BRIDGE - Building the Right Investments for Delivering a Growing Economy

The city of Rotterdam sought to address the challenge of skills gaps in a changing economy and labour market, with a focus on supporting disadvantaged youth to gain employment on completion of education. A key challenge was to successfully engage diverse target groups (young people, teachers, parents and employers) in a collaborative process, while also developing ways to fund related support activities into the future.

Innovative Procurement:

By law in the Netherlands, all service providers procured by the municipality with a contract value of €50,000 or more, have a contractual obligation of social return, amounting to (on average) 5% of the total contract value.[1] The social return obligation focuses on employing people in receipt of social welfare. Fines for non-compliance with this social return obligation are, amongst other, used to support disadvantaged youth to enter employment.

Social Credit Scheme:

The concept for the Rikx (Rotterdam Impact Keys) ‘social coin’ (as it is locally known) was conceived and developed as part of the BRIDGE project. Inspired by the system of carbon trading or the purchasing of carbon credits, it aims to identify a way to fund activities that support people to gain employment upon leaving education. Specifically, the scheme enables businesses with or without social return obligations to "purchase" social impact, i.e. to fund social entrepreneurs and to enable them to meet social return obligations simultaneously.

[1] Social return explained | PIANOo - Dutch Public Procurement Expertise Centre

Innovative procurement:

Money arising out the innovative procurement mechanism provided some co-financing for BRIDGE activities. How? Well, for some contractors it is not always possible to comply with the social return obligation and they either do not do it or they can choose alternative methods to comply with their social obligation. If the obligation or part thereof is not fulfilled, the contractor is fined 125% of the outstanding obligation.

In Rotterdam a special purpose vehicle (SPV), with a legal lifespan of three years, was established prior BRIDGE to manage this process. A SPV is a separate legal entity created for a specific purpose e.g. to manage a project or an investment. Since it operates as a separate entity it allows the municipality to isolate financial risks and to impose penalties if private partners fail to deliver agreed services.

This facilitated the establishment of a corresponding social return on investment (SROI) fund, which consisted of the fines collected from contractors who did not comply with their social obligation. The SPV was dismantled after three years (as per its legal obligations) and the remaining funds were used to co-finance BRIDGE project activities, supporting youth employment.  

Social Credit Scheme:

The above-mentioned SROI fund arising out the contractual obligation of social return was an important starting point on which the Rikx ‘social coin’ was conceived and developed.

The BRIDGE team were tasked with finding alternative ways to sustain the funding of project activities into the future. They extensively explored various options including examining the business case for a Social Impact Bond (SIB), which was later dismissed.

The idea for Rikx was born in the office kitchen of BRIDGE partner REBEL, when they considered adapting the better-known carbon trading schemes concept to fund activities with social impact. Put simply, if an organisation or social enterprise makes impact e.g. by developing the capacity of young people to enter employment and if a price can be placed on that impact, then it can be sold on the marketplace. In the first round of projects, the technical team valued one Rikx at €43. Now it is valued at €28. According to economic theory, the more projects or activities in the portfolio, the bigger the database of impact in relation to costs. The founders believe the value of Rikx will settle eventually after a period of fluctuation in this early stage. 

Figure 1. Visual representation of the way the IFS works

The Rikx model considers the needs of multiple stakeholders associated with supporting increased employment across the population, with young people (18-27 years-old) being a large part of the target group, namely:

• the needs and skills gaps of the young people
• the end value to businesses (most of whom have a social return obligation because they are contractors of the municipality) – i.e. having access to a skilled workforce
• the municipality’s need to reduce the number of people receiving social welfare support
• social entrepreneurs who are skilled at supporting disadvantaged youth but need funding.

Rikx brings each of these stakeholders together to create results which benefit all of them. The concept was refined during the BRIDGE project, but it was not until after the project ended that it was extensively piloted.

Innovative procurement:

The social return obligation is included in all municipal service contracts of €50,000 and over. Contractors need to submit proof that the social return obligation has been met within four years of the end of the contract. The social return team within the municipality are responsible for monitoring the implementation of these obligations. This is supported by an online portal called WIZZR, where companies can upload proof of their compliance.

Social Credit Scheme:

Piloting of the Rikx concept began after the (UIA) project ended[1]. The municipality is now in the fourth round of piloting with each round lasting approximately six months. During each round of piloting the municipality issued a call for project proposals to support disadvantaged youth to gain employment (today this process is managed through a foundation, carefully coordinated with the city). When the proposals are submitted, they are evaluated by a multidisciplinary team of five who score the project from a quantitative and qualitative perspective, using the Delphi method, and anticipate the level of impact which they express in Rikx. The selected projects, along with the project details (including their Rikx value and estimated cost) are placed on a website and are opened for purchase. Those projects with the highest impact value and lowest costs, tend to sell most quickly. Buyers are generally, but not always, companies with a social return obligation. Certificates of purchase are issued to buyers, which they can use as proof of compliance with their social return obligation.

Once enough Rikx are purchased for the project owner (a social entrepreneur) to break even (operate without a profit), the project implementation begins. If the entire anticipated social impact is purchased (in Rikx), the money goes to the project owner who is entitled to keep 25% profit only. They are obliged to reinvest 75% of the profit into a new project.

At the end of the pilot phase, investments in the proposals which have not reached the required ‘break even’ threshold are redistributed to fund the remaining proposals with the highest evaluation scores.

During the project lifetime a real-time monitoring system allows the project owner to upload data in relation to impact. To monitor how a project impacts the beneficiaries on an individual level, for example, they use a self-sufficiency matrix[2] assessing how an individual is feeling and progressing. Once a project is complete, it is evaluated by the evaluation team (a team of 5 multi-disciplinary evaluators, employed by the foundation), to determine if the project has reached its targets. If project targets (anticipated social impact to the estimated Rikx value) are not reached, final payment to the project owner is deducted accordingly.

[1] This is explained by the fact that the project initially set out to develop Social Inclusions Bonds instead but realised that won’t be possible and began exploring new options, which took time.

[2] Self-Sufficiency Matrix

Innovative procurement:

The fund consisting of fines arising from the non-compliance of the social obligations connected with public contracts existed before BRIDGE, and its development was relatively straightforward, using existing available measures and instruments.  

Social Credit Scheme:

The Rikx concept was more complex, being a completely new and innovative concept from design to implementation, requiring significant time and effort.

The BRIDGE framework provided time and space for the development of the concept and its technical aspects. Its implementation is being continually refined since then, through piloting.

Innovative procurement:

The innovative procurement mechanism targeted residents far from the labour market across Rotterdam. The money arising from the social return on investment fund, was used to co-finance BRIDGE which targeted supports for people far from the labour market in the district of Rotterdam South.  

Social Credit Scheme:

In the piloting phase the scope and reach of the IFS covers those who need to gain employment across the whole of Rotterdam. Beyond piloting the intention is to scale and transfer the IFS to municipalities across Europe with a demand for social impact.

Innovative Procurement:

 To enforce and manage the social return clauses within the tendering process, the social return department within the municipality was established, currently with 17 staff. Human resourcing of this department is the main associated cost.

Social Credit Scheme:

The Rikx concept was developed by project partner REBEL (consultants in strategy and finance), along with the project team members from Rotterdam City as part of the BRIDGE project. The development was supported with €29,000 from the BRIDGE project. The Voor Goed (For Good) Agency, which drives and supports social enterprise in Rotterdam, contributed €10,000.

Piloting began in 2018, and the municipality has spent approximately €200,000 of its own funds on this. These are direct costs e.g. consultancy and evaluator fees, platform development, certification and reporting  and do not include the costs of time spent by municipality staff on the piloting phase.

In 2022 the team received $1million from Bloomberg Philanthropies[1], which has supported piloting and system development to enable the running of the scheme. They are now (Q4 2024) in the final year of piloting and have spent $740,000 of that budget so far.

The budget breakdown for the social credit scheme is summarised in the table below:

Operating & maintenance costs

Innovative procurement:

A team of 17 people within the municipality oversee the compliance and enforcement of the social return obligation. The team includes business designers who help write the clause in the procurement documentation, account managers who keep in touch with new and existing companies with a social return obligation and then there are some advisors that work on policy.

There are no additional operating or maintenance costs. 

Social Credit Scheme:

The Rikx system is currently operating within the framework of a not-for-profit foundation and charges fees to generate independent revenue to support its operation. A subscription model is also available for organisations that want to integrate Rikx into their own municipality.

The foundation’s operating costs include costs associated with guiding projects, entrepreneurs, and investors from the intake process to execution. In more detail, this includes recruiting projects for each round, informing entrepreneurs, training experts, communicating about the projects with impact makers, investors, municipal Social Return (SR) and Corporate Social Responsibility (CSR) account managers, administrative costs (certificates, invoices, annual reports, etc.), platform maintenance and funding further development.

Fees charged to cover these costs include service fees for impact investors and are calculated as a percentage of the entrepreneur's investment in a Rikx project. The standard percentage is 10%, although it may vary. For example, if a business purchases €1,000 worth of Rikx, €100 of that goes to the Rikx Foundation as a service fee.

They also charge success fees for impact makers. When a project reaches its starting capital—thanks to sufficient Rikx purchases—the starting capital is paid to the project, and the success fee is allocated to the Rikx Foundation. This fee is also typically 10%. So, if a project requires €20,000 in starting capital in 2024 (which corresponds to the impact value in Rikx units), the success fee is included. This fee is only paid when the starting capital is fully reached through the sale of Rikx, not when the full added value in Rikx is sold and the project has successfully achieved its objectives (see FAQ on the Rikx website for more information on starting capital and added value).

Subscription fees for municipalities (€35,000 year 1 and €25,000 annually thereafter) cover the technical aspects of creating and maintaining the platform for the municipality (IT services). It also includes the costs of training civil servants/account managers to work with the platform. Additionally, the expert team, which is composed of experts familiar with the characteristics of the municipality or region, are trained to operate according to the Rikx system.

A 21% VAT is applied to these fees, and this is itemised separately on invoices.

[1] Rotterdam, Netherlands | Bloomberg Cities

Innovative procurement:

National legislation facilitated the insertion of social return clauses in procurement. The city of Rotterdam managed the process of integrating the social clause in procurement contracts and in overseeing compliance. No other partners were required.

Social Credit Scheme:

Rotterdam City and Rebel Group Executives BV designed and developed the concept within the frame of BRIDGE. Rotterdam City, City Development Department, managed the piloting and later received support from Bloomberg Philanthropies.

• Availability of well-trained and capable staff within the municipality
• Availability of technical expertise
• Strong partnerships and collaboration
• Colleagues who are willing and able to experiment and cooperate on developing (innovative) financial schemes (not risk averse and afraid of complexity or the unknown)
• Availability of data and analytics for monitoring impact

Social Credit Scheme-specific factors:

• Being able to experiment in the framework of the UIA project which provided a safer space for experimentation and risk taking was a key success factor in the development of Rikx.
• The fact that his project was viewed as relatively modest, externally funded, and thus not perceived as a threat was identified as a key success factor behind the favourable and effective collaborations that ultimately conceived and developed this social credit scheme.
• The receipt of $1 million from Bloomberg philanthropies has been critical in refining and scaling the model and preparing it for replication.

Innovative Procurement:

• National social return legislation was a key contextual factor in the development of this innovative procurement scheme. Legislation requires that when issuing purchase orders, public procurers can encourage or require contractors to employ vulnerable groups when implementing the contract.

Social Credit Scheme:

• Top-down political support (by city council, for example) was a key factor in the success of the IFS.

Innovative Procurement:

• The complex nature of social return obligations means implementation can be challenging.
• Checks and balances need to be put in place to ensure the enforcement of the social return obligation.
• The governance and management of the fines received requires time and consideration. The SPV had a lifespan of only three years. Now the council must decide on the future governance of this money.
•  The initial idea in BRIDGE was to further develop the social return obligation into social impact bonds but the project team discovered that these were not feasible to realise in the project lifetime. The exploration of the business case for BRIDGE showed that it would not be possible to identify a single unit cost per beneficiary outcome. Without this, the potential for a SIB was a non-starter.
• Despite this however, this BRIDGE activity of work has influenced the city’s approach to SROI and has led to the design and piloting of the innovative Rikx social coin concept.

Social Credit Scheme:

• The complex nature of social return obligations means implementation can be challenging and regulatory hurdles (e.g. measurement and accountability, administrative burden, legal compliance etc.)  need to be overcome.
• Developing Rikx involved a significant element of technical complexity and establishing a working financial model for Rikx was time consuming.
• Encouraging companies to invest in Rikx was difficult. It was difficult for everyone to initially grasp the concept of an intangible currency.
• Not all partners in the steering group were convinced of the potential of Rikx, time and effort were and is required to encourage and convince the stakeholders.

Innovative procurement:

The BRIDGE project, partly financed by the SROI fund and enabled through innovative procurement, managed to contribute to the transformation of the deprived focus area of Rotterdam South by closing the mismatch between the education system and the labour market in the area most notably through:  

• the signature of the Learning Agreement between 13 partners including the City Authority, Lead Industry bodies and vocational schools, acknowledging the importance of investment in the effective functioning of the city’s labour market
• the development of Career Start Guarantees that saw 1,135 students being vocationally trained
• 3,000 1-to-1 mentoring of secondary school pupils
• 347 additional companies willing to issue Career Start Guarantees
• 64% decrease in studies of vocational training outside technology, care and logistics, which have relatively less favourable job prospects
• 18.6% decrease in students who shift between vocational training courses
• 16.3% decrease in number of dropouts during vocational training
• 29,389 pupils and parents reached by skills development programme.

Social Credit Scheme:

The result of the 4 rounds implemented to date are presented below:

• Round 1 resulted in 18 impact investors (buyers of Rikx), 5 of 7 projects started (those who received enough funding to do so), 60 people supported towards employment (to a diploma, to work, additional education, improving skills).
• Round 2 resulted in 26 impact investors, 7 of 11 projects started, 43 people supported towards employment (additional 139 still in progress).
• Round 3 resulted in 47 impact investors, 7 of 19 projects started, 123 people receiving support towards employment. The projects from this round are still active.
• Round 4 is still underway. Currently 1 out of 10 projects have started, there have been 6 impact investors, 25 people will get to work in healthcare.

Innovative procurement[1]:

Assessing the impact of such a complex project requires the ability to attribute labour market outcomes to career decisions influenced by school-based interventions. However, data and privacy constraints prevented the project team from tracking individual experiences. While participation data for schools is available, establishing a causal link between this data and shifts in career choices remains unattainable.

Social Credit Scheme:

The Rikx scheme enables the financing of social enterprises working with vulnerable youth, helping them to enter the labour market. While the scheme is being piloted after the end of BRIDGE, it is aligned with the project's goal of reducing youth unemployment in Rotterdam.

[1] BRIDGE Project Closure & Sustainability Fiche. Available from UIA Secretariat.

Innovative procurement:

The SROI fund enabled collaboration between multiple city stakeholders on a shared challenge. It provided an opportunity for exploration and experimentation within the frame of BRIDGE, which ultimately led to a new way of funding social impact through Rikx.

The BRIDGE framework enabled a feedback loop between the project team which is not always present in policy making. It has enabled greater integration and collaboration between municipal departments on shared challenges. In addition, it initiated the involvement of cross-sectoral stakeholders, including the city’s most important learning providers and sectoral employment bodies as active partners collaboration enabling continuous collaboration and problem-solving in tackling common challenges.

Social Credit Scheme:

The process of developing and implementing the scheme has itself enabled innovation in several ways including:

• Innovation in the way social enterprises are funded
• Innovation in the measurement of impact (valuing intangible anticipated impact)
• Innovation in the process of co-developing (with social entrepreneurs) needs-based supports for those far from the labour market, enabling a thorough evaluation and feedback loop supporting continuous improvement
• The system and platform are incrementally innovating and improving over time. The hope is that the platform will soon be able to assign an automated value of social impact.
• Innovation in the evolution of the concept to become a self-sustaining model, which can be scaled and replicated across the globe

Automatic generated Corporate Sustainability Report Directive aligned report based on the funded projects, specifically for individual investors.

Innovative procurement:

The social obligation clause remains a part of public procurement contracts in Rotterdam, managed by a team in the municipality. Funds arising from related fines can be used for projects of public good, however, it is preferred that the company with an obligation, hires personnel from the vulnerable target group. If this doesn't work or they cannot hire more staff and there is a remaining obligation, then they can also invest in Rikx projects. In most cases this happens when those projects are already up and running (breaking even).

The funds continue to support BRIDGE-related activities, along with other funding streams which support career guidance and Career Start Guarantees for young people in Rotterdam south.

Social Credit Scheme:

The Rikx pilot continues (having been extended due to the pandemic) and the concept has attracted widespread interest. The scheme has engaged businesses that have previously struggled to meet their SROI obligation to the city. In this respect, it proves a win-win mechanism.

Thanks to an investment by Bloomberg Philanthropies, the Rikx team are working towards an integrated financial model which can be self-sustaining (and scalable across the globe) into the future. The team has established a foundation which operates on a not-for-profit basis, supporting the scaling and replication of the scheme outside of Rotterdam. The model will include contributions from municipalities wishing to adopt and integrate the Rikx system locally. A fee structure ensures the platform's sustainability (see above Operating & maintenance costs), and expansion to other cities is underway.

Innovative procurement:

The model is relatively straightforward and is scalable, particularly when it is driven by and has the backing of legislation. The municipality has already secured funding for and has scaled the project components beyond the BRIDGE target area of Rotterdam South to incorporate the whole of the city.

Social Credit Scheme

Testament to its scalability, Rikx won a $1million prize from Bloomberg Philanthropies as part of the Global Mayor’s Challenge seeking scalable innovations to help vulnerable inhabitants. The team are using the prize money to refine the Rikx model so that it is scalable, working for cities of varying sizes and so that it can be integrated seamlessly (replicated) in other cities.

Cities can purchase the system supporting the social credit scheme currently for a cost of €35,000 in the first year and an annual subscription of €25,000 thereafter. The additional first year costs enable training of the civil servants on how to work with Rikx.

Innovative procurement:

The model is replicable particularly in other Dutch cities where companies contracted by the municipality are legally obliged to spend a percentage of the contract value on activities supporting social impact.

Dutch cities have examined the BRIDGE model with interest, as have overseas cities including those who participated in BRIDGE’s 2019 international workshop.

Social Credit Scheme:

 The project team are working with the city of Warsaw, to support replication of the model there. Promising discussions are underway with cities within the Netherlands and across Europe interested in replicating the model. Smaller cities may encounter challenges to replication if they lack entrepreneurs willing or needing to prove social impact. Should they wish to purchase the ready-to-go-system, the €25,000 annual subscription may be more challenging for them as well.

Innovative procurement:

The funds generated from social return fines were partly used to co-finance the BRIDGE project which received an EU grant through the UIA initiative. These funds are fully complementary and blendable with other funding types and sources.

Social Credit Scheme:

Funds sourced through the current model of Rikx are entirely complementary and blendable with other funds and financing sources, however, this has not been demonstrated during the piloting phase so far.  

Innovative procurement:

• The presence of national legislation obliging the social return obligation was a key enabler – to implement this IFS, urban authorities would need to introduce it by law.
• While the model is relatively simple, a team of committed staff to monitor and enforce the social obligation is a key prerequisite for its success.

Social Credit Scheme:

• If an urban authority sets out to develop an innovative financing models like Rikx, it is important to secure long-term political and departmental support.
• Clear lines of communication and terms of reference should also be established from the outset, to ensure the involvement and continued engagement of key operative stakeholders in the process, promoting a sense of ownership and avoiding the ‘not invented here’ phenomenon (when individuals or groups within an organisation resist accepting or embracing ideas or solutions deemed to have come from external sources).
• Besides big ambitions, the execution is also dependent on being able to grasp the impact and value of social interventions. This can be complex from concept to implementation.
• Ensuring there is sufficient room for experimentation and flexibility is essential in developing such models.
• During the experimentation phase, it should be kept in mind that not everything would work out as expected and this can provide valuable knowledge and experience that helps to evolve out impact policies and programmes in the future. The learning process itself can help a municipality to think outside the box when it comes to exploring financing possibilities and tackling societal challenges.

• Rotterdam: total population 2023 | Statista
• Rikx Platform
• BRIDGE - Building the Right Investments for Delivering a Growing Economy | Portico
• Social return explained | PIANOo - Dutch Public Procurement Expertise Centre
• Implementing the BRIDGE project in Rotterdam: Get an update in the second UIA journal on what is happening on the ground | PorticoBRIDGE Journal No. 4 - the future legacy of the project | Portico
• BRIDGE Project Journal No. 5. BRIDGE Expert Journal: lessons left behind for other cities | Portico
• BRIDGE Project Closure & Sustainability Fiche, Internal document, made available by UIA Permanent Secretariat
• BRIDGE Final Qualitative Report, Internal document, made available by UIA Permanent Secretariat
• Interview with Cleo Pouw, BRIDGE Project Manager and Michiel van Keulen, Programme Manager for Impact Economy at the municipality of Rotterdam