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Stockholm – why Sweden’s capital is Europe’s new home of impact

We’re used to hearing that Stockholm is a global over-performer when it comes to producing high-value tech startups. Over the last few years, Stockholm investors have also shown increasing willingness to plough money into the 'impact' startup scene, in companies that seek to generate financial returns while also creating a positive social or environmental impact.

Stockholm – why Sweden’s capital is Europe’s new home of impact
Norrsken co-working space in Stockholm. Photo: Anna Hugosson / mediabank.visitstockholm.com

There are two main categories of impact startups, those solving social challenges, such as poverty and famine, and those solving environmental challenges, such as climate warming and decarbonisation.

Investment in these impact startups, the vast majority situated in Stockholm, grew from €1.3bn (14 billion Swedish kronor) in 2020 to €3.6bn (39 billion Swedish kronor) in 2021.

For the first time ever, Sweden surpassed the UK and Germany, becoming the top European ecosystem by venture capital money invested in impact startups.

This huge increase illustrates how impact investing has evolved from a niche investment strategy into something closer to the mainstream. 

Participants in impact investing (also known as ESG investing, with ESG standing for environmental, social, and governance) are increasingly considering these non-financial, social or environmental factors as part of their analysis process to identify material risks and growth opportunities. 

Read Invest Stockholm’s report on the surge of impact investing in the Swedish capital

Why has Stockholm been at the epicentre of this deluge of impact investment? 

In a recent report on Stockholm as an impact hub, Anna König Jerlmyr, the Mayor of Stockholm said, “In Stockholm, we take pride in the fact that sustainability has become an inherent part of our culture. This is evident in how we act as a city, setting ambitious environmental goals and initiatives to encourage the development of more sustainable solutions and technologies. And also in how we live our lives, in balance between work and life, city and nature.”

Anna König Jerlmyr, the Mayor of Stockholm

David Liu, general manager of Norrsken House Stockholm, a non-profit foundation dedicated to helping impact entrepreneurs and startups, agrees that Stockholm has a unique set of characteristics that makes it a magnet for impact startups. 

“I’ve been living in Stockholm for the past 11 years and I’ve also travelled around the world extensively,” he says. “For me, Stockholm is one of the few places in the world that combines a modern lifestyle with a real closeness and awareness of nature. It makes Stockholm residents really aware of the importance of protecting the natural environment. This is obvious in many areas of Stockholm life, with recycling efforts, electric vehicles and bikes, the prevalence of vegetarianism and so on.” 

David, originally from Taiwan, also thinks there are more fundamental reasons for Stockholm’s pre-eminence as an impact startup hub, characteristics that are hardwired into the Swedish capital’s very DNA.

“There are also many other common values in Sweden that we probably take for granted, such as the pursuit of equality, diversity, social justice, and more, which aren’t seen as so important in many other parts of the world.

These are very important, too. And then of course, there are organisations like Norrsken that fund, invest in, and support initiatives committed to positive impact.”

David Liu, general manager of Norrsken House Stockholm

There is certainly truth in the idea that Stockholm and Sweden have the mindset and startup structure that encourages creative thinking – Sweden regularly ranks in the top three on the Global Innovation Index and, in 2021, Stockholm was found to be the most innovative city in Europe.

While many other cities struggled following the outbreak of the COVID-19 pandemic, Stockholm’s ecosystem actually improved in 2020, despite the challenging circumstances.

Stockholm offers many advantages that startups, scale-ups and investors may be hard-pressed to find anywhere else in the world. It’s among the reasons more Stockholm founders are compelled to remain in the city to establish their subsequent ventures compared to founders in other European cities.

Why has this happened? Why has Stockholm in particular been at the vanguard of the search for socially important and sustainable solutions, services and products? 

According to Anna, it’s because people in Stockholm are increasingly driven by purpose. “As a global citizen, you want to accomplish something good and leave things better than when you started. Stockholm is a great place to do just that – to find meaning and co-create a better future.”

A natural consequence of this passion for sustainable, socially positive startups is the upcoming Impact Week event in Stockholm, from September 6–14, which aims to bring together the world’s most impactful and influential startups, talent, investors, business leaders and policymakers, to shine a light on the global problems that need attention, and come together around solutions to address them.

David from Norrsken agrees that the cultural and business environment in Stockholm is especially conducive to nurturing impact startups. But he also believes that larger companies understand that they need to be involved in the impact habitat, and must focus part of their innovation efforts on the small companies in the impact arena.

A fast-growing impact startup hub: learn about the opportunities to find a job or start your own impact business in Stockholm

“A lot of people and a lot of companies in Stockholm already pay attention to the impact they create on society,” says David. “There is a great deal of focus on impact. But innovation takes a lot of time and effort, especially for larger companies. I think that’s why we’re seeing so many great examples of how large enterprises are collaborating with startups, to find new and out-of-the-box solutions to large challenges. We see this happen regularly within the Norrsken ecosystem, where small and fast-moving impact startups can influence big enterprises to help them drive positive impact.”

Stockholm is clearly a world-leading impact hub now. But what of the future? Where will Stockholm be in five or ten years’ time?

David thinks that we won’t even be talking about ‘impact investment’ in ten years, simply because it’ll be a core tenet of every business in Stockholm.

“No matter if you’re making cars, running a restaurant, building houses, designing clothes, or operating power plants, people will be ensuring their business positively impacts the planet and the people around them. That will be our definition of success.” 

Anna has a very clear vision of where she sees Stockholm as an impact hub in the future.

“Our vision for Stockholm is to become a prominent hub for the impact investment and startup community with the purpose to inspire other cities and governments. Through Stockholm’s creativity, spirit of innovation and public support, we aim to bridge the gap between today and a sustainable future. It’s time for Stockholm to become even more of a breeding ground for innovative startups that positively impact the lives of more than one billion people.” 

Want to learn more about Stockholm Impact Week, where the world’s most impactful and influential startups, talent, investors, business leaders and policymakers will be meeting?

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WORKING IN SWEDEN

INTERVIEW: Does Sweden have a distinct management style?

The Local's Paul O'Mahony interviewed Pernilla Petrelius Karlberg, lecturer at Stockholm School of Economics and researcher at the Center for Responsible Leadership about the Swedish style of leadership.

INTERVIEW: Does Sweden have a distinct management style?

Does Sweden have a distinctive management style?

The Swedish style of leadership is often said to be characterised by so-called flat hierarchies, where everyone is able to – and expected to – contribute their ideas and input to tasks, regardless of whether they are in a leadership role or not.

Pernilla Petrelius Karlberg told The Local that there are a number of different aspects which can influence management style, although Sweden does have a distinct style.

“I think that there’s definitely an idea that there is a specific Swedish or Scandinavian management style,” she said. “But I think from a research perspective, it’s much more complex, because we tend to generalise or stereotype.”

“It’s got a lot to do with the company culture and the culture of the country,” Karlberg said, “There’s definitely an idea of Scandinavian leadership, I think we have a common idea of what that is, but then, is it actually practiced everywhere in Scandinavia or in Sweden? That’s another issue.”

“In many of our organisations we talk about Scandinavian leadership where the leadership is very international, it’s a mix of different people from different cultures.”

Sweden is a very individualist society, which is also reflected in Swedish business.

“I think the core of what we talk about when we talk about Swedish leadership is the fact that leaders and managers also call on co-workers to take ownership on the task and individualism comes into business,” Karlberg said.

“It’s even expected, and co-workers take that ownership, and they engage and they take responsibility for the outcome and the result. So it’s the total opposite of micro-management in that sense.”

This culture of ownership and engagement also applies to managers, Karlberg explained.

“To generalise, in a Swedish setting, if there’s a meeting with the boss, the co-workers will expect to be listened to, and to be involved in a conversation and give their opinion on things. And that’s also a way to motivate people, in a Swedish sense.”

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Can lead to cultural clashes

This expectation in Swedish workplaces can lead to clashes if employees from other countries are used to a different system, Karlberg said.

“In another culture, say Finland, for example – I’m just generalising – you go to a meeting with your boss and you expect the boss to motivate you and to tell you what to do. So if you had a Finnish manager in a Swedish context, Swedish co-workers would probably feel neglected or frustrated for not being involved. ‘No-one asked my opinion, I want to share my opinion, my opinion matters'”.

This can also happen in situations where a Swedish manager is managing a group of employees from a different culture or country.

“A Finnish crowd with a Swedish manager might be very frustrated if the manager just asks questions and doesn’t seem to have a direction of their own. There’s just different expectations”.

However, there is also a collective aspect to Swedish workplaces, which foreigners working in the country often pick up on.

“When I work with international crowds, they tend to notice that Swedish co-workers and managers are very collective, they want to have consensus, they have to discuss everything, and it takes forever and it can be very frustrating.”

Swedish co-workers aren’t afraid to speak up though, if they feel that the decision their manager is making is wrong.

“But there are a lot of behaviours where Swedish co-workers will not accept a decision. For example, if they feel that the idea that their manager is bringing is wrong, it will actually be their duty to speak up, not in a confrontational way, but to say ‘Hmm, you know, this idea about doing it this way, it’s probably not a good idea.'”

“And non-Swedish managers might not always appreciate that kind of reaction. And if it continues, and the manager says that this is the way we’re gonna do it, the typical Swedish coworker will insist that this is the best way, and then there is a clash – again, they expect to be listened to and taken into consideration.”

How do you know when a decision has been taken in a Swedish workplace?

This need to feel informed and included in decision-making can in some cases make it difficult to understand at exactly what point a decision has been taken in a Swedish workplace.

“It’s a different process,” Karlberg said. “It often involves a calculated plan for taking the time to introduce the decision, discuss it, and make people feel that they have been informed.”

This aspect of the Swedish workplace culture caused issues during the pandemic, when many employees began to work from home.

“Decisions are taken in a much more informal way, and it can be difficult to pinpoint exactly when something was decided. And we also saw that during the pandemic, that the typical Swedish organisation – which is very non-hierarchical – suffered a lot, because a lot of leadership is practiced in an informal work environment.”

“So when people were taken away from that environment – because suddenly they were working from home – it was sort of, you know, ‘how do we practice leadership now?’, whereas in an organisation with a much clearer hierarchy, it was never an issue where decisions were made or how leadership was practiced, because it was done in a different way.”

“And in the more informal, flatter organisations, we had to find a different way to do that, to translate into the virtual room.”

Despite this, Karlberg does believe that Sweden’s leadership style is effective.

“I would say that it is, yes. We stand out pretty well as a nation when it comes to different types of national measurements of competitiveness. We score quite high on that. Of course, there’s also a drawback, if people don’t want to take that responsibility and ownership, because then it’s not typical that the manager would step up and change the leadership style. So it depends on whether you actually share the same expectation.”

Where does the Swedish leadership style come from?

Sweden’s collaborative leadership style is perhaps a product of Sweden’s history, Karlberg said.

“We have always been a small country, very dependent on export. And that means that we had to adapt to the rest of the world and to other markets, but also having to collaborate – we’re too small to quarrel or fight.”

“This has been a way to bring people together in the same direction – it’s a little bit like how we work with the unions with much more of a collaborative focus instead of being confrontative, because it’s simply not rational for a small country like us.”

There’s also a strong tradition of independence in Sweden, Karlberg explained.

“There’s a genuine tradition of independence in the sense of mutual respect. And of course, a lot happened during the 20th century with the development of equality and the whole idea of individualist thinking. Where we’re individualistic with regard to family, with regard to gender, with regard to our roles in society.”

“I think that plays a part as well, with equality and also that everyone matters in that sense.”

You can hear Paul O’Mahony’s interview with Karlberg in our Sweden in Focus podcast where we discuss all aspects of life in Sweden and shed light on the latest Swedish news. Listen and subscribe.

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