The Fourth Sector

Over the past two decades, the lines between the public, private, and non-profit sectors have been blurred as many pioneering organizations have started to blend social and environmental goals with business. Even though these hybrid organizations come in a variety of forms (B corporations, cooperatives, social and sustainable enterprises, civic ventures, etc.), they all share the goal of achieving financial success while minimizing negative externalities and delivering strong social and environmental benefits. As a result, these enterprises represent society's best chance of attaining the UN established Sustainable Development Goals (SDGs) by 2030, and solve some of the most pressing challenges of our time such as rising inequality, poverty and climate change.

Nevertheless, this transformation will not happen without support. In order to thrive and succeed, for-profit enterprises are going to need a new and cohesive supportive ecosystem that adapts to their unique characteristics and helps them scale without making compromises that dilute their original values and impact objectives. This is what we call the Fourth Sector, a new economic space at the intersection of the three traditional sectors (public, private and non-profit).

The Rise of the Fourth Sector in Ibero-America

The report "Business with Purpose and the Rise of the Fourth Sector", produced by the Center for the Governance of Change in close collaboration with the Ibero-American General Secretariat, analyzes the current state of purpose-driven enterprises in 7 countries of Ibero-America, which together account for 87 % of the total GDP of the region: Argentina, Brazil, Colombia, Chile, Mexico, Portugal and Spain.

Ibero-America is witnessing the rise of a new gener­ation of enterprises driven by purpose beyond profit. These entities come in a wide variety of forms (from cooperatives to B-corps) and fall within numerous movements (social entrepreneurship, circular economy, human-centered business, fair trade, banking with values, and many others) but all of them share the same goal: to use a market-driven approach to become self-sustaining and deliver a positive social and envi­ronmental impact at scale.

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The business models and principles of these purpose-driven enterprises make of them one of the most pow­erful allies that governments, NGOs and societies have to achieve the 17 Sustainable Development Goals by 2030.

The data collected suggests that there are more than 170,000 purpose-driven enterprises in Ibero-America, which account for over 6 % of its total economy and employ almost 10 million workers annually.

There are significant divergences between countries, mainly dictated by the different weight of cooperatives, which still represent the bulk of the fourth sector. Nevertheless, in all territories we find a significant rise of new organizational forms and enterprises aimed at tackling problems such as poverty, inequality and climate change.

Governments are increasingly aware of the need to support purpose-driven enterprises. 11 countries in the region have adopted or are currently discussing new regulations aimed at typifying and supporting alternative forms of organizations that integrate commercial activities with public benefit pursuits, usually under the framework of “social economy” and “BIC enterprises”.

2However, despite these promising figures, for-benefit enterprises and their ecosystem are still in the early stages of development. Getting the Fourth Sector formally and properly established will be a long-term, multi-stakeholder endeavour that will require a number of steps — from creating new regulatory frameworks, to standardizing metrics and assessment methods to measuring social and environmental impact in empirical, efficient ways.

This report advances a vision for the development of the Fourth Sector, as well as a number of specific recom­mendations on how governments and companies can foster an environment that allows for growth and scale.

For more information and detailed data, please download the full report below.

Researchers

Diego Rubio

IE University

Heerad Sabeti

World Economic Forum

Alejandro Pacheco

United Nations Development Program

Rachida Justo

IE Business School

Sebastián Gatica

Universidad Católica de Chile

Javier Solana

Glasgow University

Sandro Cabral

Insper

Paula Miranda

Pontificia Universidad Católica de Chile

César Sánchez Álvarez

Universidad de La Salle

Diana Gutiérrez

Universidad de La Sabana

Carlos Azevedo

IES-SBS

Ricardo Zózimo

IES-SBS

Mildred Berrelleza

Tecnologico de Monterrey

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