SUPPORTING & SCALING FOR-BENEFITS IS NEEDED NOW MORE THAN EVER.
“A surge of “for-benefit” companies at the intersection of the traditional private, public and non-profit sectors will be critical in delivering on the SDGs by 2030.”
- World Economic Forum
“For-benefit” or “purpose-driven” are generic terms that refer to a wide range of emerging enterprises with a primary commitment to social and environmental purpose, while earning revenues by selling products and services. These hybrid business models are creating a new fourth sector of the economy. Now more than ever, we need to build a supportive ecosystem for for-benefits to unleash their power to address the world’s most pressing challenges.
‘For-benefits’’ comprise the emerging group of purpose-driven enterprises that operate at the intersection of the traditional three sectors (public/government, private/for-profits, third/nonprofits).
These new and growing class of business models exist to benefit society and/or the planet, leveraging the market as a means to that end.
For-benefit organizations have helped catalyze major business and policy innovations and given rise to impact investing, ESG reporting, venture philanthropy, sustainable business, the circular economy, and other transformative fields and practices. For-benefit organizations are uniquely capable of addressing some of the world’s most pressing challenges, like the ones we face now, by melding the purpose-driven focus of the public and nonprofit sectors with the scale and efficiency of the private sector.
Pre-COVID, calls to upgrade the system were already growing, and some forward-thinking countries, states, and international institutions were beginning to take on fourth sector development strategies to recognize and support the growth of this diverse class of 'purpose-driven' or 'for-benefit' entities in their economies, to address growing social and environmental challenges, while building more resilient, equitable, and sustainable economies.
For-benefits go by many names and frames
At the heart of the fourth sector are an expanding variety of hybrid organizational models that leverage market-based approaches (like a for-profit) to deliver a social or environmental benefit (like nonprofits and government). Sometimes referred to as purpose-driven or for-benefit enterprises, these include cooperatives, social enterprises, public benefit corporations, community development banks, and community interest companies, among many others.
While fragmented and still forming, this emergent sector of activity points a way forward to address the flaws and short-comings of the current system, now deeply exposed by COVID-19. Two main attributes that organizations in this burgeoning sector share are a.) a primary directive to serve a social and/or environmental purpose or purposes (such as food security, health, equality, economic opportunity, water & sanitation, climate, and so on), and b.) they use the market (private capital, agility, innovation, entrepreneurship) to that end
Governments should create the conditions that give rise to more and bigger for-benefits to help respond to the COVID-19 crises.
Taking on fourth sector development efforts, could allow governments to leverage decades of innovation, and widespread demand from citizens, consumers, CEOs, employees, investors, entrepreneurs, and youth alike, to spur sustainable and equitable economic growth, built to meet the challenges that lie ahead.
By recognizing the mosaic of new organizational types as a distinct (and diverse) class of entities (much like nonprofits and for-profits are separately identified), governments can then enable and scale them through the systematic removal of impediments and the provision of support. This can include targeted policy, financing, procurement, contracting, taxation, accountability measures, capacity building, and more.
Governments and regulators should carefully craft incentives and policies that encourage other actors in the economy — the private sector, civil society, investors, academia, philanthropy, and citizens — to engage in the co-creation and expansion of the sector, and its supportive ecosystem.
This may seem a bold agenda, but it has been decades in the making. A critical mass of fourth sector businesses and infrastructure already exists and could be readily enlisted and scaled exponentially to rise to the many challenges of COVID-19 response and recovery. Unleashing this potential requires strategic interventions by policymakers to hasten the fourth sector’s growth — transitioning from what has been an organic, self-organizing, and emergent process to an intentional one.
Doing so will both rebuild the economy and reinvent it, with an updated structure that will facilitate sustainable growth, improve resilience, and strengthen resistance to future shocks.
Legacy "3-sector thinking" and the lack of an ecosystem.
The growth of the fourth sector is constrained by legacy "three-sector thinking." This perpetuates the lack of a coherent and cohesive supportive ecosystem for the sector — including policies and regulations, financial markets, measurement and reporting standards, among other enabling conditions...
For decades, demands for a systemic shift have been growing
Calls for system change were growing louder before COVID-19 breakout. Today, they have become a survival imperative. Recognizing, supporting and leveraging decades of social innovation and widespread demand to spur sustainable and equitable economic growth must become a priority for national strategies to achieve the SDGs…
A fourth sector in action.
Despite the lack of a cohesive supportive ecosystem, for-benefit enterprises from all over the world are in the frontline accelerating innovation to mitigate the impacts of COVID-19 and showing greater resilience than other business models. Similarly, many conventional private sector firms are prioritizing public good over their bottom lines to help their communities and countries to overcome crisis…