B Corporations and the Fourth Sector

NNC recently had conversations in Paris with representatives of FourthSector.net.  That we need new and better forms of organizations is a conversation that many of us have been part of for a long time, at least since David Korten’s “When Corporations Rule the World“; I myself spent years involving corporations in rethinking true “wealth creation” at UC Berkeley in the 90’s.  The current momentum of the conversation is encouraging.  In the spirit of “The Perfect is the enemy of the Good,” I include this brief post:

The Emerging Fourth Sector

In exploring cross-sector collaborations, it’s clear that, as they say on their website, the boundaries between the public (government), private (business), and social (non-profit/non-governmental) sectors have been blurring.  This has resulted in a renewed effort to create a “fourth sector:”

“The archetypal Fourth Sector model is sometimes referred to as a For-Benefit organization, and the sector itself is also referred to as the For-Benefit Sector. There are a wide variety of other Fourth Sector models and approaches, bearing different names and emphasizing or embodying different aspects of the For-Benefit model.  For-Benefits are a new class of organization. They are driven by a social purpose, they are economically self-sustaining, and they seek to be socially, ethically, and environmentally responsible.

“Like non-profits, For-Benefits can organize in pursuit of a wide range of social missions. Like for-profits, For-Benefits can generate a broad range of beneficial products and services that improve quality of life for consumers, create jobs, and contribute to the economy. For-Benefits seek to maximize benefit to all stakeholders, and 100% of the economic “profits” they generate are invested to advance social purposes. Because of their architecture, For-Benefits can embody some of the best attributes of other organizational forms. They strive to be democratic, inclusive, open, transparent, accountable, effective, efficient, cooperative, and holistic.

“For-Benefits represent a new paradigm in organizational design. At all levels, they aim to link two concepts which are held as a false dichotomy in other models: private interest and public benefit.”

Earlier this summer NextNow attended a party celebrating the creation of a new class of corporation, the B Corporation–“B” for “Beneficial.” Jay Coen Gilbert of Social Venture Network and B-Lab, the non-profit founded to certify and promote B Corporations, spoke briefly to the crowded room, along with Jeff Mendelson of New Leaf Paper, Mike Hannigan of Give Something Back, and Scott Leonard of Indigenous Designs, 3 of the more than 20 founding Bay Area companies. Jay called the Bay Area a “hot bed” of the B Corporation movement, which is about creating and holding to exacting standards for environmental and social performance and accountability, making it harder for companies to do things like greenwash, “misleading consumers simply by putting windmills in their commercials.”

In creating the standards they leverage the good work already done by efforts like the Global Reporting Initiative and groups like the Natural Capital Institute and SVN.  The point, Jay said, is to “change the DNA” of corporations so they become accountable on these issues not just to shareholders, but to all stakeholders, in a way that persists beyond the current management:  “B Lab has created a legal framework that enables purpose-driven companies to maintain their mission as they scale, seek outside capital, or plan succession.”

Like OpenEco (see previous post about this collaboration between NN’s Natural Logic and Sun Microsystems), B-Labs provides a free online assessment tool that allows companies to get a snapshot of the current impact of their operations, as well as tools to improve their performance.  Unlike OpenEco, the assessment tool is not anonymous, and is scored–a certain score is required to be eligible for B Corporation status, and even then the status is only granted for periods of 2 years at a time.

In seven months since the program was created it has grown to over 80 certified U.S. companies representing $650 million in revenues.  However, what became clear to us in Paris is that this is a worldwide emergence.  According to Alissa Mickels of Hastings Law School and Fourth Sector, some of the international entities that currently exist include Society for Social Purpose in Belgium, Sociedad Laboral in Spain, and Social Economy Enterprise in Canada.  The RCI (Research Collaboration Initiative), a report that surveyed 108 countries covering over 96% of global GDP, with geographical representation on all five continents, lists the Unites States #18, behind the Netherlands and Switzerland in terms of countries focusing efforts to promote responsible business practices.  Clearly, we still have a lot of work to do.

Any NextNowers interested in collaborating on this topic can contact Claudia Welss cwelss@nextnow.net.

2 Comments

  1. NextNow Collaboratory

    It would be great to add your experience. Let’s talk.

  2. Claudia: I have been studying hybrid for/non profit orgs for many years and believe the B Corp movement is an emerging piece of the puzzle – we are considering creating a new B corp from our joint venture with InnovationLabs in the collaboration practice moving from an LLC partnership with very loose governance to one where B corp principles would set the tone of the organization.

    We also think the movement to B Corps is a collaborative consulting opportunity for us — what do you think?

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