as social innovation (Damvad Danmark In a number of rural areas, such savings have prompt­ A/S 2012): ed active citizens to establish their own initiatives, for ex­ ample, by opening a private school in co-operation with n 67% of municipalities indicate that they work with Organisation of Independent Schools, Dansk Friskole­ social innovation, including participation in projects forening (Wittorff Tanvig, interview 2016). Through with other actors such as knowledge institutions, com­ blog posts, Facebook and other social media, citizens panies or local associations; in these areas have rebelled against the development of n 56% of municipalities have initiated their own de­ regional and municipal inequality that undermines the velopment projects about social innovation; principle of universalism in the Danish welfare state n 33% of municipalities have participated in collabo­ (see, e.g., http://www.oprørfra-udkanten.dk). rative projects with other municipalities about social innovation; n 17% of municipalities have a strategy for their work with social innovation.

NORDREGIO WORKING PAPER 2017:2 21 One area where there is a particularly increasing focus can contribute to the creation of philanthropic pro­ on new solutions and co-operation with civil society is jects; Zumbara in Turkey, a system where groups and housing and the integration of immigrants. One in individuals can pool and trade experiences and skills, four Danish municipalities makes use of private ac­ using time instead of money as the unit of currency; commodation for refugees. However, in some cases, and the Independent Transportation Network in the the short-term commitment of volunteers can become U.S.A., which provides non-profit transport services a barrier to co-operation between the public authori­ for the elderly. None of these initiatives would be legal ties and civil society about welfare services (Wittorff in Denmark (Rene and Lauritzen 2012, 12). In some Tanvig, interview 2016). respects then, current Danish tax, employment, tender Two tendencies characterise the field of social in­ and procurement legislation constitute constraints to novation in rural districts with respect to projects that unconventional approaches in developing social inno­ receive public financial support (Lohmann, interview vation solutions. 2016). The first relates to scientific evidence and the­ ef fort to prove the effect of a planned project. The second Community-based responses relates to validating new experiments, such as a current However, economies of scale and decentralisation are project that aims to make public libraries a platform not sufficient as a solution; endogenous responses must to support vulnerable families in rural areas (Espersen also play a role, and local communities and municipal­ 2015). ities have indeed shown a capacity to respond, for ex­ ample, where a community has continued the local National policies affecting the field of grocery shop as a co-operative after the private mer­ social innovation chant decided to close down due to lack of profit. Many In 2012–2015, funds were allocated for social enterprises projects initiated by citizens are initiatives that fill out in a number of areas, for example, to work with dis­ a lack of services, for example, a school, kindergarten or advantaged people in the labour market. To be able to a local grocery store (Wittorff Tanvig, interview 2016). recognise social enterprises, a Social Enterprise Act However, there are also examples of initiatives that in­ was introduced. A social enterprise has to 1) have a so­ troduce new processes or products in the local area. cial purpose, 2) be a private business, 3) be independent from the public sector, 4) be inclusive and responsible, n Transformation of an unused harbour area into a and 5) make social use of any surplus generated (Rets­ restoration centre for ships for educational training for information 2016). This is the first legislation in Europe young people with special needs. that provides social enterprises with a specific kind of n Creation of a system of pathways in a recreational “company” registration that makes it easier to identify area to allow, for example, handicapped people to visit social enterprises for relevant co-operation partners the area. from the public and private sectors. n Renovation and transformation of industrial pro­ In 2013, a committee was appointed to identify bar­ duction halls to office spaces for entrepreneurs, which riers and opportunities as well as to make recommen­ cooperate with the nearby innovation school in dations to strengthen the national commitment in the Ryslinge in Fuen. public, private and third sectors. Following up on the committee’s recommendations, a National Centre for Forms of support Social Enterprises (www.socialvirksomhed.dk) and a The majority of initiatives in the field of social innova­ Council for Social Enterprises were established in 2014 tion in Denmark are funded from several different (Nordic Council of Ministers 2015, 109–118). Due to a sources of funding (crowdfunding, public and private change in government with new political priorities, the funds, private entrepreneurs) or from grants provided financial support for these two organisations ended in by public institutions (Nordic Council of Ministers 2015. 2015, 112–113). The European Regional Development A general constraint for the development of more Fund (ERDF) and the European Social Fund (ESF) are social innovation in Denmark is that certain kinds of important sources of financing for rural development initiatives that function well in other countries could in Denmark (Hörnström et al. 2015, 16). In 2015 the risk being defined as illegal “black labour” in Denmark; government initiated 10 projects in the coastal areas to for example, the concepts of Timebanking and Local promote growth and development in rural parts of Exchange Trading Systems, which are features of some Denmark. These are all pilot projects that aim to ex­ successful innovations such as Social Innovator, a plat­ pand, for example, housing and hotel facilities in some form supporting practitioners and other people who coastal areas. However, environmental organisations

NORDREGIO WORKING PAPER 2017:2 22 have criticised the initiatives due to the risk of damag­ rural context of local development; however, it is com­ ing the natural environment in these areas (Adrian monly used in connection with some of the platforms, 2015). forums and associations that work with the topic of social innovation. Occasionally these or other citizen Relevant actors in the field of rural initiatives are mentioned in the media and one theme social innovation that is often emphasised is the collective effort, as was To support rural social innovation, the Ministry for In­ the case in the online article “A New Participatory tegration and City Planning produced a new handbook Approach Will Transform Denmark” (Beck-Nilsson to provide tools to stimulate development through the 2016). In the article, the participatory approach is seen effort of mobilising local/internal resources to cooperate as a solution to demographic challenges, economic de­ with national/external and international resources. velopment, social care and stronger, more resilient so­ The handbook stresses that bottom-up initiatives are cieties. A number of socio-economic consultancy firms more sustainable when there is a foundation for secur­ have been established to work on finding synergies be­ ing resources to organise the activities. This may in­ tween a diversity of actors to create solutions and reach volve different types of financing, social capital, a busi­ a “collective impact” to address societal challenges. ness network or initiatives carried out by the third sector (Wittorff Tanvig 2015). Key characteristics Bottom-up initiatives of social innovation in rural In the past century, collective social initiatives have areas in Denmark are often supported through public played a central role in the development of the Danish or private funds. economy and welfare society. Today, many rural mu­ nicipalities experience challenges relating to demo­ n Realdania (private fund with a philanthropic pur­ graphic changes and social innovation is seen as one pose). approach to create bottom-up development. Many n Social Capital Fund (private fund based on co-op­ community-based responses, such as those noted eration with insurance company Tryg). above, receive some type of public financial support. n Innovationsfonden (public fund). The municipal network for social innovation func­ n Danish Social Innovation Club (DANSIC), a volun­ tions as a platform for knowledge exchange and to teer non-profit organisation/platform for social inno­ gain inspiration about social innovation initiatives in vation. different parts of Denmark. In a survey, 67% of mu­ n A forum for social entrepreneurs; an association for nicipalities replied that they had worked with social everyone interested in social enterprise and social in­ innovation within the last year. One characteristic of novation. many social innovation initiatives is the co-operation between the third sector, the public sector and in some Denmark has a long history of a strong third sector cases the private sector. with a large number of associations engaging in a broad A priority of the national government is to support range of activities including sports and leisure activities the development of social enterprises and a national such as painting, hunting, knitting, etc. These associa­ act was introduced to be able to identify them. This en­ tions have historically contributed to the coherence sures that social enterprises fulfil a number of require­ and participatory inclusion of people living together in ments and it creates a basis for public and private actors communities. Today, there is an increase in the num­ to recognise and co-operate with social enterprises. ber of volunteers who are not specifically part of an as­ sociation but who are more engaged in different types of social project work (Boje 2016). One example is the FINLAND social network connected via the internet portal, www. By Liisa Perjo eazyintegration.dk, which looks after immigrants and refugees in their local area. From the perspective of the What are the challenges in remote and sparsely rural association, the most important factor for rural populated areas? development leading to social innovation is the citizens Nordregio’s map of demographic vulnerabilities shows and their idea making. However, opportunities for that many Finnish regions are facing a variety of demo­ public support such as Local Action Group (LAG) funds graphic challenges. It also illustrates how the situation and local development funds from the ministries are es­ is most pressing in remote and sparsely populated areas sential for realising projects (Andersen, interview 2016). in eastern and northern Finland. Many remote and The term “social innovation” is rarely used in the sparsely populated municipalities experience the out­

NORDREGIO WORKING PAPER 2017:2 23 migration of especially younger people to urban areas The Association of Finnish Local and Regional Au­ and thereby increase their proportion of the elderly thorities considers that the role of the municipalities population, which threatens the ability of these munici­ is being transformed from service provider to service palities to carry out their service provision responsibili­ ensurer (Association of Finnish Local and Regional ties. In turn, an ageing population and outmigration Authorities 2015). The OECD has calculated that ap­ lead to decreasing tax revenues, as well as to increasing proximately 30% of public services in Finland are pro­ demand for services such as elderly care, which results in duced by private sector actors. This is a lower share intensified difficulties in service provision. than, for example, in the Netherlands or Denmark, but roughly at the same level as in Norway and Sweden. Who is doing what in public service provision Private actors have a more central role primarily in the and how is it all financed? areas of waste collection, public transport and tertiary The OECD reports that Finland is one of the most de­ vocational education. It is still relatively rare that mu­ centralised countries of the developed world and that nicipalities purchase social welfare, health care and its municipalities have an unusually high degree of au­ education services from private sector actors, although tonomy. In Denmark, Norway and Sweden, some re­ the topic is increasingly present on the political agenda sponsibility for public services is transferred up to the (André and García 2014). regional level while, in the absence of a similar kind of In contrast, the role of the third sector in Finnish regional government, Finnish municipalities have tra­ service provision is central, and it is common that ditionally provided and arranged a larger share of pub­ municipalities purchase services from larger “profes­ lic services (André and García 2014). This means that sional” third sector organisations, large NGOs or foun­ Finnish municipalities play a broad role, even com­ dations (Pihlaja 2010). These kinds of contracts often pared with other Nordic countries, which are also relate to home care of the elderly and disabled, youth known for their tradition of strong municipalities.5) services or after-school day care. More traditional third The current (early 2016) extensive areas of respon­ sector organisations that operate on a voluntary basis sibility of Finnish municipalities include education often provide, for example, sports and recreational ser­ (e.g., comprehensive and upper secondary education vices independent of municipal funding. Third sector and cultural services), preventive, basic and specialised organisations also play an important role in provid­ health care and dental care, social welfare services for ing other services, such as employment to vulnerable the elderly, disabled and children, as well as land use groups (Pihlaja 2010). planning, water and energy, waste collection and local The difficulties that remote and sparsely populated infrastructure (André and García 2014). municipalities in particular face in carrying out their Municipalities have fiscal autonomy and also receive public service responsibilities are high on the political transfers from the state based on population needs to agenda in Finland, and this has led the Finnish gov­ ensure equal service provision across the country. Mu­ ernment to attempt significant governance reforms in nicipalities collect income tax and property tax and recent years. A national municipal reform was initiated can freely set the income tax level. In addition to taxes in the early 2000s, with the objective of carrying out and state grants, municipalities receive revenues from municipal amalgamations leading to fewer municipali­ sales of goods and services (André and García 2014). ties with a stronger resource base and improved oppor­ However, the municipal responsibility for public tunities to provide services to all inhabitants. However, service provision does not mean that the municipali­ in the end, the reform failed largely because of strong ties themselves must produce the services for their in­ opposition from the municipal level. Although the re­ habitants. In particular, since 2000, the traditional role form was prepared and implemented at both national of municipal service provision has undergone signifi­ and municipal level for several years, in August 2015, cant change; on the one hand, increased productivity the newly elected centre-right government decided that requirements are put on services produced within the municipalities were no longer obliged to investigate fu­ municipalities, while on the other hand, some of the ture amalgamations with their neighbours, while vol­ actual service production is transferred outside the untary amalgamations would still be supported. municipal organisation in the hope of attaining im­ Although the new government abandoned the mu­ proved efficiency and economic savings (Harmaakorpi nicipal reform of the previous government, it is pro­ and Melkas 2008). ceeding with preparations for a social welfare and health care reform aiming to transfer the responsibility

5) Please note that this text describes the situation at the time of writing, that is, late for social welfare and health care services from munici­ 2015 and early 2016. palities to 15 new social welfare and health care regions

NORDREGIO WORKING PAPER 2017:2 24 (Finnish Government 2015). According to the current driven”, based on the needs of the users of a specific proposal (in early 2016), social welfare and health care service, which are often investigated through different would no longer be municipal duties, although the pro­ co-creational measures. Basing new solutions on the motion of health and well-being would remain a mu­ needs of service users has been emphasised in national nicipal task. The decision to establish a new regional innovation strategies since 2008. level implies a major change in the Finnish territorial In discussing social innovations in Finland, and governance system as it adds a new administrative level in particular in rural Finland, special emphasis is put led by new elected councils. In addition to social wel­ on partnerships between the public, private and third fare and health care, the proposed new autonomous re­ sectors. However, although the development of these gions would also take over the current tasks of regional types of partnerships and using partnerships to de­ councils on issues such as regional development. velop innovative solutions to the challenges of service The issue of social welfare and health care provision provision has been discussed in rural policy for several is central in Finnish politics. The governmental nego­ years, actual partnership-based solutions in rural areas tiations between the Centre Party and the National are still marginal (Pihlaja, interview 2015). Coalition Party led to a government crisis in November Related to innovations in the public sector, the new 2015 and ended with an agreement following the Na­ centre-right government of 2015 emphasised the po­ tional Coalition Party’s priority of opening up social tential of different kinds of pilots and uses the concept welfare and health care service provision to private and of “culture of experimentation” primarily to discuss a third sector actors. To some extent, this model is simi­ renewal of the public sector in the age of austerity and lar to that in use in Sweden with an increased focus the various budget cuts envisioned in the government on individual “freedom of choice” concerning health programme. In 2016, the government also initiated care services. At the same time, opening up social wel­ an experimentation project on the concept of “smart fare and health care services for privatisation remains countryside” to promote the development of new user- a contentious issue in Finland. Pihlaja (interview 2015) based service solutions. At the time of writing, the exact notes that the reform as such does not provide answers contents of this project remain unclear. to how services can be provided in remote and sparsely populated areas where distances are long and the major What are the roles of the public, private and challenge lies in financing the basic services. third sectors in social innovation? In the current Finnish governance system, the role of What is social innovation in Finland? the municipalities is exceptionally central in service The need for innovative solutions and increased part­ provision. This is why municipalities also are one of the nership between public, private and third sector actors most important actors in relation to social innovation. is increasingly being discussed in Finland. Innovations However, development and innovation have not tradi­ in services are viewed as ways to find solutions to de­ tionally been seen as municipal tasks, and municipalities mographic challenges and the pressure these put on have traditionally not strongly invested in or encouraged municipalities and the public economy. As in many innovation. Municipalities are nevertheless considered other countries, in the Finnish context, researchers to have the preconditions for improved innovation capac­ have linked the focus on innovation and efficiency in ity because of their autonomy and freedom of choice in the public sector to the general changes in the welfare terms of service organisation (Harmaakorpi and Melkas state where the public sector is increasingly expected to 2008). reach similar goals as private businesses, with a focus Since 2000, there has been an increased focus on in­ on efficiency, individual choice and customer orienta­ cluding non-public actors in service provision to seek tion (see, e.g., Hennala 2011). new innovative solutions. The role of the third sector is Currently, social innovation in relation to services is particularly important here, and the number of third primarily discussed in terms of “public sector innova­ sector organisations seeking partnerships with munic­ tion” and “service innovation”. The former term most ipalities and providing services on a professional basis often refers to new solutions for municipal organisa­ with employed staff is increasing (Pihlaja 2010). tion and service provision aiming at efficiency gains. Social entrepreneurship has been slowly increasing The latter term has a number of meanings. In Finland, in Finland in recent decades; two types of social enter­ it is often used to describe service-related innovations prise primarily focus on employing people who have carried out by enterprises. Moreover, discussion on the difficulty entering the labour market and on applying different types of social innovation often has a clear fo­ a social entrepreneurship business model. However, it cus on these innovations being “user based” or “user has been noted that there is a lack of shared vision con­

NORDREGIO WORKING PAPER 2017:2 25 cerning the role of social enterprises in Finland (Nordic be a solution. However, more research is needed on the Council of Ministers 2015). actual potential of social enterprises in rural areas (Il­ According to a report by the Research Institute of marinen, interview 2015). the Finnish Economy, the main barriers for increasing The role of the third sector in service provision in the role of social enterprises in Finland are the lack of remote and sparsely populated areas has been empha­ an unambiguous definition of social enterprise, as well sised in policy discussion, and third sector actors are as the challenge in measuring their impacts. Measuring particularly important for rural areas where the service impacts is seen as particularly central as it is consid­ provision challenges met by municipalities are most se­ ered that highlighting their social impact would enable vere (see, e.g., Pihlaja 2015). However, although policy social enterprises to attract funding from the private discussion emphasises the role of the third sector in sector in the form of impact investments6), while social rural areas, the preconditions for third sector activities enterprises are currently dependent on public sector have weakened because of a lack of resources and the financing. In addition, public procurement that does drop in active members in associations in rural areas not prioritise social enterprises is a challenge that es­ (Ilmarinen, interview 2015; Pihlaja, interview 2015). pecially affects social entrepreneurs in the health care The current obstacles for the development of differ­ sector (Kotiranta and Widgrén 2015). ent types of social innovation in remote and sparsely populated areas include existing boundaries between Social innovation in local development in sectors, a lack of resources, as well as project-based remote and sparsely populated areas work that involves a lack of continuity of funding and A specific challenge for remote and sparsely populated activities (Ilmarinen, interview 2015). At the national municipalities lies in providing sufficient public ser­ level, major governance reforms have been in prepara­ vices because of the economic burden of demographic tion for a number of years, which has led to insecurity change. At the same time, there are limited precondi­ in terms of future municipal tasks; moreover, the dis­ tions for private companies to provide services in those cussion and preparation of organisational reforms have areas because of challenges such as long distances and also taken up municipal resources, leaving limited ca­ low profitability (Pihlaja 2015). pacity for innovation and finding new solutions at the In recent years, social innovation has been increas­ local level (Pihlaja, interview 2015). ingly discussed in relation to national rural policy. In The role of the LEADER method and LAGs in particular, social innovations are seen as a way to in­ promoting social innovation in remote and sparsely crease access to and maintain welfare services in rural populated areas in Finland has been emphasised in areas; they are also considered important in relation to evaluations (see, e.g., Suutari and Rantanen 2011). The employment and the vitality of rural areas (Ilmarinen, LEADER method has been successfully used to sup­ interview 2015). The National Rural Policy Programme port social innovation in a way that takes into consid­ 2014–2020 mentions social innovation as an important eration the special preconditions in rural areas. The factor in reaching sustainable growth, well-being and community-based LEADER groups are also found competitiveness in rural areas. to be important contributors to social capital in their The policy discussion around social innovation in areas (Suutari and Rantanen 2011; Sihvola, interview remote and sparsely populated areas focuses mainly on 2015). In the current local rural development strategies innovation in the public sector and on improving part­ of the LEADER groups, service renewal is a central top­ nerships between the public, private and third sectors; ic. In Finland, LEADER groups have also contributed less focus has been placed on social entrepreneurship, to improved co-operation as the boards of the groups but this is becoming a topic of increasing significance always include representatives from the local authori­ (Ilmarinen, interview 2015). Although social enter­ ties, the LEADER group and the local community. This prises in rural areas are discussed, their number and approach is not common in other EU member states, role are limited. It is thought that because it is chal­ but has been found to be successful in promoting co- lenging for profit-oriented enterprises to drive profit­ operation in Finnish rural areas (Sihvonen, interview able businesses in rural areas, social enterprises could 2015). Examples of social innovations in Finnish rural areas include: developing models of “green care” where rural resources are utilised to produce health and well-being 6) Impact investments refer to different types of instruments through which the services in areas where traditional farming activities are private sector funds social initiatives that aim to contribute to societal development; however, the exact definitions of the term vary and the field is still very much under diminishing; developing mobile services (e.g., buses development providing social welfare and health care services, and

NORDREGIO WORKING PAPER 2017:2 26 mobile social services in co-operation between munici­ creasing attention given to social innovation, it is still a palities and associations); developing new ways to pro­ relatively new area in Norway and there is insufficient mote employment in co-operation with municipalities knowledge about social innovation and its potential and third sector associations; and developing new solu­ (Greve Leiner, interview 2016; Prosser, interview 2016; tions for person transport, in particular for the elderly Skar, interview 2016). population, to improve access to services. Regional development and regional policy Challenges and potentials for social innovation in Norway It is clear that the role of the public sector in the Nordic Over the past decade, Norway has experienced strong welfare state context should not be under-estimated population growth due to immigration. Compared when discussing social innovations in rural areas. In with the other Nordic countries, Norway has the larg­ Finland, even innovations stemming from the third est proportion of its population living outside urban sector are usually closely connected to the public sector, areas, which can be attributed to the effective regional which also remains the main funder of social enter­ policy promoting migration to rural and peripheral areas. prises. At the same time, the population density is low, and the Public sector innovation is central in the Finnish urban structure is weak. Due to the coastal location of context. In rural areas, funding from the EU Rural De­ the main industries (oil and gas, and fishing), the coastal velopment Fund seems to be an important contributor versus inland divide is more prominent than the tradi­ to finding new approaches to local development. Third tional urban–rural and city–countryside divides. sector organisations are also important in Finnish ru­ Norway is facing demographic challenges such as an ral areas. However, while there are some expectations ageing population and the outmigration of young people about increasing their role in the future, they also suffer from rural areas, which results in a labour shortage and from decreasing membership due to ageing. Although puts additional pressure on the welfare state regard­ social or societal enterprises (as they are called in Fin­ ing the provision of welfare services (Hörnström et al. land) are not a very common form of entrepreneurship 2015). in Finland, some potential for their role in providing Norway has enjoyed strong economic growth and services in rural areas is envisioned. Further research high participation rates in the labour market. However, on these issues is still needed. reduced oil prices and the weaker currency in recent The proposed major reform of the social welfare and years have markedly affected the country’s economy, health care system – establishing a new regional level which is dependent on the export of oil and gas. About of government and opening up for public and third 30,000 jobs in the petroleum industry have already sector service provision – will have a strong impact on been cut and Norway risks falling into recession (Moh­ how basic services are provided. However, it remains sin 2016). unclear how the proposed solutions will influence rural Securing more coherent regional development in municipalities and their access to services. employment and maintaining a more balanced settle­ ment pattern have long been among the central goals for regional policy. The focus has been on strengthening NORWAY the growth potential of the areas outside the largest By Anna Berlina urban areas, mainly through economic planning and physical investments (Aalbu 2016; Ministry of Local Similarly to other Nordic countries, Norway has a Government and Modernisation 2015). strong and well-established welfare state that takes When the new government came into power in prime responsibility for addressing social problems 2013, the focus of regional policy in Norway shifted and providing solutions. The greater focus on social in­ to labour market issues, and the promotion of innova­ novation and social entrepreneurship in recent years tion, competitiveness and knowledge infrastructure could be attributed to an increased understanding that (Aalbu 2016). The government is currently preparing a there is a need to develop innovative welfare solutions new White Paper on the role of towns and cities, which in response to rising welfare costs, as well as the conse­ would have a broader focus on the country as a whole, quences of decreasing oil prices. Moreover, there is a not only on the periphery (Aalbu 2016). growing understanding that welfare services in a tradi­ A number of support measures are available within tional sense might not be sufficient to meet the current the broad field of regional policy. The support policies and future challenges to the sustainability of the Scan­ specifically targeted to sparsely populated and periph­ dinavian welfare model (Sivesind 2014). Despite the in­ eral areas include the Regional Differentiated Labour

NORDREGIO WORKING PAPER 2017:2 27 Tax, which ranges from 0% in the far north to 14.1% in tion discourse with an emphasis on participatory and city regions in the south. The tax is intended to provide co-production approaches with end-users. In accord­ incentives for businesses to move up north. An action ance with the New Public Management approach, the zone for Northern Norway was established in 1990 and provision of public services has become increasingly is likewise intended to increase the attractiveness of the competitive with private for-profit businesses wanting northernmost areas, offering a mix of instruments, in­ to sell their products or services to the state (Hauge & cluding a lower tax on personal income, student debt Wasvik 2016). relief, exemption of labour tax and higher child ben­ efits. Within the regional policy, rural and sparsely National policies affecting the field of social populated areas are also eligible for investment aid for innovation businesses, ranging from 15% for large firms, 25% for Generally, social entrepreneurship is a more widely intermediate and 35% for small firms (Aalbu 2016; On­ recognised term in Norway today than social innova­ sager 2015). tion. References to social entrepreneurs can be found in several strategic documents and policies, including in Division of responsibilities in service and the areas of housing (e.g., the Husbanken initiative), welfare provision entrepreneurship and business (Skar, interview 2016). Local governance in Norway is executed by the mu­ Initially driven by grass-roots organisations, social nicipalities and county authorities. Currently, there are entrepreneurship in Norway has its origin in the pov­ 428 municipalities and 19 county authorities, although erty and social exclusion field from 2008. Political in­ this situation will change in the future. The White Pa­ terest in social entrepreneurship was demonstrated in per on regional reform was presented to parliament in 2011 when a grant for social entrepreneurs in that field April 2016, and the reform is to be implemented by was established by the state-owned Norwegian Labour 2019. The aim of the reform is to establish fewer, larger and Welfare Organisation (NAV) (Skar, interview 2016; municipalities that will have a greater capacity to take Nordic Council of Ministers 2015), an activity that is responsibility for new duties and tasks (Aalbu 2016; still ongoing today.7) In 2013, the national government Ministry of Local Government and Modernisation committed to improving the conditions for collabora­ 2014). tion between the sectors and using social entrepreneurs The budget for regional development has been re­ and the voluntary sector in the welfare system (Nordic duced by about one-third in the period 2013-2016 and Council Ministers 2015). How the government intends the country is undergoing a number of administrative to improve these conditions remains unclear. reforms, including the reorganisation of tax adminis­ Some of the municipalities in Norway have taken so­ tration, the police and courts, and the role of county cial entrepreneurship into the arena of public policy. In governors (Onsager 2015). In Norway, taxes are collect­ 2015, the municipality of Oslo developed a Strategy for ed by the central government and then redistributed. Social Entrepreneurship, although an action plan has In this regard, the tax system is different from Sweden, yet to be drawn up. The municipality of Trondheim has where all municipal taxes are collected locally and stay been strategically working with social entrepreneurship in the municipality (Aalbu, interview 2016). since 2014 (Skar, interview 2016). Both of these strate­ Norway has a decentralised approach to the provi­ gies emphasise that the municipalities will make use of sion of social services in which the municipalities and the innovative services provided by the social entre­ counties are the primary providers of welfare services. preneurs to supplement the municipal public services Municipalities are responsible for care for the elderly (NHO Service 2014). Trondheim municipality provides and disabled, primary health care, the provision of support to social entrepreneurs in the form of loans and primary and lower secondary education and kinder­ grants and encourages the use of an innovative public gartens. The responsibilities of the county authorities procurement tool to create more favourable conditions lie within a broader field of regional development, as for social entrepreneurs. well as the provision of upper secondary education, Regarding public sector innovation, the strongest maintaining county roads and public transport, and focus in past years was on technological innovation, cultural and environmental issues (Ministry of Local particularly in the field of health care services, to in­ Government and Modernisation 2014). crease quality, reduce costs and overcome distances The municipalities have focused on realising better services at lower cost, which entails more responsibility 7) For 2016, the budgetary framework of the grant was NOK 13.5 million https:// being placed on employees and often limited resources. www.nav.no/no/NAV+og+samfunn/Samarbeid/Tilskudd+gjennom+NAV/Tilskud These constraints have driven the public sector innova­ d+til+frivillig+arbeid+mot+fattigdom/Tilskudd+til+sosialt+entreprenorskap

NORDREGIO WORKING PAPER 2017:2 28 (e.g., e-health) (Dons Finsrud, interview 2016). More sure that residents in rural areas have access to nearby recently, however, the national and the local govern­ grocery stores that stock good quality produce. The ments have been increasingly interested in finding new programme works with smaller grocery stores in rural ways to address social problems and started to rethink areas to find opportunities for them to take on addi­ the way public services were designed and delivered. In tional services (e.g., post office facilities) that increase this context, the idea of promoting increased collabo­ their profitability and provide members of the commu­ ration with the private sector and voluntary organisa­ nity with better services. So far, the programme has tions in the provision of social services has appeared benefited about 1,000 retailers from around 800 rural on the agenda. Although the municipalities recognise areas (MERKUR, 2016). the need to integrate private and third sector actors in n The Alliance for Innovation (Innovasjonsalliansen) the innovation of public services and transcend the was established by KS, the Norwegian Association of boundaries between different sectors, this idea is cur­ Local and Regional Authorities (Kommunesektorens rently not widely executed (Dons Finsrud, interview organisasjon) in 2010, and aims to promote social in­ 2016). Some examples of projects exist, but they have novation and serve as a platform for debate and solu­ not been communicated in an efficient way and they tions on different societal challenges concerning wel­ tend to stay very local (Greve Leiner, interview 2016). fare. Members of the alliance comprise municipalities, The social innovation scene in Norway has been counties, volunteer organisations and state actors. inspired by successful examples from Europe, includ­ ing the U.K. One of the recent initiatives has been to Other supporters of social innovation outside adapt a model from UnLtd (Unlimited) in the U.K. to the public sector the local context of a deprived area in Oslo in promot­ Private investors and foundations have been among the ing more user-driven solutions to societal challenges forerunners in the social entrepreneurship field in Nor­ in close collaboration with the public sector (Prosser, way and have been actively driving the development. interview 2016). This clearly demonstrates an interest Among the key actors is the investment company Ferd, in stimulating new ways of delivering social services which has been promoting social entrepreneurship that are more inclusive, bottom-up and collaborative. since 2009 when Ferd Social Entrepreneurs was estab­ A focus on collaborative approaches and cross-secto­ lished. The company provides seed funding to social ral collaboration can also be seen in the governance enterprises, in addition to business development sup­ framework in Norway. The Norwegian Programme for port, advice and competence development, network Regional R&D and Innovation (VRI) is an example of building and incubation (Greve Leiner, interview 2016). an innovative regional development programme that Ferd has developed specific investment criteria for ac­ focuses on creating new spaces for interaction and in­ knowledging an applicant as a social enterprise that novative forms of collaboration between diverse part­ relate to innovation, realism, sustainability, benefit- ners (Totterdill et al. 2015). driven growth (scaling) and development of the initia­ tives (Ferd 2016; Nordic Council of Ministers 2015). Social innovation in rural areas Among other important actors is SoCentral, which At this stage, the interest in social innovation and so­ acts as an incubator for new ideas and solutions for cial enterprise is largely concentrated in urban areas. societal challenges, and facilitates cross-sectoral co- Despite this, it is possible to find examples of mecha­ operation between the private and public sectors, the nisms that have been introduced to support the emer­ voluntary sector and social entrepreneurs. SoCentral gence of social innovation in rural and remote settings. aims to create the best environment for social innova­ tion to be set up and scaled. The ideas are mainly ­fi n Innovation Norway, the government agency nanced through national funding and foundations. charged with promoting innovation, provides risk loans targeted towards projects in rural areas that have Challenges and opportunities for social difficulty obtaining financing through the private ­sec innovation tor because of the perceived lack of security. Evaluation The current procurement regulations in Norway make of the scheme has demonstrated that the risk loans are it difficult for NGOs and other not-for-profit organisa­ profitable and that the initiatives they have financed tions to tender and compete against larger private com­ are valuable to the regions. panies. It is also difficult for public actors to purchase n The Merkur programme, financed by the Ministry services from private and third sector actors. The mu­ of Local Government and Modernisation, aims to en­ nicipalities are required to develop innovative procure­

NORDREGIO WORKING PAPER 2017:2 29 ment, which is often more demanding and requires Municipalities are responsible for basic schooling, care knowledge; it is therefore easier to continue with “busi­ services for children and for the elderly, recreational ness as usual” (Greve Leiner, interview 2016). and cultural activities, water supply and sewerage, To tackle these challenges, innovative public pro­ rescue services and refuse disposal. County council curement has been increasingly promoted as a tool responsibilities centre mainly on public health and to facilitate co-operation between public, private and medical services, but also duties in connection with third sector actors, as it offers opportunities to com­ public transport and regional cultural institutions. mission in a different way. Since 2010, Norway has had Municipalities and county councils levy their own a national programme for supplier development (Nas­ taxes among their citizens, which means that Sweden jonalt program for leverandørutvikling), which is de­ has fairly strong local governments with a rather high signed to improve the ability of state and municipalities degree of autonomy. to implement innovative public procurement.8) There Sweden is currently divided into 290 municipalities have been some good cases of innovative procurement and 20 county councils/regions. For many years, there practices in Norway, when both economic and long- has been an ongoing process of restructuring of county term social costs have been integrated. The Norwegian councils and regions. Although a merger of county Association of Local and Regional Authorities (KS) councils into larger units was suggested in 2007, this was commissioned to conduct a study on innovative reform has not yet been fully implemented. In the sum­ public procurement practices in Norway showcasing mer of 2015, the new government relaunched an inves­ the possibilities and challenges (Dons Finsrud, inter­ tigation on regional reforms. view 2016). In facilitating the implementation and scaling-up of Innovation and regional and rural development social innovations in Norway, there is a need to chal­ In policies for regional and rural development at the lenge the embedded practice and change the mindset national, regional and local levels, there is a rather of public sector organisations. Local governments are strong focus on innovation, although this seldom re­ not used to purchasing these types of solutions, partly lates explicitly to social innovation or a rural context. because they have historically co-operated with vol­ As part of the Swedish Innovation Strategy, significant unteer organisations (Greve Leiner, interview 2016). efforts have been made to align the national policy for Moreover, there is a lack of flexibility in public sector or­ innovation strategy with regional and local develop­ ganisations that hinders innovation. In fostering public ment, as well as with the negotiated policy framework sector innovation, it is crucial to facilitate the ability of at the EU level regarding cohesion policy. Although the municipalities to develop innovative solutions to­ different policy frameworks at the EU level, such as the gether with the different stakeholders and users. There structural funds, explicitly prioritise social innovation, is a need for knowledge building about the tools and there seems to be rather limited attention in the Swedish innovative approaches that can be used (Dons Finsrud, regional efforts to this. interview 2016). In the partnership agreement on European Struc­ tural and Investment Funds (ESIF) made between the European Commission and Sweden in October 2014, SWEDEN the following are the Swedish priorities for achieving By Åsa Minoz the Europe 2020 objectives:

Strong local governments n Foster competitiveness, knowledge and innovation. Compared with other European countries, Sweden is a n Strengthen the sustainable and efficient use of re­ rather “rural” country, large in terms of surface, sparsely sources for sustainable growth. populated and with a small number of larger cities. The n Increase employment, promote employability and rural parts of Sweden are quite diverse, encompassing improve access to the labour market. sparsely populated areas, urban fringes, archipelagos and smaller cities. An important aim of the agreement is to increase the In Sweden, at the local and regional level, munici­ co-ordination and possibilities for collaboration be­ palities and county councils, respectively, are respon­ tween the four different funds to create better outcomes sible for public services in a variety of welfare sectors. and to make it easier for those who carry out the work in the specific projects that are funded.

8) http://leverandorutvikling.no/om-programmet/hvem-er-vi-article699-706. In June 2015, the government launched a new na­ html tional strategy for regional development. At its core are

NORDREGIO WORKING PAPER 2017:2 30 four societal challenges: demographic development; In 2015, VINNOVA launched a call for proposals on globalisation; climate, environment and energy; and social innovation. The interest was great, resulting in social cohesion. Four priorities were set for the regional over 400 applications, with some 20 projects receiving development policy for Europe 2020: funding of SEK 300,000 (ca. EUR 30,000) each. Chal­ lenge-driven innovation is another programme that n Innovation and entrepreneurship. has been run by VINNOVA since 2012, and could be n Attractive environments and accessibility. described as a programme for social innovation in a n Competence maintenance. broad sense. Some of the projects that are funded are n International co-operation. relevant to social innovation in a rural context, for ex­ ample, projects concerning collaborative service solu­ To enhance the collaboration and dialogue between tions for sparsely populated areas and telemedicine. the national and regional levels, a new forum for col­ The Swedish Board of Agriculture is responsible for laboration was established for civil servants and politi­ the Swedish rural development programme, which cians at both levels. comprises various forms of support intended to en­ Some of the regional development strategies or in­ courage efforts to increase competitiveness, environ­ novation strategies in the Swedish regions explicitly mental sustainability and improve the quality of life relate to social innovation. However, the relative im­ in rural areas. Numerous support programmes target portance and form of these vary. For example, in the innovation in a rural context. However, overall, the regional innovation strategies of Jämtland-Härjedalen, concept of social innovation is rarely discussed and Kronoberg, Västerbotten and Skåne, the rural perspec­ innovation is mainly framed in relation to enhancing tive and social innovation have an explicit role. the competitiveness of companies, although there are In June 2015, the government assigned a parliamen­ policy frameworks that are relevant for social innova­ tary committee the task of developing proposals for a tion, such as the LEADER programme. comprehensive policy for sustainable rural develop­ SALAR is both an employers’ organisation and an ment in Sweden, with its conclusions to be delivered in organisation that represents and advocates for local 2017. In its directives to the committee, the government government in Sweden. All of Sweden’s municipalities, states that the policy proposals “should contribute in county councils and regions are members. Since 2011, rural areas to innovative and resilient companies, at­ SALAR and VINNOVA have had a formal agreement tractive living and housing environments, and sustain­ to collaborate on innovation in the public sector, al­ able use of natural resources”. Social innovation is not though social innovation has not yet played a signifi­ mentioned in the directives. cant role in this collaboration. In general, social inno­ vation has received little attention by local government. Some relevant actors and policy initiatives A host of different actors in the Swedish policy land­ Limited attention for and understanding of scape are relevant to social innovation in a rural con­ social innovation text, including Tillväxtverket (the Swedish Agency for Compared with some other countries, social innova­ Economic and Regional Growth), VINNOVA (the Na­ tion and social entrepreneurship have been given little tional Innovation Agency), the Swedish Board of Agri­ attention in the Swedish policy debate, and even less so culture and SALAR (the Swedish Association of Local in relation to social innovation and rural development Authorities and Regions). Following the launch of the or local development in rural areas. Swedish Innovation Strategy, in 2012, the Forum for While there are policy frameworks in place that Social Innovation Sweden, hosted at the University of open up to initiatives the promotion of social innova­ Malmö, was designated by the government as a nation­ tion, with just a few exceptions, explicit reference to al knowledge hub for social innovation and social en­ social innovation is generally absent in the rhetoric or trepreneurship. in the actual policy frameworks. Furthermore, some Tillväxtverket is the co-ordinating authority in the initiatives within existing policy frameworks promote regional development policy for Sweden, and has been social innovation, at least partly, although these are not running a programme on social innovation and social always described in this way. entrepreneurship since 2011. The initial scope of the Currently, there is a lack of common understand­ programme was exclusively on work-integration social ing and definition of both social innovation and social enterprises; however, since 2013, the scope has been enterprise in Sweden. In the Swedish Innovation Strategy broadened and a number of the funded projects are rel­ adopted by the former (centre-right) government in evant to social innovation in a rural context. 2012, social innovation and social entrepreneurship

NORDREGIO WORKING PAPER 2017:2 31 were highlighted as important aspects of the national task and cost divisions between the state and local gov­ strategy to address societal challenges, and their role in ernments. Compulsory schools (from grade 1–10) were a rural context was also touched upon. Within the in­ transferred to local governments in 1996 and services novation strategy work, an effort was made to broaden for the disabled in 2011. The tasks of the government the policy discourse to embrace a wider set of stake­ are continually being revised in terms of how they can holders and policy areas, and to put societal challenges best be met (Rikiskassinn, n.d.). at the heart of the efforts to enhance the national inno­ vation capability. This approach is well in line with in­ Revenues and allocation ternational policy development with a broader under­ Treasury revenues are largely generated by the collec­ standing of innovation in recent years, for example, the tion of taxes on income, products and services. In a EU strategy (Europe 2020) for smart, sustainable and typical year, taxes make up roughly 90% of government inclusive growth and the OECD Innovation Strategy revenue (Rikiskassinn, n.d.). The largest share (63%) of from 2010, updated in June 2015. municipality revenues is collected by special municipal The current Swedish government has put innovation taxes, with the remainder being obtained from service at the forefront of the policy agenda. The most apparent fees, property taxes and payments from a governmen­ initiative to date is the establishment in February 2015 tal Equalisation Fund, which is designed to balance the of an Innovation Council led by the prime minister municipalities’ revenue potential to meet their expend­ and the ministers of finance, industry, environment, iture needs according to certain regulations. research and higher education, as well as 10 advisory The municipalities’ share of public consumption is members from industry and academia. The focus of around 32–35%, which is considerably less than in the the Council has been on issues such as life science, en­ other Nordic countries where it is 60–70%. The differ­ vironmental technology, innovation procurement and ence lies mainly in the fact that regional authorities in digitalisation. Although the need for a stronger empha­ the other Nordic countries are responsible for a vari­ sis on social innovation has been raised in discussions ety of tasks, such as hospitals and secondary schools, in the Council, it remains unclear whether such dis­ which in Iceland are carried out by the government cussions will influence the Council’s proposals and, in (Norden.org, n.d.). particular, whether rural development is part of these discussions. Municipalities and their responsibilities As a result of the sharp reduction in the number of mu­ nicipalities through amalgamation in 1993 and 2005, ICELAND currently 74 municipalities represent 294,000 residents. By Hjördis Rut Sigurjonsdottir Before the first amalgamation, there were 197 munici­ palities, and 1,116 locally elected municipality officials. The governmental system After the local election in 2006, this number was re­ Iceland has two levels of governance and the constitu­ duced to 529, or approximately one elected official for tional structure is divided into three parts: judicial, 560 people (Sveitastjórnir á Íslandi, n.d. ; Hagstofa Ís­ legislative and administrative. The government and the lands, n.d.). municipalities hold the official executive power in the The existence of the municipalities can be traced to country. Population density is among the lowest in the the democratic traditions that settlers knew from Nor­ world with just 3.6 persons/km2, and more than 60% of dic culture from home, and have played an important the country’s 330,000 inhabitants live in the continu­ role in society for centuries. The municipality’s initial ally urbanising capital area (Sveitastjórnir á Íslandi, role was based on mutual aid. Today, all municipali­ n.d.; Norden.org, n.d.). ties have the same status and obligations, regardless of During the first half of the 20th century, the scope of population. The biggest task involves education, such the Icelandic government was small, as in many other as the operation of preschools, primary schools and Western countries. Later, its scope started to change music conservatories. In recent years, the role of mu­ and people’s faith in the public sector as an active par­ nicipalities has changed and projects have increased ticipant increased, believing that it would improve substantially. In many cases, municipalities have es­ their conditions. Attitudes changed again after 1980, tablished collaborations for the resolution of different with an increasing number of people believing that projects (Sveitarstjórnir á Íslandi, n.d.). the individual should have more opportunities to take The municipality’s legal obligations can roughly be over some of the responsibilities of the public sector. divided into three areas. (1) Administration, which in­ Likewise, considerable changes have taken place in the cludes tasks such as monitoring that health and con­

NORDREGIO WORKING PAPER 2017:2 32 struction regulations are followed and issuing various when pupils are 15–16 years old) wanted to live outside permits for economic activity and acts. (2) Welfare Iceland in the future (Akureyri.net, 2015). The discus­ services for residents such as social services, operating sion in Iceland is not just about how to encourage peo­ primary schools, kindergartens, conservatories, and ple to stay in the rural and sparsely populated areas, sports and leisure activities for young people. (3) Tech­ but also about how to get them to stay in Iceland or to nical services such as the maintenance of public spaces, return after pursuing education abroad. water, waste and sewerage services (Sveitastjórnir á Íslandi, n.d). Social innovation in Iceland The municipalities play a significant role as local ­em The concept of social innovation appears to be relative­ ployers, being one of the largest employers in the coun­ ly unknown in Iceland (Ármannsdóttir 2012; Nordic try with about 22,000 employees. Across the country, Council of Ministers 2015). Overall, it appears that its the municipalities are often the largest single employer absence from the policy discussion is a result of a lack in the area. Sixty per cent of tax revenue is used to pay of awareness rather than any active resistance to such salaries and related expenses. Some municipality ser­ initiatives. In light of the considerable damage sus­ vices, such as water, heating utilities, social apartments tained by the Icelandic economy in 2008, one could ar­ and harbours, are provided through separated operat­ gue that social innovation has the potential to play a ing units that have independent revenues and finances key role in providing social solutions (Ármannsdóttir, (Sveitastjórnir á Íslandi, n.d.). 2012; Nordic Council of Ministers, 2015). The web page of the Innovation Centre in Iceland Remote and sparsely populated areas explains the concept of “social innovation”. However, In Iceland, rural development has followed a similar the only information that is relevant to the situation in path as elsewhere in the West. There has been consider­ Iceland is a link to Ármannsdóttir (2012), who noted able migration to the capital area and the Icelandic au­ that although the phenomenon is to be found in Ice­ thorities are actively working to counter this trend land, as in most other countries, little is known about (Byggðastofnun, n.d.). The Icelandic parliament has its real impact and importance for the society. Icelan­ approved a resolution to instruct the government to dic educational institutions have not engaged in a se­ implement a Strategic Regional Plan every three years. rious discussion of the subject, or conducted research In the plan for 2014–2017, the main objectives are to in this field (Ármannsdóttir 2012). There is no separate create greater equality of opportunity in work and ser­ programme for social innovation at university level, vices for everyone, to mitigate differences in living although several courses on entrepreneurship, innova­ standards, and to promote the sustainable develop­ tion and non-profit organisations are provided at the ment of the regions in all parts of the country. Special University of Iceland. There is also a separate centre for priority will be given to long-term depopulation, un­ research on the voluntary sector, the Centre for Third employment and substantial dependence on a single Sector Research (Nordic Council of Ministers, 2015), industry. Emphasis will also be placed on ensuring that but there has been no activity on its website since Janu­ measures taken under the plan help to promote greater ary 2014. gender equality (Alþingi 2014). The report from the Nordic Council of Ministers The Icelandic Regional Development Institute is Secretariat states that the third sector in Iceland is an independent, state-owned institution. It monitors deeply anchored in the welfare system and some ini­ and researches regional development in the country to tiatives can be categorised as social innovation. It also contribute to regional development through the imple­ notes that very little research has been conducted on mentation of government policy via the introduction of social innovation and that political interest on the sub­ regional strategies. Operations aim to strengthen set­ ject has been scant, possibly because the concept has tlements in rural areas through the support of viable, only recently reached the country (Nordic Council of long-term projects with diverse economic bases. The Ministers, 2015). Halldór Halldórsson, the chairman of Institute supports and strengthens local development the Local Government Association in Iceland, says that by the provision of credit and other forms of financial it is embarrassing how little progress the municipalities support, with the intention of improving economic and have made in encouraging innovation and efficiency in living conditions particularly in those regions threat­ the welfare service. In his role as Reykjavik city coun­ ened by depopulation (Byggðastofnun, n.d.). cillor, Halldór Halldórsson also reports that nothing is A recent survey carried out by the University of being done in this respect in Reykjavik City Council. Akureyri reported that half of all pupils in the last year He mentions his colleague in the Independent Party, of their compulsory education (10th grade in Iceland Áslaug Friðriksdóttir, who has tried to promote such

NORDREGIO WORKING PAPER 2017:2 33 solutions. Although the other city councillors have not the Scottish Government passed an Act in 2003 to set objected to proposals and know that there is a need for up Community Planning Partnerships10), which bring initiatives, no action has been taken. together most of the public agencies responsible for de­ Halldór Halldórsson thinks that a lack of vision is livering services in each of the 32 Council areas. Each the greatest obstacle for developments in the field of so­ of these has produced a “Single Outcome Agreement” cial innovation within the welfare system in Iceland. describing their strategy. “We haven´t made the effort to implement this clearly At a more local level, there are more than 100 Com­ and that needs to be done for something to happen.” munity Councils11), which are elected representative bodies for communities. They have limited powers, Early examples of social innovation mainly in terms of developing a community consensus Clear examples of social innovation in Iceland are the about local issues, and transmitting it upwards to the operation of search and rescue teams around Iceland. It Unitary Authority. There are many “gaps” in the map, is a volunteer movement – the largest in Iceland – and where no community council exists. Less than 10% of serves to save lives and properties. The first team was the communities identified by the Scottish Govern­ established in 1928 after an accident in which 15 fisher­ ment in 2012 have elected Councils. The turn-out at men lost their lives at sea, and a further 10 were saved elections is often very low, and in many communities in very difficult conditions. In those years, it was not it is difficult to find candidates. There is a widespread uncommon for dozens of fishermen to die each year. perception that they are “toothless talking shops”. The whole society relies on the search and rescue teams to save lives and property in all kinds of conditions all Who holds the purse strings? year round, and the teams thereby constitute an im­ In Scotland, only 20% of Council expenditure is raised portant link in the national security system in Iceland. locally through a property tax, and this power is tightly Further well-known examples can easily be classi­ controlled by the Scottish Government (it has been fied as social innovations in Iceland, for example, the “capped” for a number of years). The other 80% of local men’s and women’s fellowships that collect money to government funding comes from national (U.K.) in­ support those in need. come tax. Scotland’s allocation of this is estimated by the U.K. Treasury using a calculation (the Barnett for­ mula) originating in the late 1970s. This situation has SCOTLAND become controversial in recent years, since it has the By Andrew Copus effect of translating expenditure decisions that apply only in England (i.e., they are devolved in Scotland) A very centralised system into allocations for Scotland. The “block grant” re­ The Scottish local governance system is very different ceived by the Scottish Government is subsequently di­ to that of the Nordic countries. Like the rest of the U.K., vided between the Councils on the basis of a complex Scotland has one of the most centralised public admin­ calculation involving a range of indicators of the need istrations and one of the weakest local democratic for the different services for which they are responsible. frameworks in Europe. Two recent reports produced by Thus, the resources available to Scotland’s 32 Councils the Commission on Strengthening Local Democracy9) are largely out of their control. provide a clear and powerful illustration of this. In Scotland, just 32 Councils represent 5.2 million What services are the Councils residents; the ratio of councillors to residents is more responsible for? than 1:4,000. Even after the recent process of amalga­ The Councils are responsible for providing education mation, in Sweden there are 290 municipalities for a (school and vocational education post-16, together with population of 9.5 million, and locally elected municipal­ some preschool provision), waste collection and recy­ ity officials represent, on average, a couple of hundred cling, planning and building standards, social services people. In Scotland, the average turn-out for local elec­ (care services are mixed public/private), sport and rec­ tions is around 40%, which is roughly half the equiva­ reational facilities (including public libraries and ven­ lent figure for Sweden. ues for community activities), local road maintenance, In recognition of the complex and fragmented way grass cutting and snow clearing, and maintenance of in which services are delivered in Scotland (see below),

10) http://www.gov.scot/Topics/Government/PublicServiceReform/CP 9) Commission on Strengthening Local Democracy: http://www.localdemocracy. info/; see also 11) http://www.communitycouncils.org.uk/

NORDREGIO WORKING PAPER 2017:2 34 public spaces. sources, and created a multiplicity of innovative It is important to point out that in many ways the community solutions, which in many cases would role of the Scottish Councils is similar to the Swedish qualify as social innovation in terms of this project’s County Boards, in that their freedom to deviate from definition. national guidelines is limited; in effect, they are deliv­ The Scottish Government seems very supportive ering national policies to their area. It is also important of such “localism”. It continues to fund research into to be clear that “planning” is mainly to do with zoning community development and to provide various forms for development and permission to construct build­ of support for community initiatives of varying de­ ings. Strategic planning of economic development is grees of complexity from simple schemes to address a mostly the responsibility of specialist agencies (see be­ specific issue, to the more holistic and integrated strat­ low), but a few of the more rural councils have stronger egies of the Development Trusts (see below). competences in this area. What are the implications for social innovation How are the other services organised? in rural areas? Some services, particularly the welfare system, are cur­ The key implication to draw from this review of the rently administered by the U.K. government12). Others, “governance ecosystem” within which social innova­ such as the emergency services, water/sewerage and the tion takes place in rural Scotland is that it explains why trunk road network are run by agencies of the Scottish public sector-led social innovation is less common Government. Health services are overseen by a sepa­ here. On the one hand, Council staff are generally pre­ rate branch of the National Health Service (NHS Scot­ occupied with trying to understand the latest instruc­ land), with day-to-day management overseen by 14 re­ tions from the Scottish Government, or how to avoid gional Health Boards (some of which overlap with the overspending their dwindling budget. On the other 32 Councils). hand, rural inhabitants sometimes perceive their local The pattern of responsibility for economic develop­ Council staff as part of the problem rather than as a ment is highly complex, involving a pair of regional source of solutions. Nevertheless, this “lean environ­ agencies (Scottish Enterprise and Highlands and Is­ ment” (from a traditional public sector welfare per­ lands Enterprise), modest involvement of the Coun­ spective) is proving rich in terms of genuine social in­ cils, plus a large number of national, regional and local novation, which is borne out of local social capital, and institutions from the public, private and third sectors. in turn reinforces community cohesion. As such, it EU Structural Funds are superimposed on this com­ should be a rather rich source of case studies of social plexity. The Highlands and Islands region is classified innovation in local development. as “transitional” and has its own programme for which the Scottish Government has responsibility devolved A long history of innovation from Westminster. A similar arrangement exists for Every country or region likes to point to local high­ agriculture and rural development policy (including lights in the development of social innovation. In the LEADER). case of Scotland, the philanthropic social experiments carried out at New Lanark in the early 19th century by What are the particular issues for remote and industrialist Robert Owen13) are most often cited. This sparsely populated areas? strongly underlines the fact that social innovation is As in most European countries, the Scottish govern­ not a new phenomenon; it is the terminology and the ance system and service delivery arrangements have increasing recognition of its role in development that been affected both by longer paradigm shifts (New drive the current high level of interest. Public Management and neo-liberal approaches) and, Since Owen’s time, it is widely acknowledged that more recently, by austerity, which has resulted in a Scotland has developed a distinctive ethos/political highly complex network of public, private and third economy (within the U.K. context), namely a tradi­ sector provision. “Rationalisation” has all too often left tion of equality of opportunity supported by universal more remote and sparsely populated areas without easy access to education. This is manifest in the sphere of access to services of general interest. Faced with the re­ sulting tangible reduction in well-being, the inhabit­ ants of many such areas have looked to their own re­ 13) However, it is fair to say that it is not clear whether Owen’s activities would qualify as social innovation in terms of the strict definition. Given the inequali­ ties of power and resources, it seems unlikely that the remodelling of local society 12) However, some aspects of welfare and taxation policy are due to be devolved to could have taken place without top-down philanthropy to initiate it (see https:// Scotland under a deal promised in the run-up to the 2014 independence referendum. en.wikipedia.org/wiki/Robert_Owen).

NORDREGIO WORKING PAPER 2017:2 35 politics. Prior to the recent rise of the Scottish National and disabled people receive personal care budgets from Party, the Labour Party has been the dominant force in their local council social services department, which Scottish politics. The SNP has positioned itself as the they use to pay for services provided by either commer­ heir to pre-New Labour socialist roots. cial companies or the third sector. Thus, the role of the public sector is mostly quite indirect and facilitative, as Distinctiveness and devolution opposed to involving initiation or leadership. In 1999, a range of powers relating to “public” services were devolved from Westminster to the Scottish Gov­ What is going on in rural and remote areas? ernment. Significantly, these included education Rural services in Scotland, as elsewhere in Europe, (which had always been a separate system) and health, have been affected in recent years by a combination of but excluded the benefits system and services related to “rationalisation” overlain by austerity. Remote and the labour market. These are all services that have been sparsely populated areas in particular have faced chal­ very much affected by austerity, and even devolved ser­ lenges to maintain acceptable levels of well-being for vices have their budgets (indirectly but) tightly con­ residents. Social innovation has clearly been part of the trolled by the U.K. Treasury. Herein lies the impor­ solution. Local transport, support for elderly, disabled tance of this context for the evolution of social and disadvantaged groups, childcare, local transport, innovation in Scotland. A very substantial third sector housing, retailing, provision of food for the poorest (comprising voluntary organisations, co-operatives, people, even local economic development strategies are charities, social enterprises, etc.) is perceived as a all commonly tackled by local third sector groups. The means of filling the gaps in the provision of services territorial nature of these initiatives is indicated by the that have been opened up by cuts to public sector fact that many have place names in their titles. It is im­ spending and the welfare system. portant to be clear that most of the people involved in the many local community initiatives that would surely The role of the public and third sectors in qualify in terms of this project’s definition would not social innovation use or even be familiar with the term social innovation. The current Scottish Government is very favourable to­ Some of the most striking examples of social innova­ wards social innovation. For example, it commissioned tion in recent years have been community development a report on how EU Structural Funds can be used to initiatives, sometimes associated with the purchase by support it (Glasgow Caledonian University 2013), and the local resident population of substantial areas of another to explore how its potential is perceived by or­ land, together with all buildings and other assets under dinary people and groups within the third sector (The land reform legislation. A well-known example of this Melting Pot 2014). It also supports a substantial popu­ is the Isle of Eigg Heritage Trust, which owns all the as­ lation of representative and advisory bodies that pro­ sets of the island, runs many local services, and facili­ vide various services to the third sector. However, the tates economic and social development in a variety of extreme centralisation of decision-making and public ways. However, even where land reform has not taken administration that renders the 32 Unitary Authorities place, many local communities in rural areas have set or Councils little more than delivery agencies for na­ up “development trusts” with the aim of making their tional policies means that, compared with the Nordic communities more sustainable (in the broad sense) and countries, there is very little scope for genuine public to promote appropriate development. sector-led social innovation at the “municipal” level. However, the third sector, which is the dominant Some reflections source of social innovation activity in Scotland, is not Innovation in the mainstream? In the context of such a by any means independent of the public sector, at either crowded third sector environment, the definition of in­ central or local level. Many social innovation initiatives novation becomes tricky. If every village has a commu­ that deliver a range of services to different segments of nity shop, can setting up another one be described as a the population (the elderly, young unemployed, the social innovation? There are now more than 500 Com­ homeless and destitute, handicapped or with mental munity Development Trusts across the U.K.; which of health issues, etc.) survive on the basis of a combination these was/is a social innovation? of volunteering and grants from their local council, the Scottish Government, or a range of other public sector Individual innovation in the third sector. It is also im­ bodies. Others are in effect subcontracted by the pub­ portant not to assume that all third sector activities are lic sector to deliver services. For example, many elderly social innovations. Even if they are innovative, they

NORDREGIO WORKING PAPER 2017:2 36 may not be borne out of social capital, but rather be parts of the EU. The 21 LEADER Local Action Groups driven by strong and independent individuals. Such cover almost all of rural Scotland. They are usually led activities may be social “in their ends” but not “in their by the local council, together with a range of other or­ means”. ganisations and representative bodies. They do not carry out projects themselves, but instead act rather as Are LEADER and Community-Led Local Development a combination of animateur and funding agency for local (CLLD) social innovations? The LEADER programme projects, some of which may qualify as social innova­ and CLLD are well established in Scotland14), as in other tion according to our definition.

14) http://www.ruralnetwork.scot/funding/leader

NORDREGIO WORKING PAPER 2017:2 37 Part 3: Learning from Practice

A total of 23 cases from across the five Nordic countries and, as can be seen in Figure 1 below, many incorpo­ (including one from Åland and one from the Faroe Is­ rate more than one of these elements. lands) and Scotland were studied in this project. This section outlines the methodological approach that was used to select the cases, provides a listing of all the cas­ es and presents the overall lessons that can be learned by different stakeholders from the cases. The high level of detail contained in the cases themselves made their inclusion here impractical. Instead, the cases can be ac­ cessed through the online resource: www.nordregio.se/ socialinnovation and in the accompanying document to this Working Paper. The 23 cases all have three points in common.

1. They are consistent with the project’s definition of social innovation in that they are social in both their means and their ends.

2. They all occur in, or have relevance to, rural or re­ Figure 1. Examples of social innovation in local development mote areas and as a result can help us to understand the role of social innovation in local development. Although the cases and the contexts they are drawn from vary in many ways, there are some broad lessons 3. They all work in some way to address demographic that can be gleaned from the project as a whole. To challenges faced by rural communities in the Nordic make these lessons as relevant as possible, we have or­ countries and Scotland including ageing populations, ganised them based on the different actors who work outmigration of the population (in particular young with social innovation in a local development context. people), and limited access to services. Where initiatives were led by communities them­ selves, we found that it was important to focus on spe- Material for the cases was collected through desktop cific goals and be patient. Particularly in small commu­ research and interviews with people involved in the nities, it can be impossible to address every challenge initiatives. The cases were developed based on the “so­ right from the start. Initiatives were successful when cial innovation biography” approach developed for the they took the time to think about all the goals they SIMPACT Project, an EU initiative focused on boost­ wanted to achieve and established priorities based on ing the impact of social innovation across Europe. The what was most important and what could realistically aim is to provide a detailed account of each case from be achieved with the available human and financial its inception, including an analysis of the role of the resources. Passionate people were also vital; it was dif­ local context and of different actors in the success of ficult to find an example of a successful social inno­ the initiatives. A short description of each case is pro­ vation that was not driven by committed people who vided in Table 1 and the complete case studies can be were willing to dedicate their time and expertise. At read on the Nordregio website. the same time, making the most of the skills and expe­ The 23 cases can be broadly divided into three cat­ rience in the community and making space for a range egories: Local community capacity building/forums, of people to get involved were good ways to avoid over- innovative service provision, and providing commu­ reliance on a single individual. Sharing the commu- nity spaces/ infrastructure. The cases are quite diverse nity’s vision and successes through the local and even

NORDREGIO WORKING PAPER 2017:2 38 CommunityServiceCommunity development provision spaces forums and activities Case Description Country “Viesimo” Societal Enter- * A great example of a user-based approach to public service development. Finland prise Cooperative

Area committees in re- * Increasing close-range democracy by giving local residents responsibility Finland mote areas of Rovaniemi for local service budgets. Bærum Municipality * Working systematically to mainstream innovation in the public sector. Norway Community Care Assynt * * A charity established by local residents that delivers services to support pe- Scotland ople to overcome barriers they face due to age, health or disability issues.

Cycling Without Age * Promoting the older generation’s right to the wind in their hair, using bicycle Denmark rides to connect people across generations.

Emmaus Association * Addressing unemployment by acting as a middle-man between unemploy- Åland ed immigrants and local people who require assistance with small tasks.

Fish Factory Creative * The result of the transformation of an abandoned fish factory in Stöðvar- Iceland Centre fjörður by a passionate group of individuals.

Free State Lucky * Using humour, fantasy, craziness and courage as tools to mobilise the local Norway Næroset population and encourage joint action.

Knoydart Foundation * * The foundation owns the Knoydart estate (17,200 acres of land) and works Scotland to preserve, enhance and develop Knoydart for the wellbeing of the envi- ronment and the people.

Life Cycle Café * * Provides a place where retired volunteers and school students can meet Finland and teach each other new skills.

May I help you * Links young people, particularly those at risk of social exclusion, with Finland elderly people who need assistance with everyday tasks.

Offerdal Healthcare * A resident-owned cooperative economic organisation that provides health- Sweden Centre care services to local residents in a rural area of Jämtland.

Pikene på Broen (Girls * A collective of curators and producers who are working to inspire cross- Norway on the Bridge) border cooperation and cultural exchange between Norway and Russia.

Ramsjö Public Meal * A local entrepreneur has taken over the public meal program with amazing Sweden Program results.

Röstånga Together * * An inspirational example of community-driven local development with Sweden positive outcomes for both social and economic development.

Skovgård Hotel * Demonstrates how the local community can collectively take over private Denmark institutions and establish enterprises where people with disabilities can contribute to local rural development.

Sorø Senior Service * A network of volunteers who deliver groceries to elderly citizens in the Denmark remote parts of the municipality.

Tag Del / Participate * An online space where communities can come together to solve challen- Denmark gers they face.

West Harris Trust * * A community trust working to reverse a long history of declining population Scotland and limited opportunities through local endevour.

Kalix Övre Bygd * A service center (economic association) that runs a local store and provi- Sweden des a combination of public services in the fields of aged care, childcare and education.

The Association of Outer * Addresses the issue of outmigration from the small islands of Faroe Islands Faroe Islands by increasing social networking and knowledge exchange among people Islands living on the outer islands.

Village house service * * Brings services to local residents through cooperation between the munici- Finland centres pality, local people, local associations and businesses.

Workplaces for refugees * * Cooperation between a local entrepreneur and the Norwegian State Hou- Norway in Tranøy Municipality sing Bank to create homes and jobs for refugees.

Table 1. Social Innovation examples included in the project

NORDREGIO WORKING PAPER 2017:2 39 national media was a great way to open up new avenues nect social innovators with potential private funders for funding and collaboration. At times, it also led to would be a good way to encourage more of this type opportunities to upscale the initiative. of collaboration. In a similar vein, rural actors could Where initiatives were led by the public sector, in- benefit frommore opportunities for skills development volving the end-users in the innovation process was vital and knowledge exchange. Attracting project funding to ensure that services met the needs of communities. requires specific competencies and public actors can Giving local inhabitants the chance to influence de­ support community-led initiatives by providing such velopment in their area also led to improved relations expertise, sharing data or hosting skills development between local residents and the municipal authority. workshops. There is also scope to simplify application Embracing co-operation and reinventing traditional processes to make funding more accessible. roles were also important factors for success in public Along with these more specific lessons, analysis of sector-led innovations. Because the development of the cases also generated some broad ideas about social partnerships between public, private and civil society innovation in local development. One of the main find­ actors is complex, time-consuming and also relatively ings from the case studies was that the process of social new in the Nordic context, adequate resources must be innovation can be just as important as the outcome. So­ allocated. Successful approaches also demonstrated a cial innovations are typically developed through a col­ willingness to be brave, take risks and experiment with laborative process that involves a variety of local actors. new ideas. Courage and commitment from leadership Through this process, valuable skills and networks are and politicians are vital, as risks may be perceived as developed that further strengthen the community as a high compared with business-as-usual solutions. Cre­ whole. This increases innovation capacity and the po­ ating a “culture of innovation” within the municipality tential for future action. Coming together to address requires an attitude shift but also knowledge and skill local challenges also contributes to an increased sense building. In reality, the current situation in some ru­ of belonging to the local area – a factor that has the po­ ral areas means that not daring to do things differently tential to address the problem of outmigration. This is could be a much greater risk in the long term. Finally, consistent with the definition of social innovation de­ being truly innovative in the public sector means rein- veloped in Part 1 of this report and reinforces the rele­ venting old processes, for example, public procurement. vance of this definition in a rural development context. Innovative public procurement is a promising tool in Further evidence to support the unique nature of the rural context; it can result in solutions that better social innovation in rural areas was found in the ap­ meet the needs of end-users, it is more efficient from a proach to problem-solving taken by many of the cases. cost–benefit perspective, and it can increase the number In urban settings, social innovations often target a and diversity of actors involved in service provision. specific group or problem. In the rural settings exam­ There are lessons to be learned from all 23 cases re­ ined here, it was just as common to find initiatives that garding external support and funding. First, flexibility adopted a holistic approach, working to improve the is a vital component of support and funding structures. community for all residents. This suggests that social Funding and other support structures work best when innovation has a unique “local development” compo- they are flexible enough to respond to specific needs nent in rural areas. in different local contexts. For example, local develop­ Several of the cases focused on community own­ ment funds should be available for a range of purposes, ership of assets, companies or foundations through a rather than being earmarked only for particular types range of legal forms. These democratic ownership mod- of activities. Second, the cases demonstrate that creative els have great potential in rural areas and appear to pro­ approaches to sourcing and providing funding can lead vide a strong foundation for long-term success. They to successful outcomes. Financial support can come in can create opportunities for income generation as well various forms and in-kind contributions can make a as formal structures for resident participation in local huge difference (e.g., exemptions from property taxes decision-making processes. on a community facility, the donation of goods). Third, As noted above, the case studies clearly demonstrate the cases examined suggest that there is scope to create that social innovation in rural areas is often heavily re- more links between different types of actors. In almost liant on a few key individuals. Although the presence all cases, the inputs of voluntary labour and public sec­ of such individuals is naturally positive, the weight tor resources were much more important than com­ of their efforts in ensuring success also presents chal­ mercial involvement. Despite this, when links were lenges. Individuals can become burnt out or, in the case made between innovators and private sector actors, of ageing communities, their capacity may be reduced. the results were extremely positive. Activities that con­ There is a need for improved understanding of how dif­

NORDREGIO WORKING PAPER 2017:2 40 ferent approaches to social innovation can encourage on results and/or ongoing performance. Better utilisa­ the sharing of responsibility and the involvement of a tion of existing monitoring and evaluation methods broad range of community members of different ages. would increase the visibility of social innovation ini­ Finally, the cases analysed here demonstrate the tiatives and their impact, which could in turn make it need for improved monitoring and evaluation. Very few easier to attract clients and/or funding. of the initiatives were subject to any type of follow-up

NORDREGIO WORKING PAPER 2017:2 41 Final remarks

The Nordic Working Group on Demography and Wel­ have decided to include social innovation and social fare and Nordregio started to work with the topic of entrepreneurship in rural development as one of the social innovation in 2014 with a vague idea of social priority areas in its Nordic co-operation programme innovation being a potentially useful but not widely for regional development and planning for 2017–2020. used concept in a rural and local development context. This means that although the project “Social Innova­ It has also become evident that whenever this project tion in Local Development in the Nordic Countries and and the idea of social innovation in rural settings were Scotland” comes to an end, new actions will be taken presented in conferences and other gatherings, there to build on the findings of this project. Regarding the was keen interest among actors at both national and issues of social innovation and social entrepreneurship, community levels, with enthusiastic discussions on the the Nordic Council of Ministers’ new Thematic Group topic. In the project, Nordregio and the Working Group on Sustainable Rural Development will continue from have created some new and clearly much-needed knowl­ where the Nordic Working Group on Demography and edge about the current status and potential of social in­ Welfare left off, and work on investigating the potential novation in rural areas in the Nordic countries. of social innovation in strengthening the vitality of rural On the basis of the project and the recent policy de­ communities. velopments, the Nordic ministers for regional affairs

NORDREGIO WORKING PAPER 2017:2 42 References

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