This report has reviewed the role of impact start-ups in public procurement processes throughout the Nordic Region. Impact start-ups in the Nordic Region face three overarching challenges: firstly, actors on all sides of the public procurement process face difficulties with the rigidity of procurement rules. Secondly, the literature in all four countries indicates that public actors lack resources, especially experience, knowledge, and capacity to interpret, prepare for, navigate, or develop new procurement schemes. In some cases, the legal regulations around public procurement—whether at the EU level or locally—are unclear. This is most notable in Norway, where a lack of administrative management means that each public agency carries out its own procurement. Finally, the slow bureaucratic processes for updating procurement procedures to contemporary models of practice cause difficulties for all actors involved. All three of these barriers are intertwined. For example, in Norway, the lack of capacity for brainstorming new procurement frameworks is connected to a fear of making mistakes, which ultimately leads actors to continue working within existing procurement agreements. For public actors in Denmark, the lack of willingness to take risks also means that establishing new procurement frameworks through collaboration methods and across administrative silos is a rare occurrence. Finland faces similar obstacles, with some actors pointing out the need for flexibility in public procurement processes while at the same time realising that adjusting public governance structures is a slow process. Sweden also suffers from these barriers but has developed some flexible rules that allow for innovation as well as tools for both public and private actors to gain access to funding, networking, and knowledge around innovative procurement.

To combat these barriers and enable social enterprises to gain public procurement opportunities, policies as well as less formal schemes need to foster networks of personal relationships between the public and private sectors. Many start-ups also benefit profoundly from being part of larger collaborative systems where funding, knowledge building tools, and institutions can pave the way for the projects to achieve their expected impacts. In Denmark and Norway, impact start-ups have been especially affected by their participation in relevant networks where communication between the private enterprise and the public actors can occur prior to the procurement process. These opportunities for dialogue enable both the public client and the private supplier to understand one another’s needs and potential solutions that can feed into tendering applications. Importantly, the success of many impact start-ups in the Nordic Region is due to their timely response to a pressing social issue that is already on the public agenda. Another enabler is the general rising interest in social impact start-ups. Finally, knowledge about procurement legislation needs to be made widely available in order for key actors from both the public sector and from private start-ups to prepare for and engage in public procurement. 

Many institutional support measures are already in place that encourage social impact start-ups from receiving investments and gaining procurement opportunities. In Sweden, public procurement and innovation are linked in governmental strategies which provide a structural basis for programmes and funding. The procurement regulations in Norway also limit competition for smaller start-up projects by removing any regulations from procurements that are less than NOK 100,000. In both Norway and Denmark, online tools exist for enabling innovative procurement as well. In Norway, a government website provides tools for public institutions to navigate innovative procurement easily, while another organisation, Effekt-lab, works to connect public purchasers with insights that can help them make informed decisions regarding which impact start-up can solve which social need most effectively. Similarly, the Danish business authorities have established a process model that enables collaboration among public actors and private suppliers from social enterprises, which can lead to procurement agreements.

Gaining financial support from impact investors can be critical for social entrepreneurs/enterprises, especially at early stages of their work. Thus far in Finland, impact investors mainly support projects initiated by experienced companies rather than start-ups, but interest from the investors’ perspective appears to be on the rise. In Sweden, green impact investments are increasing, while other social impact programmes have less momentum. The continued increase in investments from private actors will likely depend on impact start-ups’ abilities to define their success criteria through quantitative methods, but qualitative methods should not be overlooked as viable metrics for justifying social impact. In Norway, as is the case in other Nordic countries, many investors fail to see the profitability of social impact start-ups. Despite being a resource-intensive activity, as specifically mentioned in the Danish literature, measuring and reporting on the effectiveness of the social impact as well as the profitability are important for impact investors to get on board. 

Both SIBs and public-private partnerships offer opportunities for impact start-ups to share risks, encourage transparency among stakeholders, achieve their social goals, and build momentum for future public procurement. Though they are not yet commonly used in the Nordic Region, SIBs are a form of partnership that can be an attractive way for investors to fund social enterprises with payback determined by project results. SIBs also provide an alternative to public funding, thus easing the burden on the public sector and sharing risk across multiple stakeholders to address a social challenge. However, developing indicators for success becomes paramount in such models. Thus far, Sweden and Finland have shown varying models of SIBs in action.

Public-private partnership models are also explored in Finland, Sweden, Norway, and Denmark. Unlike the public procurement process, public-private partnerships help to lift the financial and structural onus from the public sector for carrying out social services. Unlike in public procurement (in which the public actors act as clients who seek a private service provider), public-private partnerships help to ease the budgeting burden from the public sector by securing loans from private banks. But achievements in this area can lead to greater engagement across public and private entities and more effective results that offer an alternative to public procurement bureaucracy. In this way, partnerships can help shape public procurement rules that enable impact start-ups to have a foot in the door. Thus far, these partnerships have been able to respond to various social welfare needs, especially in the realm of healthcare.

What remains for the Nordic Region now is to exchange knowledge on potential models for how new forms of partnership and procurement schemes can best operate within a Nordic Model of governance whilst working to support private social entrepreneurs in addressing pressing societal concerns.