4. Social innovation in rural Scotland

In recent decades, OECD countries and regions have faced a number of structural transformations affecting their development trajectories. Globalisation and digitalisation are not new to rural contexts and have already been part of the economic landscape of rural economies for a long period of time. More recently, the shocks of the global financial crisis and the COVID-19 crisis have created a number of new social challenges for local communities. Today, social innovation is seen as a way to empower societies to take action to enable them to make a positive change in the places they live and has never been so relevant.

Social innovation seeks new and cost-effective answers to social and societal problems and refers to new solutions that aim primarily to improve the quality of life of individuals and communities by increasing their well-being as well as their social and economic inclusion. These solutions can be new services, new products and new relationships with stakeholders (OECD, 2000[1]; 2022[2]). All regions across Scotland face a variety of challenges, with accessible rural regions suffering from larger social and economic inequalities than remote rural regions, and remote rural regions suffering from lack of access to basic government services.

The territorial dimension plays an important role in defining the types of social innovation as well as defining its specific drivers at different geographic scales. Social innovation takes place on any territorial scale (national, regional and local); however, the needs and the drivers for it might vary considerably depending on the geographical and territorial context. This would also require different policy interventions at different territorial scales and that is why it is important to distinguish policy actions at the national, regional and local levels. There are also specific challenges relating to rural and urban contexts, which should be distinguished.

Social innovation has proven particularly important in a rural context. It is effective in identifying, designing and implementing new solutions to social and environmental problems. It can provide a response to a variety of rural challenges and a variety of market failures; it brings actors together locally to deliver necessary products or services. Moreover, social innovation promotes the application of more sustainable and resilient models, which is why it is an important driver for rural resilience (OECD, forthcoming[3]).

Scotland provides an interesting case for exploring social innovation. Facing a number of social and environmental challenges especially related to rural areas, the Scottish Government has put in place a number of reforms supporting social innovation. These reforms have helped to spark some interesting examples of social innovation in recent years, linked to community empowerment and allowing the purchase by the local resident population of substantial areas of land under land reform legislation.

This chapter analyses the Scottish social innovation ecosystem based on the social innovation framework for local development developed by the OECD and approved by the LEED Directing Committee. It has a particular focus on rural communities and aims to look at situations with social innovation around them. The following sections will look at the socio-cultural context and behaviours, legal frameworks, institutional set up and policy frameworks, local actors and, finally, resources available to engage with social innovation (Table 4.1). This framework was approved at the 80th OECD LEED Directing Committee proposing a framework for analysis of social innovation in rural context (OECD, forthcoming[3]).

Scotland’s rural areas as a whole display good socio-economic indicators as compared to urban and intermediate areas but should be carefully analysed. Rural areas have been performing relatively well compared to the other parts of Scotland in the area of education, health, employment and even income generation (Table 4.2). For example, the level of employment in remote rural (77%) and accessible rural (78%) areas is high compared to the rest of Scotland (74%). However, these indicators are only available for the situation prior to the COVID-19 pandemic and they still indicate a gap between remote and accessible rural areas. The cost of living in rural, remote and island areas is often substantially higher than in towns and cities, partly because of the distance to services and larger shopping centres (with lower prices) but also because of the costs of heating homes, which are often off-grid and less well insulated (Shucksmith et al., 2021[4]). Fuel poverty in rural areas is therefore more prevalent compared to urban areas. Some of this data might not necessarily be present in the official comparative data. There is also a large discrepancy among many remote rural regions, particularly in the periphery and islands which lag behind on several social indicators (see Table 4.2).

Local government has to ensure services of general interest across large geographical areas; however, it is often a challenge to bring them to remote rural areas. Local government in Scotland is organised through 32 councils that represent some 5.4 million residents. The councils are responsible for providing crucial services to residents such as education, social services, waste collection and recycling, local infrastructure maintenance and others. In comparison with some other counties, the councils have often larger geographical and population scope. Managing large territories with relatively limited resources could add difficulty to ensuring the delivery of services of general interest across the entire council’s area.

Rural services in Scotland have been affected in recent decades by a combination of “rationalisation” overlain by austerity (Copus et al., 2017[5]). In periods of slimmer budget space, the government has to rationalise the way the funds are spent, which can affect rural areas. Remote and sparsely populated areas in particular have faced challenges to maintain acceptable levels of well-being for residents. At the same time, this has created a multiplicity of innovative community solutions, many of which are social innovations.

A number of elements indicate that there is a reason for social innovation to be a particularly good fit for Scotland. The rural areas of Scotland face issues related to geographical remoteness, less developed infrastructure in terms of roads and public services, increasing depopulation and demographic changes as well as challenges for the government to ensure the delivery of all of its services. This geographical remoteness and tough climate have translated over centuries into the characteristics and behavioural patterns of the local community. They have formed the features of the local population building on the local traditions of solidarity, and behavioural and societal attitudes of the population and stakeholders. These characteristics are important enablers for collaboration and social innovation (OECD, forthcoming[3]).

Scotland is not new to social innovation and has seen a large number of successful initiatives over the last several hundreds of years. Scotland was the pioneer of applying mutual life insurance for marginalised communities and benefitted from founding the first mutual savings bank back in 1810 (Neal, 2015[7]). The philanthropic social experiments were tested in Scotland in the early 19th century by Robert Owen at New Lanark.1 Since that time, Scotland has showcased a tradition of community support, equality of opportunity and access to education. Social innovation could build on these values and is increasingly gaining ground in Scotland thanks to government support in exploring ways to make social innovation take place. For example, the Social Care (Self-directed Support) (Scotland) Act 2013 (Scottish Government, 2013[8]) allowed to supplement the state’s provision of welfare services involving social enterprises and social innovators. This was also one of the ways to spark innovation in the sector and explore new solutions developed involving various actors.

Another relevant example showcasing an important civic movement is the fact that it is the only part of the United Kingdom that hosts a democratic assembly like the Scottish Rural Parliament. The most recent Virtual Scottish Rural Parliament hosted a democratic assembly of over 600 participants from across rural Scotland. This new trend promoting all voices being heard, including the ones from the rural areas could be able to effect policy change.

The Scottish population has relatively high levels of social capital, which is a supporting factor for social innovation. Social capital (i.e. the sum of trust, networks and norms) is an important precondition favouring the emergence of social innovation. Scotland counts as the top United Kingdom (UK) region for perceived social support networks, with 96% of respondents confirming that they can rely on someone once in trouble (OECD, 2014[9]). Scotland enjoys a high level of civic engagement (measured by the voter turnout in general elections) at 71.1% (OECD, 2015[10]) and a relatively high level of volunteering at 64% (in the pre-COVID-19 period, it was also relatively high standing at 48%) of the population, including 26% who have volunteered formally (SCVO, 2020[11]). The same source also confirms the level of formal volunteering is much higher in remote rural areas (38%) compared with large urban areas (25%). Scottish small and medium-sized enterprises (SMEs) also tend to confirm more concern about environmental, civic and community engagements compared to peers in the United Kingdom. For example, a third (33%) of SME employers said offering solutions to environmental problems was of great importance to them, higher than the United Kingdom as a whole (24%) (Scottish Government, 2020[12]). The level of solidarity is high in Scotland with a strong tradition of supporting charities, particularly in rural areas. The majority of people in Scotland give to charity at least once a month and, in rural areas, this number (65%) is slightly higher compared to those in urban areas (62%) (Scottish Government, 2021[6]), which is a relatively high number compared to most OECD countries.

The high levels of social capital in Scotland should not be taken for granted as, over the last several years, the numbers have been decreasing. The Social Capital Index2 in 2019 was at 93 index points, 7 points lower than the 2013 baseline (100) and the index score for 2018 (95). This change between 2018 and 2019 was statistically significant and indicates worsening performance around areas of getting support from the neighbourhood and volunteering (Scottish Government, 2019[13]). It is likely that the trend of worsening could have continued during the COVID-19 outbreak and especially affected the most vulnerable communities. This is also aligned with the rising wealth inequality in households across Scotland as measured by the Gini coefficient,3 which has been worsening. It was at 64% in 2018-20, compared to 62% in 2016-18 and 60% in 2014-16.

Scotland performs well on the United Nations Sustainable Development Goals (SDGs) and has been particularly successful in its considerations for the environment. On most sub-indicators, in particular the social and environmental ones, Scotland has been performing better than the rest of the United Kingdom. It performs particularly well in SDG 13 “Climate action”, SDG 15 “Life on land” and SDG 8 “Decent work and economic growth”. At the same time, SDG 3 “Good Healthy and well-being” could be further improved and is likely to be affected by the remoteness of some regions. The good performance on the environmental indicators by Scotland suggests consideration for the environment by the population.

Entrepreneurial activity in Scotland is at the middle-range level compared to European peers and is comparable to the general UK level. However, unlike in other places, the most deprived tend to have the same opportunities to start a business. Scotland’s entrepreneurial activity is important for transforming an idea into a concrete concept and for scaling this idea. The Global Entrepreneurship Monitor (GEM) survey estimates that 7.3%4 of the Scottish population were actively engaged in setting up a business or already running an enterprise established in the last 3.5 years, which is comparable to the UK national average of 7.5% (Mwaura et al., 2021[14]). Across Scotland, the highest rate of entrepreneurial activity was observed in the Highland and Islands region (8.7%), followed by South Western Scotland (7.4%), Eastern Scotland (6.9%) and North Eastern Scotland (6.5%) (Mwaura et al., 2021[14]). Another GEM finding in Scotland is that the most deprived 20% were thus just as likely to start a business as the wealthiest 20% in Scotland in 2020 (Mwaura et al., 2021[14]), which is another supporting factor for social innovation. Furthermore, women in rural areas tend to have more substantial challenges in starting firms as argued in Chapter 2.

In Scotland, the status of women is legally recognised: however, women still have challenges, especially in rural areas where a lack of childcare solutions could create barriers to their full engagement in economic activities. Even if in Scotland women take an active role in the economy, they often work part-time and typically have a higher representation in community groups and social enterprises. Women in Scotland tend to become entrepreneurs out of necessity and lead most of the social enterprises (OECD, forthcoming[3]). According to the GEM study, some 14% of SMEs employers were women-led (Mwaura et al., 2021[14]), while this number goes up to 65% of social enterprises led by women in Scotland according to the Social Enterprise Census (CEIS, 2019[15]). This could indicate that, in Scotland, women are particularly conscious of social and environmental issues. The recent GEM study for Scotland confirmed that there is a significant difference between male and female motives with regard to “earn[ing] a living because jobs are scarce”, with 76.4% of females highlighting this motive compared to 57.3% of males (Mwaura et al., 2021[14]). Studies also confirm that employees in remote rural areas, particularly women, are more likely to have a second job than in accessible rural areas or the rest of Scotland (Scottish Government, 2021[6]). Gender equality is a good indicator of the openness of the local population. It is correlated to high levels of social innovation (OECD, forthcoming[3]).

People living in rural areas of Scotland have a strong sense of belonging to their areas and their communities. Strong attachment to community and area can be a positive factor for social innovation, as it can create a desire for change and for action to make it a better place. Based on the Scottish Household Survey 2019 (SCVO, 2020[11]), a higher proportion of residents of rural Scotland, compared to the rest of Scotland, rate their neighbourhood as a “very good” place to live. Moreover, more people living in rural areas (71%) report a feeling of belonging to their immediate neighbourhood, compared with people living in urban areas (63%). They also seem to have more personal contacts and conversations with their neighbours in rural areas (82%) compared with people living in urban areas (72%) (Scottish Government, 2021[6]). The 2022 research across the Highlands and Islands has found that residents are proud of living on an island (94%) and remote rural areas (92%) (Ipsos/HIE, 2022[16]).

In summary, the existing local traditions and behaviours in Scotland and especially in its rural areas, are supportive of social innovation. The Scottish population has a strong sense of solidarity, a high level of social capital and sense of belonging to the local area, a sense of justice and high environmental concerns. However, the data show that the Social Capital Index has been decreasing since 2017, which should raise the concerns of policy makers. In Scotland, the status of women is recognised and they take an active role in economic activity. These characteristics are supportive of social innovation and can create the prerequisites for policy makers to support social innovation in Scotland. The next sections will highlight the legal and institutional settings that policy makers have created in order to enable social innovation and raise awareness around it.

Having a common definition and understanding of social innovation is important for policy makers. In this respect, the legal framework plays an important role in creating and ensuring an enabling environment for social innovation. It serves as a reference point for eligibility to public support schemes, notably regarding access to public procurement, and financial and non-financial assistance and benefits. It is particularly important to identify whether any barriers prevent social innovations from developing and growing. The legislative framework in Scotland empowers communities to take action.

The Scottish Government strives to ensure sustainable inclusive economic growth, for which involvement and stakeholders’ buy-in is crucial. Following years of increasing social needs and budget austerity, the Scottish Government has put in place a number of legislative packages to help local communities better deal with the challenges and better enable communities to act. Scotland does not have a legal or single commonly accepted definition of social innovation; however, legislation covers many of the elements of social innovation and supports community-led economic solutions to social challenges.

A major piece of legislation is the Community Empowerment Act Scotland 2015 (Scottish Government, 2015[17]), which enhances community empowerment as a way to deliver the planned outcomes. Its objective is to work with local communities to take action to improve their quality of life and well-being. This legislation builds on other legislations in a variety of fields, enacted in Scotland as part of the overall trend over the last decades to promote a partnership approach, especially in rural development strategies. The act covers 11 different topics including land reform, community planning and asset transfer amongst others, which are relevant to social innovation too and which empower communities to take action. It builds on the legislation mentioned below. In many areas, the 2015 act goes one step further in reinforcing local communities’ powers. It allows communities to act by creating scope for community asset transfer and increases the scope for community land purchase. It also gives powers to local communities to express their opinions through participatory budgeting voting.

Land use legislative reform allowed for ground-breaking development, promoting experimentation and is very relevant to social innovation, particularly in a rural context. The 2003 Land Reform (Scotland) Act (Scottish Government, 2003[18]) allowed the establishment of a statutory framework of public access rights to most land and provided the enabling legislation for community land purchases.5 This has enabled the provision of land for social housing and the development of community-owned renewable energy developments. This has also allowed communities to benefit from the financial contributions that renewable energy projects and especially wind turbines brought them, especially since 2011 under the Community and Renewable Energy Scheme (Box 4.1). Moreover, it allowed using land for experimentation purposes, for highlighting new ways of doing things and it has been an important element for the promotion of social innovation in rural areas of Scotland. To further build on this success and address the issue of highly concentrated land ownership, the Scottish Government gathers proposals for its new Land Reform Bill, which will be introduced by the end of 2023 (Scottish Government, 2022[19]). The act has the potential to create new opportunities for community-led social innovation and wealth building through increased access to land. It also has the potential to identify opportunities for community-led initiatives and create a more level playing field for social enterprises and other community-based businesses.

Scottish social care legislation allows supplementing the state’s provision of welfare services involving social enterprises and social innovators. The Social Care (Self-directed Support) (Scotland) Act 2013 (Scottish Government, 2013[8]) makes legislative provisions relating to the arranging of care and support, community care services and children’s services to provide a range of choices to people for how they are provided with support. This creates an opportunity for social sector organisations and social innovators to develop projects where other care providers are failing to deliver effective service.

Scottish public procurement is a good fit for the promotion of social innovation but more progress is needed in its implementation. The Procurement Reform (Scotland) Act 2014 (Scottish Government, 2014[24]) defines the sustainable procurement duty of the government. It obliges the contracting authority to consider how, in conducting the procurement process, it can improve the economic, social and environmental well-being of the authority’s area as well as promote innovation. Moreover, the 2014 act places an obligation on public sector bodies for the systematic delivery and reporting of social value in the Scottish public sector. Based on the latest data available, only around 35% of procurement bodies involved the third sector bodies in contracts awarded in 2018-19. This is confirmed by the data that only one in five social enterprises participated in public procurement and additional support with skills and awareness raising is needed (Scottish Government, 2020[25]).

Social innovations take a variety of legal entity forms; in Scotland, one can distinguish several forms more commonly present locally. There is a wide range of institutional forms and social practices that can be considered potentially innovative. The recent academic paper by Bill Slee (2019[26]) looked into the fields in which social innovation has occurred in Scotland and identified several forms it tends to take. There does not seem to be evidence that existing laws and regulations could prevent some social innovation actors from benefitting from public support.

The Community Development Trust is the dominant legal entity form for a range of community-led, place-based development entities. Mostly, development trusts are community-led organisations which are owned and managed by the local community. The Development Trusts Association Scotland (DTAS) counts over 300 members (DTAS, 2022[27]). Development trusts are involved in a very wide range of activities such as health, economy, energy, sustainable use of resources, etc. Often, they act as support agencies and help the communities to define and develop their projects. Development trusts are typically incorporated and are constituted as a company limited by guarantee, the Scottish Charitable Incorporated Organisation or Community Benefit Societies (DTAS, 2022[27]).

Partnership is another common legal entity form in Scotland, often used with the objective to tackle a specific issue involving civil society as well as other actors. Typically, this legal entity form builds around bringing together several stakeholders and partners with a common defined objective, making it relevant for social innovation. Public sector, private sector, civil society or social economy actors can all be members of such partnerships. An example of this form would be the Kirkcudbright Red Squirrel Group, formed to preserve and improve the habitat for the endangered red squirrel population. These groups or partnerships could operate with a formal structure, especially if they are delivery agencies for specific policies, but they can also have an informal setting. Many of these partnerships rely on volunteering and youth and seniors tend to be active in them.

Social enterprise is another important vehicle for the delivery of social innovation in Scotland. Social enterprises are entities which trade goods and services that fulfil a societal (social and environmental) objective and whose main purpose is not the maximisation of profit for the owners but its reinvestment for the continued attainment of its societal goals (OECD, 2022[2]). In addressing unmet needs, social enterprises often adopt social innovative approaches. There is no single legal form nor a process of the registration of social enterprise in Scotland. There is a broad spectrum of legal options for social enterprise legal entities in Scotland including limited companies, charities, Scottish Charitable Incorporated Organisations (SCIOs),6 co-operatives, community interest companies (CICs)7 or sole traders or business partnerships. Scotland’s Social Enterprise Census (CEIS, 2019[15]) highlighted that three-quarters of social enterprises are incorporated under the law. While about 42% of social enterprises hold limited company forms (limited by guarantee, not shares), the CIC or hybrid form is becoming more popular and its popularity is growing rapidly. Most social enterprises hold a charitable status and the majority are registered with the Office of the Scottish Charity Regulator (OSCR) (CEIS, 2019[15]).

The charity is a particularly popular legal entity form in rural areas, where there is a higher concentration of charities per head of population. There is a long tradition of charity and philanthropy in Scotland and the charity sector has a relatively high profile and public visibility for such a relatively small legal jurisdiction. This emphasises the role that smaller charities play in the country generally, including village halls, social clubs and recreational organisations. The terms of being classified as a charity are set out in the Charities and Trustee Investment (Scotland) Act 2005 (Scottish Government, 2005[28]). In Scotland, an organisation can only call itself a charity if it is part of the Scottish Charity Register, published and maintained by the OSCR. Even if generally, the charity is not a legal structure, in Scotland, there is also a special legal form of SCIO unique to Scottish charities allowing the latter to be legal entities also reporting to the OSCR.

In summary, the legislative framework in Scotland is supportive of social innovation. It empowers communities to take action and allows for socially innovative actions in supplementing the state’s provision of welfare services. Since 2003, land use legislative reform allowed for ground-breaking development, promoting experimentation and allowing for the transfer of community assets to relevant actors. A variety of legal entities are active in social innovation in Scotland, with the Community Development Trust being a popular form for a range of community-led entities. Other common forms also include social enterprises, partnerships and charities. Social enterprises enjoy a broad spectrum of legal options for their legal form in Scotland. This could also enhance the uptake of the application of local public procurement supporting local social innovations.

The policy framework and institutional setup shape the scope and efficacy of interventions relevant to social innovation. Both the policy context and institutional architectures for community engagement have changed rapidly in Scotland over the last decade and have enabled more social innovation.

Even though Scotland does not have a dedicated social innovation framework and policy, there are a number of relevant policy frameworks that are in place in order to support social innovation development and growth. The Scottish Government’s approach is explicitly connected to social innovation as a means of delivering a communitarian policy agenda. It offers a range of policies focused on empowering communities to help themselves. Over the last decade, local government in Scotland has benefitted from increased welfare powers and responsibilities devolved from the central government, which has provided an opportunity for local agents to engage with new forms of provision and experimentation. Scottish political commitment to community-led social innovation has been implemented through a clear vision and a number of relevant approaches developed over the last years. Moreover, the Scottish Government continues to build on the successful examples of community-led initiatives, such as the European LEADER8 local action group structure even after leaving the European Union. In 2022, 23 rural community-led development progrects and programmes will benefit from the funding of over GBP 7 million to promote LEADER-type initiatives.

The Scottish National Outcomes set an overarching purpose for Scotland and addresses issues of inclusiveness and addressing inequalities among other themes. The national outcomes are the Scottish Government’s broad policy aiming to provide a vision for Scotland with which every policy must align. There are 11 national outcomes which are monitored through the set of indicators to each outcome. The vision is monitored through the National Performance Framework (Scottish Government, 2007[29]). This strategy allows mainstreaming the mutually reinforcing themes of environment, inclusive economic growth and addressing inequalities. This frames every policy developed in Scotland so all sectors and all of Scotland’s key actors must pay attention to how they contribute to this overall purpose and the national outcomes. For example, the indicator of the number of assets in community ownership measured by the framework indicates a steady growth from 452 to 612 over the last 7 years. At the same time, the indicator measuring the quality-of-care experience has been slowly decreasing over the same period of time. Local authorities must prepare Local Outcome Agreements, in conjunction with their Community Planning Partners. These local outcomes must align with the national outcomes, detailing how these will be delivered at the local level.

The Scottish Wellbeing Economy Monitor (Scottish Government, 2022[30]) is a valuable tool for promoting social innovation in Scotland by providing a framework for understanding the links between social, economic and environmental factors and their impact on well-being. It is an initiative led by the Scottish Government to monitor Scotland’s progress towards a well-being economy. The monitor provides a comprehensive set of indicators to track progress across a range of areas related to well-being, including social, economic and environmental factors. Even if the latest data give us a mixed picture, this initiative indicates the importance the government gives to well-being and helps provide an evidence-based approach to tackle areas which have been underperforming. It highlights the importance of social and environmental considerations in shaping Scotland’s future.

Land reform has been crucial for the growing number of Scottish community buy-outs, especially in rural areas. The reform managed to engage a number of bottom-up social innovations, especially in rural areas, generating new socio-economic opportunities for communities. It has also been a source of revenue generation for some communities which again empowered communities to continue other actions (Box 4.1).

The community empowerment reform has led civil society to have its say at the local level. The Community Empowerment Act has allowed many communities to transfer community assets, unused buildings to new initiatives, allowing them to test their efficiency and empowering the local citizens to initiate action. This has also led to the uptake of participatory budgeting, allowing communities to take control of some aspects of local government spending (Henderson et al., 2019[31]). This community empowerment is further strengthened by the recent ten-year National Strategy for Economic Transformation (2022-32), which aims at a fairer and more equal society. The strategy promotes the well-being of economic objectives and recognises the importance of the community wealth-building approach to economic development as a way to move ahead in Scotland (Scottish Government, 2023[32]).

Another relevant policy tool is the Social Enterprise Strategy, which recognised the important role social enterprises could play in localised regional responses to social challenges and hence is relevant to social innovation. In 2016, the Scottish Government published a ten-year Social Enterprise Strategy. It was co-developed with the sector itself and was translated into action plans covering three-year periods each. Since the beginning, the government has invested over GBP 30 million into Scotland’s social enterprise sector and provided a wide range of support mechanisms for the start-up, development and internationalisation of social enterprises in Scotland. The latest Social Enterprise Action Plan (2021-24) confirms the Scottish Government’s long-term vision and furthermore builds on the opportunities internationalisation can bring to social enterprises.

There is not a single implementation agency which has a unique mandate to deal with social innovation in Scotland; its implementation is decentralised. There is no clearly defined approach to the way social innovation implementation is operationalised at the local level. Indeed, social innovation implementation is seen as a horizontal area where a number of institutions could be relevant, especially the three enterprise agencies (see Box 4.3). Some of the agencies deal with it based on their geographical scope while others handle it based on their subject area. The sections below summarise some of the most relevant institutions.

The councils have a unique position in enhancing social innovation implementation locally due to their access to resources and proximity to local stakeholders. Scotland counts 32 councils which are very close to the local setting and are well aware of the issues, actors and possible solutions. Even if councils do not have a formal mandate, they deal with issues of education, waste collection, social services and other relevant services to social innovation. Even if economic development is mostly the responsibility of specialist agencies (see below), councils can be instrumental, especially in more rural areas where they have stronger competencies (Copus et al., 2017[5]). This has especially been demonstrated in the self-care industry (Box 4.2).

Councils have been collaborating with local communities to capture and realise local ambition through the creation of Community Planning Partnerships (CPPs). There are 32 CPPs with 1 for each local authority area. Each CPP is responsible for developing and delivering a plan for its council area. The CPP provides an example of how public bodies can work with each other and local communities to gather information about the needs, realise local ambition and help them take action. There is wide variation in the size and membership of CPPs. Even if not all CPPs might be as effective as some other ones, it is seen as a way to empower local communities to work closer with the councils, for example through participatory budgeting.9 It can also be a useful tool for sharing information with the community of stakeholders. The social economy and civil society usually have a role to play in the CPP.

From an economic development perspective, the social innovation ideas could be supported by the three enterprise agencies in Scotland. The pattern of responsibility for economic development is relatively complex in Scotland, involving regional but also to some extent council and a number of national, regional and local institutions. However, the three enterprise agencies are likely to play the most important role as implementation agencies for a sizeable part of social innovations (Box 4.3). The agencies include the Highlands and Islands Enterprise (HIE) regional agency (for northern parts and islands), the Scottish Enterprise (SE) national agency (for central parts of Scotland) and the South of Scotland Enterprise (SOSE) regional agency (for southern parts). These agencies would be the right agencies to provide business support. Moreover, both SOSE and HIE have a particular focus on inclusive growth in their visions and are in the process of integrating it into the implementation of activities on the ground. The agencies put in place specific activities focused on local communities and social enterprises.

There is no formal co-ordination mechanism among stakeholders dealing with social innovation in Scotland but there is a dialogue among a variety of relevant mechanisms such as CPPs. A co-ordination mechanism in policy development and policy implementation could be helpful in order to share experiences and ensure non-replication, get feedback from stakeholders, as well as ensure a more co-ordinated approach. A network of CPPs with a holistic approach to the way they are operating across the areas is a good base for the provision of feedback and exchange of experience among stakeholders. A more co-ordinated approach could also contribute to discussing the bespoke needs of different communities and ways to address them.

Currently, there is not a single official information portal where users can get information about social innovation in Scotland. This could be a missed opportunity to engage some of the innovators. Availability of information can help new social innovations get inspiration and guide them to the relevant contacts for additional information or help. Even if initiatives such as Find Business Support exist, they are only focused on some actors helping them to locate available public support. Several years back, a portal and social innovation centre, Social Innovation Scotland, was established. However, its activities were discontinued. An information portal could also provide a link to the relevant initiatives, institutions and actors which could provide additional information. At the same time, Scotland has active independent initiatives and organisations, which bring together relevant stakeholders, such as the Scottish Community Development Centre which is the lead body for community development or other initiatives such as Social Enterprise Scotland or the Social Enterprise Academy, which also play a role in information sharing. Just Enterprise, a multi-million (GBP) programme, delivered by local and national actors, does play an important role in some areas. Its delivery mechanism is built around consortia of actors who act as networker and signposting organisations (see Box 4.5).

In summary, over the last decade, both the policy context and institutional architecture around social innovation have had a positive change benefitting the emergence of social innovations. The local government in Scotland has benefitted from increased welfare competencies and responsibilities devolved from the central government, which has provided an opportunity to local agents with opportunities to engage with new forms of provision and experimentation including around the environment, inclusive economic growth and addressing inequalities. A number of relevant policies have been put in place, many of which focused on empowering communities to help themselves and supporting the creation of social enterprises. The enterprise development agencies along the councils are the major public implementation actors and have access to resources and proximity with local stakeholders which should be further enhanced. Yet, there is no co-ordination mechanism around social innovation policies and regional implementation practices. At the level of implementation, this could create replication and a lack of knowledge of what is done by the actors. Better co-ordination between the councils and the three enterprise development agencies (SE, HIE and SOSE) could ensure a more consistent approach. The lack of an official information portal around social innovation might make it challenging for newcomers to find relevant information and is a missed opportunity to link the relevant stakeholders and promote good initiatives and policy practices. The local government could also benefit from dedicated capacity building on how to practically apply public procurement in order to further promote community wealth-building efforts, support experimentation and ensure socially and environmentally sustainable outcomes. Another area to explore is the ways for the government to monitor advancement in social innovation and ways to measure the social impact. Scotland’s Procurement Reform Act 2014 already incorporates an element for the social contribution of procurement activities by requiring public entities to set out in their procurement strategies how they will contribute to compliance with the duty to deliver social impact. The Wellbeing Economy Monitor is another excellent start and work on the exploration of the relevant indicators should be continued (OECD, forthcoming[3]). Social impact measurement has been gaining significant traction and policy makers are increasingly looking at ways to promote its uptake through different mechanisms including improving the policy framework, providing guidance, building evidence and supporting capacity (OECD, 2023[36]).

Social innovation brings together private, public and non-profit actors, together with citizens to develop innovative solutions to emerging societal challenges. The quality and diversity of the community of actors define the richness of ideas and abilities to manage and implement innovations.

Scotland enjoys a diversified fabric of social innovators that include social enterprises, civil society, charities as well as private and public entities. Compared to many territories in continental Europe, Scotland has a number of similarities in relation to the actors with an active participation of senior citizens and social enterprises in rural areas. What might distinguish Scotland’s rural areas from some of the continental territories is the active involvement of charities, which often rely heavily on volunteers. Social movements have arguably played an important role in Scotland in promoting some rural social innovations.

Social enterprise is an important player in rural social innovation in Scotland. It has received substantial attention from the government in terms of visibility and financial support. The latest Social Enterprise Census (CEIS, 2019[15]) identified 6 025 social enterprises operating in Scotland, of which one-third are located in rural regions. There is a larger number of social enterprises per 10 000 inhabitants in remote rural areas compared to accessible rural areas by a significant factor. The main sectors of trading activity for entities located in accessible and remote rural areas relate to areas where they address social needs and include: i) education, training and employment; ii) health and social care; iii) early learning and childcare; and iv) community centres and halls. Social enterprises in rural areas are smaller compared to the enterprises in metropolitan settings; they have a lower turnover and hire fewer people. Prior to COVID-19, rural social enterprises had an average headcount of 23, below the urban social enterprises which counted 46 staff, but slightly higher than the average of small-town social enterprises (19). Moreover, in rural areas on average, the majority of staff work part-time, much more compared to the urban setting or small-town setting (Figure 4.1).

Social enterprises in Scotland in rural areas had a much lower income and mean grant income compared to the social enterprises in urban areas and small towns. Looking at the sources of income, data also confirm that the share of grants presented a larger share of income compared to peers in urban areas and small towns (Figure 4.2). Urban social enterprises had an average grant income of GBP 156 633, while rural social enterprises and small-town social enterprises had GBP 47 922 and GBP 70 380 respectively, which means that social enterprises located in rural areas had a mean grant income of only 30.5% of the ones based in urban areas.10 Data also indicate that, especially for entities located in remote rural regions, they have slimmer chances to bid for and win a public sector contract (CEIS, 2019[15]).

There is a long tradition of charity and philanthropy in Scotland and the charity sector has a relatively high profile and public visibility for a legal jurisdiction of the size of Scotland. There were over 25 000 charities in Scotland in 2021 (OSCR, 2021[37]) which rely greatly on volunteering, with 68% of organisations reporting that they are run entirely by volunteers. Charities are also focused on operating locally: 40% of charities operate locally based on a local point, community or neighbourhood, with a further 22% operating within 1 local authority area. There is a larger density of charities (number of charities per 10 000 inhabitants) in rural and especially remote rural areas (OSCR, 2021[37]).

Charities in Scotland are heavily reliant on volunteering, which is reported higher in rural and remote rural areas compared to the rest of Scotland. Around a third of people in rural Scotland give up time to work as a volunteer compared to a quarter in the rest of Scotland (Scottish Government, 2021[6]). For charities located in remote rural areas, the most frequently reported “primary area of work” was the local community or neighbourhood groups (28.7%), youth and children (16.7%) and religion (16.7%). In accessible rural areas however, the case is markedly different, with religion being the primary area of work (32.5%), followed by youth/children (19.3%) and then local community or neighbourhood groups (15.7%) (Woolvin and Rutherford, 2013[38]).

Civil society has been active in rural areas and has been an active enabler of social innovation across the world. As a subset of the population, elderly or early-retired citizens tend to be very active actors in social innovation in rural areas across the world. This might be explained by the fact that when people get to retirement age, they are more likely to live in rural areas and also have more time as they are no longer working. One particularly important feature of Scotland’s rural areas is the demographic trends of these communities. Rural Scotland has some of the highest median ages of the population of any part of the United Kingdom. Rural areas in Scotland have a lower proportion of the population in the age range of 16 to 44 but a higher proportion of people aged 45 and over. This is particularly true for the age range of 65 and over in remote rural areas (Scottish Government, 2021[6]). Data comparing the members of the Impact Hub Inverness based in the rural region also showed a much higher prevalence of members over 55 years old, at least double or triple compared to other analysed Impact Hub locations in Europe (Impact Hub, 2019[39]).

Actor engagement platforms are physical or virtual touch points where actors meet, exchange information and resources and co-create value and new initiatives. The presence and number of these platforms locally would arguably correlate positively with the number of interactions that actors could have among themselves. Community partnerships play an important role in supporting social innovation in Scotland through collaboration among different stakeholders. Increasing the number of collaborations among various actors could increase the quality and depth of social innovations. In Scotland, Community Planning Partnerships have been put in place for a long period of time and have empowered communities to take a more active role and allowed collaboration opportunities among various stakeholders. Recently, the communities have played an important role in addressing the consequences of the COVID-19 pandemic and allowed various stakeholders to have a voice in supporting their communities.

In Scotland, community energy is largely driven by community development trusts or community partnerships. These community-led initiatives could play a role as actor engagement platforms are often owned and managed by the local community. They allow citizens to present and support the development of socially innovative projects. Moreover, they allow citizens to be engaged in their implementation as well as their management through involvement in the board. Information about existing partnership initiatives, such as the Galloway Glens Landscape Partnership (Box 4.4), is available. Other examples can be found in other countries where community partnerships play an important role in ensuring that local rural communities have access to the services needed and where local communities have to take an active role in ensuring the service.

Actor engagement organisations have supported social movements to contribute to the uptake of social innovations especially in rural areas of Scotland. Social movements could be social innovations as such but they can also create an environment where social innovations can be nourished (Smith, 2014[43]). Even if social movements are not essential precursors of social innovation, there is often a profound and important link. One example of community forestry in Scotland is presented by Slee (2019[26]), in which social movements represented by organisations such as Reforesting Scotland succeeded in making a shift. Acting collectively, the movement has successfully promoted collective forestry and new ways of land use across Scotland. In most rural areas in Scotland, a community forest could be seen as a social innovation but its roots lie in social movement.

The Scottish Rural Network plays an important role in connecting with individuals living in rural areas, communities, organisations and businesses across rural Scotland and beyond. The network allowed us to gather inspiring stories also relevant to social innovation and support major policy change in a variety of sectors. For many years, it helped to ensure an outward focus and exchange of relevant inspirational examples of social innovation with rural community policy at the European level. For example, it has been promoting work around smart villages.

Another sector engagement platform has been the Scottish Council for Voluntary Organisations (SCVO), which has united over 3 500 organisations including charities, social enterprises and voluntary groups from the voluntary sector. Its mission is to support, promote and develop the voluntary sector across Scotland. The SCVO provides a whole set of support services for the voluntary sector including advice, tools and peer support. Importantly, it also gathers important data on the sector which is published regularly.

In summary, Scotland enjoys a diversified fabric of social innovation actors such as social enterprises, civil society, charities as well as private and public entities. Many of these actors are based in rural areas and are smaller, have less income, a lower headcount and have slimmer chances of benefitting from the public sector contracts compared to their urban counterparts. At the same time, many of the social innovators are heavily reliant on grants and even if revenue-generating models have been increasing, relatively few of the actors are financially sustainable. There is a great reliance on volunteering and the involvement of senior citizens, especially in remote rural areas. The community energy is largely driven by community development trusts, community partnerships and, generally, actor engagement organisations. Development of local partnerships with financial support such as demonstrated by the Galloway Glens scheme could empower social innovators to take action.

The available resources section looks at the availability of financial public and private resources, as well as physical infrastructure and support programmes in rural areas.

Across Scotland, a network of public and private organisations offers grants and financial support directly to local social enterprises and community initiatives. Access to finance is seen as critical to developing successful social innovations. Such finance can come from public support programmes for social innovation and innovations in public procurement but also from an emergent field of impact-oriented financing or impact investing. In the pre-COVID-19 period, some 17% of social enterprises reported access to finance as a barrier in Scotland (CEIS, 2019[15]). The government (Scottish Enterprise) also runs an online portal Find Business Support (Scottish Government, 2022[44]) which provides a range of information and resources to support businesses in Scotland and help them locate public sector support. Grants remain the most popular form of financing social enterprises, alongside charities in Scotland. Even if there is a whole range of repayable forms of finance available in Scotland, which has been evolving over the last several years, only one in ten social enterprises applied for a loan in the last year (CEIS, 2019[15]). A grant is an important source of funding of social enterprises, charities and community initiatives.

Public sector support comes from the UK government, the Scottish Government, HIE and SOSE (Box 4.5) as well as the number of council-led initiatives adjusted to local needs. The funding support mainly covered the growth phase for social innovations and in a more limited way the start-up phase. Examples of public funding mechanisms are described below (Box 4.5). Local councils also provide direct financial assistance, mainly in the form of grants to selected social innovations that deliver a range of services to different segments of the population (elderly, young unemployed, homeless, persons with disabilities, etc.).

Public sector financial support and especially venture capital funding is a positive element in the Scottish ecosystem supporting social innovators but it might not be the approach that fits all social innovators. Public financial support schemes (Box 4.5) have a place in supporting the inducement, scaling and development of social innovations. The growth component of many of these initiatives presumes that their financial sustainability would be achieved through social innovation scaling (Vanderhoven et al., 2020[48]). However, it is not always the case and many, especially in rural areas, prefer to remain small and local, others facing difficulty even when they have a financially sustainable business model. These programmes also tend to be limited in time and might create a vacuum once one phase is finalised or funding is discontinued. Scaling through growth might require considering innovative financial support mechanisms, potentially in collaboration with private sector actors for example, through the creation of partnerships.

Social ventures in rural contexts still lack financial support and require financial products adjusted to their needs. Unlike social ventures in a more urban context which have easier access to finance and a larger opportunity to scale, social ventures in rural regions are often multi-faceted, operating in areas where there is a need but limited potential for financial returns. This does not allow many social ventures, especially in rural contexts to benefit from mainstream finance. They often need special products, which have adjusted repayment terms, the provision of flexible terms and often require back-up by the government to at least partially absorb the risk of the loan to the early-stage entities.

Private finance initiatives exist and cover rural Scotland, and they are often also supported by the Scottish Government. Scotland is home to several privately led initiatives, which are tailored to the specific needs of the social economy and social innovation community. Social Investment Scotland (SIS) is a social enterprise and charity which provides loan funding to social enterprises, charities and community groups looking to make a positive societal impact. SIS’s ambition is to reach all 32 of Scotland’s local authority areas and, since 2001, it has invested over GBP 101 million in 460 organisations across Scotland (SIS, 2021[49]). Inspiring Scotland is another venture philanthropy organisation with a desire for social change and specifically focused on Scotland’s charities. It provides long-term investment to the Scottish voluntary sector. For example, Inspiring Scotland runs the Rural Communities Ideas into Action Fund supported by the Scottish Government to encourage and support innovative approaches to community-led local development in rural communities across Scotland. The fund promoted 120 initiatives through small grants for projects up to GBP 3 000 and large grants of up to GBP 50 000 (Inspiring Scotland, 2022[50]). The Social Entrepreneurs’ Fund, managed by Firstport thanks to government support, provides grants of up to GBP 25 000 to individuals or to early-stage social enterprises to test or develop their social business case idea (Firstport, 2022[51]). Power Up Scotland develops early-stage social businesses through investment, business support and cross-sector partnerships. Each venture benefits not only from access to social finance but also from a 3-month mentorship focused on becoming investment-ready (Krlev et al., 2021[52]).

Scotland benefits from a relatively wide range of innovation centres, business incubators and accelerators: however, only a few are based in rural areas. Each of the several innovation centres have a focus on a specific innovation area, for example the Fife Renewables Innovation Centre, where social innovators can find an office, support and inspirational environment. The lack of population and demand for services due to scarcely populated territories makes it difficult to establish traditional incubators or accelerators in rural areas since they are mainly present in cities or larger towns. This contributes to the lack of awareness about the need and importance of incubation and business support. That is why raising awareness of the work of organisations thanks to programmes such as Just Enterprise has been so important, especially in rural areas around the need for leadership and skills upgrading support (Box 4.6). Organisations such as the Social Enterprise Academy also contribute to developing capacity building around these subjects.

Incubators and coworking spaces in rural areas have to explore the operational models in order to be able to provide services to rural communities. An example of such incubation support would be Impact Hub Inverness, which has innovated its operational model, providing space and consulting services for social enterprises and community groups. Impact Hub Inverness collaborates with the Highlands and Islands Coworking Association in order to allow coworking solutions across several physical locations in rural areas. These initiatives are important not only for business development support but also as a source of networking and capacity building delivered locally.

The lack of business physical infrastructure in rural and especially remote rural areas is partially compensated by relatively good digital connectivity to other remote rural areas in other countries (which still argues for its further improvement as per Chapter 3). Building on the extensive areas of 4G connectivity and the latest fibre optic broadband technology, Scotland enjoys relatively good Internet coverage. Improved Internet connection also allows the establishment of small coworking spaces linked with limited often-administrative support services across urban areas. This also allows social innovators to benefit from a number of capacity-building initiatives and advice services offered by various capacity-building institutions.

The government aims to provide services covering the entire lifecycle of a venture at the national but also local levels. Scotland’s Social Enterprise Strategy has committed a considerable budget to support various stages of development of ventures and put in place a whole range of support mechanisms. Support is provided at the level of Scotland as well as through the three economic development agencies (Box 4.3) and at the local level through council support.

Scotland enjoys a complex fabric of organisations supporting business development for social ventures but is mainly focused on the urban areas. The business support available ranges from general business development to which social enterprises can get access to specialist provisions targeting social enterprises. There are many agencies tasked with providing business support across Scotland, mainly through Business Gateway, a publicly funded body that provides services to people starting or growing their businesses.

Local economic development agencies play an important role in the provision of a range of support services not only to general enterprises but also specifically to social innovators. Both HIE and SOSE provide not only traditional business support and support in aligning to net zero, Fair Work and community wealth-building initiatives but could also offer customised support to community organisations or social enterprises. For example, SOSE provides enterprise advice, training and resources that support social enterprises. It is also possible to benefit from the support tailored to specific needs such as business planning, asset development or peer review. HIE also provides a range of services ranging from project development (e.g. community engagement and planning, development of strategic plans) to financial support (e.g. securing investment, development of funding applications) or procurement (e.g. undertaking and supporting procurement exercises, including use of appropriate advertising routes and portals) and many others.

In some locations, dedicated services are provided specifically to social enterprises through service agreements. For example, the Fife Council through Business Gateway supports the setting up of social enterprises and provides support to the existing ones. Another example is in North Ayrshire: the local authority has a dedicated social enterprise network manager and a development officer to provide support to local social enterprises and grow the sector. Even if, on the surface, the social enterprise support structures in Scotland seem comprehensive, one of the criticisms of the recent study specifically looking at the support provided to social enterprises found that support could be better co-ordinated and more efficient (Mazzei and Steiner, 2021[53]).

Even if there is a large offer of organisations proposing learning and development skills, their focus on rural areas is uncommon and innovative approaches should be tested. Scotland has created a complex state-led ecosystem with several dozens of actors, most of whom are funded at least in part by the Scottish Government. These agencies, institutions and organisations provide new and existing social enterprises with development advice, skills training, funding and networking. Individuals and social enterprises can benefit from skills upgrading and learning opportunities through a variety of organisations including Social Enterprise Scotland, the Social Enterprise Academy, Firstport, Social Firms Scotland, the Development Trusts Association Scotland, the Community Business Network for Scotland, Community Enterprise in Scotland, Social Value Lab and Co-operative Development Scotland, among some other institutions.

The number of organisations indicates the scale of financial and political investment and the present offer, even if many of these organisations have relatively few operations in rural areas. Firstport, Scotland’s agency for start-up social enterprise provides one-to-one and/or group advice, as well as training and workshops to new and emerging social enterprises. Only a few organisations are exclusively focused on rural areas: an interesting example is the charitable enterprise Inspiralba (2022[54]) based in Campbeltown (Box 4.6). It provides business support, training opportunities and advocacy to rural-based social enterprises. Another example is the Impact Hub Inverness (Impact Hub Inverness, 2022[55]) providing business support services to the areas around the whole of the Highlands and Islands.

Rural regions cannot adopt the same approach to business support services as urban areas; this approach should integrate the specific needs of the actors and explore new ways of delivering services. Social innovation actors need to get access to specific services, which should include support with measurement of the societal impact and help to adjust their operational and business models. It is difficult to get this expertise in rural Scotland. Digitalisation can help to address the issue by integrating online training modules, digital tools and digital support services. It also requires public support to integrate new ways of delivery of public support services and ways to operationalise business support reaching everyone. The specific needs of the social innovation actors should also be taken into account. For example, the South Ayrshire Council enterprise and development programme supports social enterprises and rural communities with the development of entrepreneurship and leadership capabilities. Local government can also put in place a system of mobile support services. There are a number of interesting examples of how mobile units and mobile business support services (Box 4.7) could reach rural regions.

The Just Enterprise programme, which receives public funding, allows providing business support services in rural areas through the network of support organisations and ensures a more co-ordinated approach. Just Enterprise (Just Enterprise, 2022[56]) has been operational in Scotland for over 10 years and is delivered by a consortium of social enterprise support organisations including local ones such as Inspiralba or Impact Hub Inverness (Box 4.6).

Some institutional actors in Scotland have been active in connecting and engaging local actors around social innovation. Specifically, in promoting innovation, the Interface programme (2022[61]) works with individuals, social enterprises and organisations of all sizes and in all sectors to match them to Scotland’s leading academic expertise with the aim to help them diversify and innovate. The Interface team provides services for free and helps to explore possible funding options that support academic collaboration partnerships.

There is a pocket of academic excellence around social innovation in Scotland which should be seen as a resource. Even though not specifically focused on rural Scotland, the presence of academics has considerably contributed to the creation of relevant information about the social innovation ecosystem and its analysis. These actors include academic actors, such as Glasgow Caledonian University, the James Hutton Institute and the University of Edinburgh among others. This presence of academic excellence around social innovation allowed the creation of research projects developing studies looking at successes and areas for improvement many of which were focused on Scotland (Henderson et al., 2019[31]; Mazzei and Steiner, 2021[53]; Mwaura et al., 2021[14]; Slee, 2019[26]).

Social innovation in Scotland builds on years of experimentation with the community wealth-building approach that aims to create sustainable and inclusive economies by shifting ownership and control of local assets and resources to communities. It also benefits from the land reform and seeks to transform land ownership patterns to ensure that land is used in the public interest and benefits local communities.

The National Strategy for Economic Transformation specifically promotes community wealth building along a fairer and more equal society. A number of local authorities have put in place concrete examples of how they can implement relevant community wealth-building initiatives using local assets. Examples include community-based initiatives that create affordable housing and shared facilities which enable new households to remain, return and settle (Rural Housing Scotland, 2023[62]), as well as initiatives buying community land from the government, allowing to experiment around income-generating activities such as wind turbines, residential and commercial properties that benefit the local community (Galson Trust, 2023[63]; Harris Trust, 2023[64]).

Rural communities benefit from a number of assets such as village halls, donated properties or lands. In many cases, these assets have been underused or not used for many years and are often in need of refurbishment (OECD, forthcoming[3]). At the same time, they might be a useful asset for social innovators. By 2019, communities owned 472 community assets in accessible rural and remote rural regions compared to just 118 in the rest of Scotland (Scottish Government, 2021[6]). It has been an important resource, especially in remote rural areas, allowing social innovators to experiment with the assets or renovate/redevelop them to meet community needs which can include office, arts or specific needs of the senior citizens or parents with young children. One of the well-known examples is the Men’s Shed network, which was able to benefit from various community assets (Box 4.8) across rural regions in Scotland. Another example is the More than a Pub programme, which helped the community to own some 67 pubs across England (United Kingdom) and provided business development support and funding to enable the local community control of pubs in both rural and urban areas, especially where they play a central role for community to meet (Plunkett Foundation, 2022[65]). Building on this need, HIE has initiated a dedicated Maximising Community Assets programme, helping community organisations acquire and manage land or assets locally and providing them with assistance on the subject, as well as with the management of the land or asset. This can also include funding and support for project development.

In summary, the Scottish ecosystem proposes a wide range of resources to promote social innovation. There are financial instruments to support social innovations at different phases of the lifecycle, including at initiation, development and scaling. These financial resources are mainly driven by government support but there are also private sector initiatives. Yet, finance is still one of the main barriers to social innovation especially in rural areas and the need for additional support especially at the early stages of social innovation development was highlighted by the stakeholders. Another point to highlight is that since the government provides funding through a wide range of actors delivering at different levels within different geographies, there is a risk of duplication of efforts. There is a large number of organisations providing support and this might also be confusing for the actors seeking support.

In terms of infrastructure and especially in public assets transfer, Scotland is advanced compared to many of the OECD countries. However, in rural areas, there is still a need to work on creating an understanding of the advantages of business development and mentoring support and development of specialised programmes, which could be delivered in scarcely populated rural areas. Programmes such as Just Enterprise enable the network of local partners and support organisations to reach out to social innovators in rural areas. Digitalisation and new operational models of delivery of business support services should be further explored. In terms of the overall focus for social innovation support, many of the programmes emphasise scaling while it might not necessarily be a focus of many social innovations, especially in a rural context. Many of these innovations were initiated with a specific objective to tackle a local challenge and did not have a vocation to scale. Policy makers might consider adjusting the support mechanisms to support local social innovation initiatives aimed at improving their financial sustainability and impact measurement support, at the same time keeping the focus on high-potential and scalable initiatives.

This section provides a synthetic overview of the main strengths, challenges, policy issues and recommendations for Scotland.

  • Scotland has good socio-cultural preconditions to engage with social innovation. A number of elements indicate that Scotland has a particularly good fit for engaging with social innovation due to high levels of social capital, consideration for the environment by the population and a strong sense of belonging to the local communities. Indeed, Scotland enjoys a high level of civic engagement, high levels of volunteering and solidarity. This is particularly true in remote rural areas, where remoteness and weather conditions drove the development of principles of solidarity.

  • Government long-term commitment encourages social entrepreneurship and elements around social innovation across Scotland. The government has developed an advanced legal framework around social innovation with the Community Empowerment (Scotland) Act 2015, the Land Reform (Scotland) Act 2016, the Social Care Act 2014, the Procurement Reform (Scotland) Act 2014 and other elements to facilitate co-operation and the creation of partnerships tackling societal issues and promoting experimentation. Social innovation actors can choose from various legal entity forms. This builds on the solid policy framework for various elements around social innovation, which enables local actors to have more control and engage a bottom-up approach.

  • Scotland benefits from a diversified fabric of social innovation community of actors. With an active social enterprise community, civil society, large number of charities as well as public and private actors, the country benefits from a richness of ideas and abilities to manage and implement social innovations. Specifically in rural areas, senior citizens, charities and social enterprises tend to be very active. The particularity of Scotland is the active involvement of the community development trusts as vehicles and enablers of a large range of community-led and place-based initiatives.

  • Scotland has arguably one of the most advanced ecosystems to support social innovation and social entrepreneurship in the world. There has been a continuous effort by public and private actors to develop mechanisms that support local innovation. This includes a variety of financial support schemes at different phases of the social innovation lifecycle as well as business support building efforts and a wide range of business support infrastructure, including in rural areas.

  • Scotland has put in place a land reform agenda enabling experimentation, which is particularly important for social innovation in rural regions. Over the last decades, Scotland has been pursuing the land reform agenda that has enabled the growing number of community land purchases and experimentation with the community assets. This is of particular importance to rural areas, where land allowed the creation of new experimentation zones, new concepts and initiatives. The reform helped to optimise the shortage of rural social infrastructure and the increasing demand for rural space for multiple uses by directly tackling the land ownership issue, allowing the sustainable development of rural communities. It also allowed to showcase the implementation of sustainable farming, new methods of fertilisation and ways to grow cattle. Finally, this reform has been also important in helping local communities benefit from their land and financial contributions coming from the renewable energy project.

  • There are several levels of policy implementation that are involved around the UK-level initiatives, Scottish initiatives and local government initiatives. In the situation where there is not a single agency with a clear mandate for social innovation, this can create a risk of replication and asymmetry of information. There is a need for a co-ordination mechanism among different levels of government.

  • The recent decentralisation reforms have empowered the local level to take decisions. Even if, often, local authorities have a good understanding of the local needs and know local actors better, there is a risk that some of the operational models might be too conservative. Local policy makers might be conservative in trusting innovative approaches to social innovation. Generally, local authorities tend to be risk averse in the devolution of responsibility to organisations perceived as unproven or unsustainable.

  • There is a lack of centralised public points of information on social innovation in Scotland. It might be challenging for local actors, especially those living in remote rural areas to get access to information and know about support initiatives. Information gathering is subject to access to personal contacts, relevant networks and support initiatives across Scotland. The lack of a public portal around social innovation could be seen as a missed opportunity in sharing information about government initiatives at a local level and getting inspiration from what is done elsewhere.

  • Rural areas, and especially remote rural areas, still face challenges related to access to the resources necessary for social innovation such as infrastructure, finance, knowledge and skills. It is a challenge for the government to deliver these services and ensure that there is a local demand by increasing awareness around the benefits these resources can bring. Rural areas and remote rural areas have different options for resources compared to their urban peers; these options create an opportunity for supporting actors in rural regions differently. For example, this argues for the exploration of novel ways of supporting social innovation actors using the advantages digitalisation can bring and exploring peer-learning opportunities.

  • Even though financing is present in Scotland, for many social innovations, access to funding remains the main obstacle. This is particularly true for social innovations in a rural context and at the early stages of the life cycle of social innovation. There are a variety of financial instruments giving access to a small amount of a few thousand GBPs but it is relatively difficult for social innovations to get access to amounts slightly greater than that. There is also a need for more public finance to support the initiatives given that they are delivering key public services in many cases.

  • Social innovation actors in Scotland tend to have a large dependence on grants. There is a need to promote the development of operational and business models integrating revenue-generating activities, especially among traditional social economy actors. At the same time, there is a need for grants since, in a remote rural community with limited customers, it can be very difficult to generate revenue, while some services and products are crucial and government support will still be needed.

  • There is a need for further diversification of support services. Even with the given continuous effort and the wealth of support available across Scotland, some gaps remain and practitioners still face challenges at various stages of entrepreneurial development. Many of the support programmes in Scotland supporting social innovation either focus on not-for-profit organisations providing support with filing the grant applications and providing basic support or, alternatively, more on social enterprise, helping them grow, scale and internationalise. While both approaches are useful, many of the social innovations, especially in rural areas, were copied with the idea of tackling a very local challenge and do not have an objective to scale or grow. What they need is business development support, helping them to diversify their business model, develop revenue-generating activities, and help with the development of the necessary skills to better manage and develop it.

  • The territorial dimension plays an important role in defining the types of social innovation as well as its specific drivers at different geographic scales. All regions face different issues with accessible rural regions suffering from larger social and economic inequalities than remote rural regions, and remote rural regions suffering from lack of access to basic government services hindering further opportunities for innovation in the region. Drivers for social innovation in rural and remote rural areas are different and policy makers need different approaches to tackling it. Scotland offers an interesting example where funding comes from different territorial scales including the UK level, the Scottish Government as well as decentralised initiatives. Each of these levels would have different expectations from the social innovation and argues for a more co-ordinated approach, also for a better understanding of the impacts and better information sharing.

  • To have a more systemic impact from social innovation, there is a need to reconfigure the way public services are organised and how government can make a shift in the provision of its public services in partnership with a large array of social innovators. Supporting individual social innovation is beneficial and some of them can grow but it is likely insufficient in order to have a substantial impact or systemic shift. That is why the government should help to create the conditions for this systemic shift and ensure that there is a direction for social innovation and an enabling environment supporting their creation and development.

  • Levels of social capital have been decreasing since 2017, which should be closely monitored by policy makers. The pandemic has likely worsened levels of many of the social capital areas and affected the most vulnerable communities and territories. There is a need to further understand the impacts, with a specific focus on understanding the reasons for this trend.

  • Scotland does not have a legal or single commonly accepted definition of social innovation; however, the concept is not unknown. A commonly agreed definition of social innovation is used by public authorities and, although not indispensable, it could facilitate policy settings. Even without a formal definition, policy documents refer to elements around social innovation and legislation covers many of the elements that support community-led economic solutions to social challenges.

  • Effective rural policies involve the engagement of a broad array of actors and multilevel governance mechanisms. A pooling of resources and capabilities across entities creates the ability to collectively accomplish what no individual actor can achieve independently. This requires the collaboration and engagement of government at multiple levels and the involvement of the private sector and third sector. Building capacity underpins the implementation of rural policy. Long-term capacity building makes rural communities more engaged in processes of development and more resilient to shocks.

  • Rural areas rely heavily on social economy and civil society with the aim to address the market failure and asymmetries of development. By tapping into the social economy potential, national governments and regions could reinforce regional development while also supporting the expansion of the social economy.

  • It is important that social innovation is not seen as an abdication of responsibility for public service delivery and a replacement for the provision of services of general interest by the state. This is particularly the case in some remote rural Scottish areas where socially innovative solutions have emerged from necessity as budget cuts, combined with increased pressure from the ageing Scottish demographic, have reduced service availability.

  • There is a risk that further focus on diversification of the revenue streams of some social innovation actors could result in a failure to respond to the demands of the most vulnerable groups who might be punished because of their lack of access to funds. Policy makers should understand that not all actors can have revenue streams and that grants are still important in ensuring that everyone has access to support, especially in remote rural areas where opportunities for support are limited.

  • While there is a large number of examples of social innovation in Scotland, many of these innovations are replications of already existing examples in a local context. While there are likely to be some social innovations that are distinctive to Scotland, many are likely to be replicated in other locations. This demonstrates the need to share successful examples widely as they can inspire and inform others on elements which can further improve understanding of social innovation and their application locally. This might also argue for the need to give a dedicated mandate to one of the institutions in Scotland to help facilitate social innovation awareness and information sharing.


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[15] CEIS (2019), Social Enterprise in Scotland Census, Community Enterprise in Scotland, https://socialenterprisecensus.org.uk/ (accessed on 15 March 2023).

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← 1. New Lanark is a village where Robert Owen integrated social and welfare programmes around his industrial site of cotton mills, creating decent living conditions for the workers and schooling facilities for their children.

← 2. The Social Capital Index monitors aggregate changes in the resource of social networks, community cohesion, social participation, trust and empowerment in levels of social capital since 2013. It is based on the Scottish Household Survey.

← 3. The Gini coefficient is a measure of inequality where 0% expresses perfect equality (every household has the same wealth) and 100% expresses maximal inequality (one household has all the wealth and all others have none).

← 4. Total Early-Stage Entrepreneurial Activity (TEA) calculated as the sum of the nascent entrepreneurship rate and the new business owner-manager rate – without double counting.

← 5. Scotland’s particularity to land use has historical roots. In rural areas, the Highland clearances, combined with the lack of land redistribution in favour of smallholders, had resulted in an unequal class system of large landlords and small farmers that made it difficult to engage farmers’ common interests. The situation has been changing recently.

← 6. The SCIO is a corporate body which is a legal entity and is able to enter into contracts, employ staff, incur debts, own property, sue and be sued.

← 7. A community interest company is a special type of limited company that aims to benefit the community rather than private shareholders. It includes a “community interest statement” and creates an “asset lock” or a legal promise stating that the company’s assets will only be used for its social objectives and setting limits paid to shareholders.

← 8. The acronym LEADER derives from the French phrase "“Liaison entre actions de développement de l'économie rurale”, which means “Links between activities for the development of the rural economy''economy”.

← 9. Participatory budgeting is a democratic process in which citizens decide directly how to spend part of a public budget. Typically, it is characterised by the dispersal of relatively small amounts of public money within a community (small grants) or, increasingly, by deciding where larger sums of public money are invested in pure public services and infrastructure.

← 10. Calculated based on the six-level classification of the Scotland Social Enterprise Census Dataset 2019, which was regrouped into three-tiered regional classification: urban (large urban areas and other urban areas), small towns (accessible small towns and remote small towns) and rural (accessible rural and remote rural).

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