The fourth sector: Can business unusual deliver on the SDGs?

August 1, 2018

The Sustainable Development Goals (SDGs) are impossible to achieve unless we figure out how to resolve an inherent contradiction between two realities.

The main reason why the SDGs were created and sustainable/inclusive development have become such important global priorities is that business-as-usual doesn’t work anymore and is taking us to the brink of systems collapse.

At the same time, the missing trillions of dollars required to achieve the SDGs are expected to come from the private sector.

For all the great progress we have made on the corporate responsibility and sustainability agendas, the private sector still mainly prioritizes, and is rewarded for, short-term financial results—not sustainable long-term value creation. And the way we measure success in national growth and development agendas is still in terms of how much we manage to scale this outmoded model of business.

Fortunately, this is starting to change.

For decades, we have seen increasing demand among citizens, consumers, investors, workers and other actors in the economy for a new way of doing business that brings purpose and values to the core. As a result, we have seen many traditional for-profit businesses respond by broadening their purpose beyond profit maximization to include advancing social and environmental priorities. We have also seen many nonprofits and governments shifting their strategy and practices by adopting market-based approaches to scale their impact. At the same time, at the intersection where the private sector, civil society and government come together, we have seen the rapid emergence of a distinct fourth sector of organizations—consisting of for-benefit enterprises whose main purpose is to solve social and environmental problems, but generate their income mainly through commercial activities.

We have also started to see the beginnings of a new supportive ecosystem developing around this fourth sector, with changes in policy and regulation, new blended approaches to finance, integrated assessment and reporting systems, specialized technical and legal assistance, training offerings and more.

While these are very promising trends, they are not advancing far enough or fast enough.

Scaling the fourth sector exponentially is essential to achieving the SDGs and tackling many of the big challenges we face—from climate change, inequality, energy and education to corruption, forced migration and extremism. Put simply, if we want more inclusive, sustainable economies that do a better job of taking care of people and planet, then we need more inclusive, sustainable business models as the building blocks of those economies—in other words, more for-benefit businesses.

This is why we recently launched the Fourth Sector Group, a global non-profit platform to help grow the fourth sector by the trillions of dollars required to achieve the SDGs by 2030.
In collaboration with the World Economic Forum’s System Initiative on Shaping the Future of Economic Progress, we are bringing together stakeholders from business, government, philanthropy, academia and civil society through the Fourth Sector Development Initiative to work together to pave the way for for-benefit companies to become mainstream around the world.

We are thrilled to have the Ibero-American General Secretariat (SEGIB) and UNDP as partners who are doing remarkable work leading the development of the fourth sector across Latin America and the Caribbean. With its biodiversity superpowers and rich cultural heritage, the region has huge opportunities to boost for-benefit enterprises. There are already thousands of companies that integrate public benefit pursuits with commercial activities, dozens of impact investment firms providing capital to these types of businesses, and 10 governments that have recently adopted or are currently discussing new regulations aimed at identifying and supporting what are known as “social enterprises and companies of collective benefit and interest.” Latin America is determined to be a leading actor in fourth sector development.

If correctly supported, for-benefit businesses could be a game changer in achieving the 2030 Agenda. Consider, for instance, Natura, the largest cosmetics maker in Latin America and one of the biggest companies in Brazil, which also operates in Europe. Natura generates an annual turnover of US$4.4 billion and employs more than 7,000 people. At the same time, it is helping advance virtually every SDG in Brazil—reducing poverty and social inequality through fair salaries and good working conditions; tackling climate change by supporting sustainable use of forest products, particularly from the Amazon; avoiding redundant packaging; prioritizing the use of recycled and recyclable materials and using a fully biodegradable polymer produced from sugar cane; and offsetting all its carbon emissions. And their scope of impact keeps expanding. Natura recently bought The Body Shop and had previously acquired Australia’s Aesop, expanding the notion of for-benefit enterprise beyond the region’s borders.

If we are to truly transcend business-as-usual, we need to invest exponentially more effort into creating the enabling ecosystem for for-benefit enterprises, at the global, regional, national and subnational levels. Efforts like what SEGIB and UNDP are doing are showing the way. We also need to engage the whole of society. There is certainly much opportunity for government, civil society and the private sector to engage, but each of us can also play multiple roles—as consumers, citizens, investors, employees, professionals and in our other capacities, we can look for opportunities every day to support for-benefit businesses. If we come together soon, we can still make the transition to the world we all want by 2030.