Alternative economy: the rise of social innovation in Berlin.
The German capital is fast gaining a reputation as a creative hub for sustainable and social businesses, making the most of cheap working spaces.
Survey the ubiquitous litter of cigarette butts and wall-to-wall graffiti and Berlin reeks of urban decay. With the exception of its exemplary Bauhaus architecture, the city’s atmosphere is grey and drab, often reinforced by the curtness of its residents.
Enter one of the many co-working spaces that Berlin boasts, however, and you’re hit with a breath of fresh air. Behind the facade of disparate and dilapidated apartments are areas flooded with light and lined with Post-it notes. Here is something Berlin offers in cheap abundance: open space.
One of these co-working spaces, the Social Impact Lab, is designed to facilitate collaboration and incubate ideas. Many social businesses and enterprises earned their spurs here and through its scholarship programme. The draw is obvious: it is a community, or a dreamer madhouse where you can “work with other crazy people who actually believe you can make money changing the world”, says George Tarne, CEO of Soulbottles, a company producing stylish and carbon-neutral water bottles.
Collaboration spaces such as this are why Berlin is gaining a reputation as a hub for creative sustainable and social businesses. Twenty per cent of the city’s GDP flows through the creative and culture industry, while more than 4% is generated by research and higher education. Berlin boasts more than 70 publicly funded foundations along with 40 technology incubators, bringing the brightest and most creative together.
The German Federal Enterprise for International Cooperation recently launched its Inclusive Business Action Network in Berlin as well. In addition, a recent initiative called the Entrepreneur’s Pledge has prominent entrepreneurs from across Germany pledging to found social businesses that will reinvest half their profits into social or environmental projects.
Despite this growing space for collaboration in Berlin, there are questions about whether such initiatives can be scaled up to have a greater impact. Although Berlin’s reputation is burgeoning as one of the most exciting startup hubs, a recent study showed that only €926.1m flowed into its internet startup scene during 2011-12. That is scraps compared with Silicon Valley.
The booming ecosystem and support system for the tech startup scene in Berlin has not begun to bubble over to social businesses until recently, often leaving the network fragmented. The Changer, a social impact career platform launched in April 2014, believes it has begun to change this.
“Our goal was to connect these social businesses,” says co-founder Nadia Boegli. “By presenting examples of successful, innovative business that also solve social problems. Innovation happens most naturally when people get together to build on ideas. By creating a digital space that makes social engagement more accessible to a wider audience, we hope to foster social innovation and catalyse social change.”
Crowdfunding is another compelling way of bridging this network and funding divide, which gives social entrepreneurs more control over their business. Berlin’s Startnext lab, the largest crowdfunding platform in Germany, hosts and coaches entrepreneurs in their office space. Local collaboration removes the middleman between producers and consumers. Startnext lab’s crowdfunding campaign for Original Unverpackt collected more than €100,000 to fund a store without packaging. Impressively, the platform boasts a 63% increase in funding since 2013.
Scaling up social businesses, however, has the complication of bringing them into direct competition with larger corporations which draw more funding. Social businesses clearly want to grab market share but often must rely on the strength of their idea, rather than funding. Companies such as Ruby Cup, a social business that donates menstruation cups to girls in Africa, face this challenge. Their product cuts down on wasteful tampons and maxi pads and is therefore not as fast moving as their competitors. Read: it’s not as profitable.
Most of the social entrepreneurs I spoke to did not expect their businesses ever to develop into behemoth corporations. But that isn’t the point: they believe there is an optimal size for a business that should serve the recurring needs of the world and shift consumption norms by connecting consumer habits with values of fairness and sustainability.
As these initiatives thrive the change, and hopefully some of the money, will accompany this shift. And many are thriving. Soulbottles struggles to meet demand; Ruby Cup is widely available in a local Bio grocery chains around Berlin; and Coffee Circle – a company that produces sustainably grown coffee and donates a portion of the proceeds into development projects in Ethiopia – recently received a large investment from investors and plans to move into retail.
In the absence of large alternatives to conventional consumption models, supporting businesses that connect daily needs with a social good is a good thing. It’s not a revolution: but it is a process of transforming habits into values.
The above article by Thomas McGath first published on theguardian.com in March, 2015.