Social Innovation to Drive Shared Value


6th Nov 2019

Social Innovation to Drive Shared Value

Social Innovation to Drive Shared Value

Social innovation is becoming a buzzword which is discussed around the world. There’s a surge in attention and government support for social development and social innovation, because it’s seen to be providing effective ways for addressing societal challenges and possible pathways towards more sustainable, inclusive and resilient societies.

Today’s global challenges in line with the Sustainable Development Goals - from climate change to unemployment and poverty - are both economic and social. The current economic crisis reminds us of the importance of mobilising all possible resources - not solely for generating economic benefits, but also for anticipating and responding to social problems.

Innovation in the 21st century differs from the model embraced in the last century which was characterised as profit-oriented and nationally targeted. The underlying motive of innovation has been generating economic value. However, looking ahead to the society of the future, it’s crucial to construct a new system that enables us to address social challenges through innovation by collaborating and acting globally. Thus, there’s a need for finding ways to foster innovation, which in-turn generates social and public value.

Today’s social challenges are numerous, complex, and urgent. From ageing societies and climate change, to energy efficiency and security. There is a wide consensus that the disconnection between economic growth and wellbeing is increasing. At the same time, research and innovation have become one of the main engines of growth. However, these two overarching trends haven’t yet been reconciled. There is a clear lack in exploitation of innovative solutions to address these social challenges. Failing to mobilise innovation to address some of the issues that affect populations at the global and local level has very high opportunity costs. Social innovation can be a way to reconcile these two forces, bringing growth and social value at the same time, thereby creating shared value.

Trends Driving Social Innovation

Despite the current trend of a growing interest towards social innovation as a means to solve social challenges, there are still a number of barriers to overcome.

These barriers to social development and social innovation stem from the very nature of social challenges and their specificities.

  1. First, the traditional concepts and systems are not adequate to properly understand these activities. Addressing social challenges by means of social innovation requires setting clear and agreed definitions, and creating a new framework to better understand the changing nature of innovation and the multiplicity of economic, social and technical drivers.
  2. Social innovations are by nature multidimensional insofar as a variety of issues are addressed as social challenges. This entails a significant degree of diversity in terms of knowledge basis in science and technology. The complexity derives from the wide scope covered by ‘social innovations’, as social challenges are related to demographic changes, climate change, poverty, employment, health care, education. The multidimensional package of existing social challenges and the systemic failure in fostering social innovation clearly call for a reform of research & innovation governance.
  3. Social challenges are also addressed by multi stakeholders (e.g. universities, research institutes, private companies, government, civil society, citizens). This calls for more research activities on multidisciplinary, and promoting stakeholders’ involvement—particularly by favouring the implementation process of research priorities (while avoiding lobbyism). To do so, the development of a new governance system, in particular participative tools aiming at facilitating partnerships, is still to be strengthened in order to be effective.
  4. Moreover, new actors have emerged that challenge the current established innovation support institutions and instruments. These actors range from social entrepreneurs and enterprises to scientists, International Organisations, NGOs and private foundations. A new way to establish proper and fruitful cooperation between them must be found. Their respective roles in the social innovation system must be reshaped so that they become an effective driving force of technical and social progression. In particular, as a new actor, social entrepreneurship proves to be more and more essential to promote this trend, but still has to be fully recognised and supported by governments.
  5. Social challenges have a public-good nature. Market processes are inefficient to coordinate these activities that directly address social challenges. Prospects of large profits in the social area are limited, which hinders incentives to invest and commit resources to social innovation activities. Consequently, specific processes and mechanisms should be specifically established to support social innovation activities that aim to address social challenges.

These barriers result in governance and coordination inefficiency, lack of incentives to invest in social innovations and uncertainty. All of these hinder the development and dissemination of social innovation. As social challenges are growing, the cost for failing to solve them is increasing dramatically. Innovative solutions to address these social challenges are clearly not adequately exploited. New solutions, new collective initiatives, new instruments, as well as new modes of public supports & management are required to address social challenges. Several private and public agencies, research organisations and political institutions at all levels are carrying out dedicated projects to promote social development and social innovation.

What is Social Innovation

Social Innovation refers to traditional innovation in terms of ‘value creation’. Its ultimate goal is not only to create economic value, but to also enhance social institutions.
  1. Social innovation is the creation of new social relations and [1]
  2. new ways of doing and thinking. [2]
  3. Some organisations see social innovation as an approach: [3]
    • A pragmatic approach: Social innovation as ‘innovative activities and services that are motivated by the goal of meeting a social need and that are predominantly developed and diffused through organisations whose primary purposes are social’. [Mulgan et al. (2007) Social Innovation, What It Is, Why It Matters, and How it Can Be Accelerated].
    • A systemic approach: Social innovation as a ‘complex process through which new products, processes or programs are introduced, leading to a deep change in daily routines, resource streams, power relations, or values within the system affected by the innovation’. [Westley (2010) Making a Difference- Strategies for Scaling Social Innovation for Greater Impact].
    • A managerial stance: Social innovation as a ‘new solution to a social problem which is more effective, efficient, sustainable or fairer compared to existing solutions; and which generates value primarily for society instead of single individuals or organisations’. [Phills et al. (2008) Rediscovering Social Innovation].
    • A critical approach: Social innovation is conceived as a process of ‘empowerment and political mobilisation’ targeting a bottom-up transformation of the functioning of a social system, in terms of stakeholders and in terms of distribution of material and immaterial resources. [Moulaert et al. (2009) Social Innovation and Territorial Development].
    • An economic approach: Social innovation defined as ‘conceptual, process or product change, organisational change & changes in financing, and new relationships with stakeholders and territories’. [OECD (2009) Transforming innovation to address social challenge].
    • A comparative approach: Social innovation perceived as being ‘distinctive both in its outcomes and in its relationships, in the new forms of cooperation and collaboration that it brings. As a result, the processes, metrics, models and methods used in innovation in the commercial or technological fields, for example, are not always directly transferable to the social economy’. [Murray et al. (2010) The open book of social innovation].

Social innovation seeks to deliver beneficial outcomes that directly address societal challenges like climate change, inequalities & poverty, labour market & employment issues, gaps in healthcare & education systems, and demographic issues like ageing & migration. According to BEPA [4], there are three societal levels at which social innovation may deliver such outcomes:

  1. The social demands level: tackling specific problems faced by specific groups on the ground that are traditionally not addressed by the market or existing institutions and often impact vulnerable people much more than others. These are typically seen at the micro level.
  2. The societal challenges level: tackling challenges that affect people at a larger social scale or across whole sectors often manifests through complex mixes of social, economic, environmental and cultural factors that require new forms of relations between social actors. These are typically seen at the meso level.
  3. The systemic change level: enquiring some fundamental transformation of the way society, its institutions and actors operate, for example by changing governance structures, and creating more participative arenas where empowerment and learning are both the sources and outcomes of well-being. This is typically seen at the macro level. This hierarchical notion of levels represents a useful taxonomy of the possible results and aims of social innovation and provides a simple model of the relationship between social innovation and social change. However, it implies a somewhat linear, functionalist and perhaps overly simplistic view of society. It tends to focus on changes that are intentional and immediately valuable to the participants and beneficiaries, as well as ultimately for society at large, whilst ignoring complex and unintended consequences.

In general, social innovation approaches are: [5]

  1. Open rather than closed when it comes to knowledge-sharing and the ownership of knowledge;
  2. Multi-disciplinary and more integrated to problem solving than the single department or single profession solutions of the past;
  3. Participative and empowering of citizens and users rather than ‘top down’ and expert led.
  4. Demand-led rather than supply-driven;
  5. Tailored rather than mass-produced, as most solutions must be adapted to local circumstances and personalised to individuals.

Social innovations typically go through stages. They start as ideas, which may then be piloted or prototyped. If successful there is a process of sustaining the new model in the implementation stage – perhaps as a new venture or as a new policy within an existing institution. The final stage is to scale up so that the new approach makes a real impact and becomes part of the norm.

Social Innovators

Social innovators come from all walks of life. These can take place in public, private and third sector organisations. Often the most fruitful sources of new ideas take place in collaborations across sectors. It follows that social innovation is not the preserve of any particular group such as social entrepreneurs or think tanks but that these people and organisations make valuable contributions as do consultancies, policy makers, politicians etc. They can operate at the level of new ideas and pilots, of implementation and scaling, but also at the level of policy making.

  • The term social entrepreneurship is used to describe the behaviours and attitudes of individuals involved in creating new ventures for social purposes, including the willingness to take risks and find creative ways of using underused assets.
  • Social enterprises are not solely driven by the need to maximise profit for shareholders and owners. A 'social enterprise' whose primary objective is to achieve social impact rather than generating profit for owners and shareholders; which operates in the market through the production of goods and services in an entrepreneurial and innovative way; which uses surpluses mainly to achieve these social goals and which is managed by social entrepreneurs in an accountable and transparent way, in particular by involving workers, customers and stakeholders affected by its business activity.’ Basically, this covers enterprises for which the social or societal objective of the common good is the reason for the commercial activity, often in the form of a high level of social innovation, where profits are mainly reinvested with a view to achieving this social objective and where the method of organisation or ownership system reflects their mission.
  • Then there is the social economy. Social enterprises are part of the social economy, which also includes foundations, charities and cooperatives. The social economy and social entrepreneurship are also tools for social inclusion. They often provide employment opportunities for people facing disadvantages or provide social services and/or goods and services to persons in risk of poverty or exclusion. They’re also often involved in civil society initiatives aiming at social change.

Using Social Innovation to Create Shared Value

For social investors wanting to achieve a good return the following ideas are presented as an opportunity to create shared value:

  1. Preparing a strategy and action plan for social innovation that is linked to the organisation’s sustainability strategy.
  2. Building capacity for social innovation by supporting new organisations and adapting existing organisations. This might involve supporting independent third sector agencies for social innovation as well as setting up units within the public sector. There is also a role for training in new methods of idea generation, problematizing and in financial models.
  3. Strengthening the market for social innovations and encouraging cross sectoral collaborations by using the power of public procurement to encourage innovative and cross sectoral approaches.
  4. Supporting the innovators to get started and to grow through business support measures and by encouraging workplace innovation.
  5. Investing in new financing models for each stage of the innovation process and specifically for financing pilots, implementations and scaling up. Exploring how new financial instruments might support results-based approaches (e.g. along the lines of social impact bonds or payment by results models).
  6. Setting up better structures for measuring the results of social innovation, for impact evaluation, benchmarking and comparison of existing and proposed policies and projects.
  7. Promoting exchange and learning on approaches to social innovation.

In Conclusion

Companies are using their existing business models to address societal challenges, or even creating social businesses—special subsidiaries that emphasize social impact over commercial success. These operations can often achieve what non-profits and governments cannot. Over the long run, social innovation benefit companies that aim to create shared value by:

  1. Providing arenas for learning and experimenting
  2. Boosting the company’s reputation
  3. Giving employees a greater sense of purpose
  4. Connecting the company to potential future markets
  5. Improving relationships with regulators and other stakeholders

[1] Source:  OECD.org

[2] Source:  transitsocialinnovation.eu

[3] Source:  http://www.socialinnovationacademy.eu/8-popular-social-innovation-definitions/

[4] Source:  BEPA (Bureau of European Policy Advisers) (2010): Empowering people, driving change. Social innovation in the European Union. Publications Office of the European Union: Luxembourg.

[5] Source:  https://s3platform.jrc.ec.europa.eu/documents/20182/84453/Guide_to_Social_Innovation.pdf