The question of how to develop grassroots urban initiatives into flourishing businesses is a multifaceted one. Joost Beunderman takes us on a journey from Todmorden to Birmingham and talks us through the benefits and dilemmas of civic entrepreneurship on the way.
When asked to explain what I mean by the civic economy, Incredible Edible Todmorden is still one my favourite stories to tell. Who could have predicted that what started around 2005 as two women anarchically digging up public spaces to plant fruit trees and vegetables, would 10 years later become a real engine for self-confidence and economic growth in this previously depressed Northern English mill town? The network of participants is in the 1000s; the local police, railway station, health center and schools enthusiastically take part. The town has seen ‘food tourism’ on the rise along with many new start-ups. There are fewer vacant shops and an increasing number of young people choose to stay rather than seek their luck elsewhere. Not bad for a leftfield food growing initiative – and something that ‘formal’ public sector planning or market-driven economic development would have found very hard to achieve.
It is becoming increasingly evident that societal energy is a force for good to be mobilised in a wide range of ways.
There are now Incredible Edibles springing up all across Europe and beyond, but more crucially, it is becoming increasingly clear how initiatives like this can have a deep systemic impact on a place, addressing not just one issue but generating fertile ground for a wide range of gradual shifts. However, at the same time Incredible Edible Todmorden is also struggling to measure and explain this impact, something which many funders for potential future ideas demand. Is the initiative reaching the limits of what it can achieve? At a time when providing viable and genuinely supportive investment mechanisms for civic entrepreneurship is a challenge of growing importance, how can we learn the lessons from a place like Todmorden and think of what they could mean elsewhere?
The benefits of civic entrepreneurship
We are seeing an increasing number of civic initiatives like Incredible Edible; from local renewable energy coops to a civic enterprise that unlocks the knitting skills of older people by connecting them to young fashion designers.
Our understanding of the benefits of civic entrepreneurship to cities is also growing. Whereas large-scale institutions like the state failed to see society at large as the generator of solutions, it is becoming increasingly evident that societal energy is a force for good to be mobilised in a wide range of ways. This gives new, practical meaning to Nobel Prize winner Elinor Ostrom’s warning that our collective obsession with favouring the market or the state, which ruled much of the 20th century, neglects to consider the real achievements of citizen-driven collectives or the ‘commons’. These efforts have often been remarkably effective at resolving social problems, environmental issues and shaping places.
The new citizen initiatives can be cooperatives, not-for-profit companies, informal volunteer initiatives or sometimes quite commercial and mission-driven. Many of these ventures model themselves on the now-fashionable idea of being a real ‘start-up’ and are considering their next step in becoming or staying independent and financially resilient. In the context of decreasing levels of Government grant finance, as well as public sector cutbacks in service contracts to social or civic ventures, it is interesting to see a remarkable growth in the number and reach of a new generation of investors.
We are now witnessing how in the boardrooms of philanthropic organisations, mission-driven investors, government-backed investors and even mainstream private investors, there is an increasing willingness to support social and civic entrepreneurship through investments rather than grants or subsidies. A report published in 2014 by the Social Impact Investment Taskforce, established by the UK’s presidency of the G8, describes the global market for investment in ‘impact driven organisations’ as one that is rapidly moving from a conversation about hundreds of millions to a figure in the billions or trillions. (Impact driven organizations are defined in the report as “organisations that hold a long-term social mission, set social outcome objectives and measure their achievement, whether they be social sector organisations or impact-driven businesses.”)
Financial models for organically grown initiatives
Impact investors tend to expect either a ‘blended return on investment’ (with a mix of financial return and measurable impact), or a return on investment fully dependent on the social outcomes. The logic for the latter is increasingly compelling. Projects that prevent or resolve not just the human but also the financial cost of various social issues from spiralling out of control enable us to avoid large societal costs. For instance, organically grown initiatives like Australia’s Men’s Sheds are places where retired men, who often suffer from loneliness and a sense of being superfluous, can come together, use their DIY skills, tinker, make and repair things and feel reconnected to their community. By now, Men’s Sheds have been thoroughly evaluated and are shown to have a real impact on older men’s lives. This also significantly diminishes the costs of mental health problems and care. This type of beneficial outcome is the ultimate basis for impact investment, irrespective of whether it be a semi-commercial social enterprise, charity or other forms of local civic organisation.
The worlds of local civic entrepreneurship and financiers, even the ones driven by social impact, rarely meet.
What we are struggling with is the development of investment models for such initiatives in ways that truly suit this increasingly diverse sector. The worlds of local civic entrepreneurship and financiers, even the ones driven by social impact, rarely meet. In particular, it is not yet evident how potential new sources of investment can benefit the often small-scale, complex and emergent value creation models of local civic entrepreneurs, as opposed to more business-like, scalable social enterprises. In a funding-scarce world, imposing the need to generate revenue on fledgling initiatives, or indeed on newly acquired civic buildings, could very well choke the energy and motivation of the people involved, or stymie their potential reach and impact. Not every citizen-driven project can or needs to see itself as a ‘start-up’ or a revenue-driven social enterprise looking for rapid growth to achieve impact. Equally, we are still struggling to define exactly how these smaller civic initiatives could show their cumulative impact on people and places. Because of the difficulties in proving such causal links, let alone collective and systematic impact, we have trouble investing in projects and initiatives at the very micro level where frequently it matters the most.
We end up with relatively limited concepts like Social Impact Bonds, a notion that now has increasing traction. With a ‘SIB’ the upfront cost of social interventions, such as a project to reduce recidivism in prisons, is borne by private investors instead of a cash-strapped governments. The private investors equally carry the risk of the intervention not succeeding. Investors gain a return depending on whether the intervention succeeds in achieving social outcomes. This will save the public the cost of fixing the problem down the line.
While this approach is smart and useful, we need to be clear about its limitations. One of them is the fact that for the SIB to work, there needs to be a clear causal trail between interventions, outputs, outcomes and ‘cashable savings.’ SIB is very useful for funding highly structured and often large-scale ‘corporate’ social enterprise projects but less compatible with many local citizen-led activities, which tend to be quite open-ended in the type of outcomes they create. Moreover these outcomes are often multifaceted, such as in the case of Todmorden, rather than highly singular and targeted as is required by Social Impact Bonds. If we truly want a civic economy led by the many, SIBs, useful though they are, will often not be the answer.
From singular to systemic outcomes
Another key trend to recognise is that we now have an increasing understanding of the systemic nature of problems. Complexity theory, famously represented by the relationship between a butterfly flapping its wings and the hurricane it causes elsewhere in the world, is more commonly accepted now when it comes to social issues than it was during the 20th century. A great example is the 2011 presentation where Joe Hsueh of the Academy for Systemic Change shows how the health of fish stocks can be shown to be interrelated with gang violence. Gang violence is an aspect of social breakdown, which has a deep impact on social capital (mutual trust), and thus reduces the ability of a community to enforce collective governance arrangements around fisheries. In a high-trust community, people will be expected to play by the rules, limiting their coastal catch to the benefit of all. But in a free-for-all environment, the common fish stocks will more easily fall prey to people seeking short-term personal gain or asserting their power through violence.
It follows that meaningful progress on intractable and wicked social issues in the 21st century requires us to acknowledge that change can no longer be the responsibility or the capability of a single actor, organisation, institution, domain or start-up. Acting effectively in this context requires multi-actor coalitions – whether at the neighbourhood scale or beyond. The age of the large state, the heroic leader or charismatic start-up founder led to a convenient set of truths about development, investment, accountability and governance. However, what we really need is an understanding of the value of open-ended initiatives like Incredible Edible, coupled to broad coalitions of start-ups, government, innovative city mayors corporates, community organisations, NGOs and financiers working together.
The global market for investment in ‘impact driven organisations’ is rapidly moving from a conversation about hundreds of millions to a figure in the billions or trillions.
Importantly, this means that the emerging world of impact investment must avoid being hung up on the ‘silver-bullet’ approach which often, whether deliberately or by default, characterizes individual mission-driven start-ups or charities. We must reimagine investment. Rather than being oriented around individual start-ups and their clearly defined products and services, investors should focus on supporting system outcomes. In sum, we must invest in systems change.
At the moment I am involved in developing an accelerator programme that recognizes this approach. An example of our work is the #radicalchildcare proposition, which is being developed by a team in Impact Hub Birmingham. It responds to the increasingly obvious issue that the existing ways of delivering childcare, through an uncomfortable state-market arrangement, do not meet the needs and aspirations of families across the UK – particularly in a city like Birmingham with Europe’s youngest population and amongst the highest child poverty figures in Britain.
Our proposition is not just to recruit a cohort of 15 start-ups that could become individually investable because of their revenue and/or social impact. Instead, we recognize that to reimagine the way we resolve the ‘children versus work’ conundrum probably requires addressing cultural aspirations, employer attitudes, policy regulations, tech solutions, business models and ownership structures – to name but a few issues. Hence we see this as less a start-up accelerator than the beginning of a coalition of change-makers at the level of the urban region, generated by open research, storytelling, the building of a shared language and a common understanding of issues, the collaborative identification of particular pressure and leverage points in the system and finally the support for a series of collaborating ventures. Whether these ventures are citizen campaigns or parent-led cooperatives, corporate social innovations or data gathering approaches, they are all held together by a commonly shared theory of change. This will take a long time – and a significant amount of ‘patient’ investment – but to mend a broken system and create genuine impact, isolated citizen initiatives or individual silver-bullet start-ups won’t do.
This article is based on a number of pieces written with colleagues, an article written with Jurgen Van der Heijden (“Investment dilemmas – financing a flourishing commons” – Planning Theory & Practice 2015); an unpublished paper written with Indy Johar for UNDP, “The challenge of massive change” and more generally, our work with the Impact Hub Birmingham team and Dark Matter Laboratories, the 00 research lab focussed on systems change.