The Three Traditional Economic Sectors: The Head, the Heart and the Harness.
Businesses: The Head
Creates and distributes goods and services that enhance our quality of life, promote growth, and generate prosperity. They spur innovation, reward entrepreneurial effort, provide a return on investment and constantly improve their performance responding to market feedbacks. They draw on the skills, effort and ingenuity of individual workers, and share with them the economic value created by the enterprise.
Non-profit organizations: The Heart
They give us ways to celebrate, build and protect the many human values that give rise to healthy, thriving communities. They have worked to ensure that all people have adequate necessities of life, including clean air, water, food and shelter; an equitable share of wealth and resources; and opportunity to develop their full physical, mental and spiritual potential. They create spaces to celebrate the joy of culture and artistic expression, and reveal opportunities for generosity.
Governmental organizations; The Harness
Protect and expand the principles of democratic freedom for both individuals and communities, protecting the public interest while at the same time ensuring a level playing field of opportunity and a common framework of laws and their enforcement at a scale that matches the scale of human activity. They have been granted, or they have presumed, the responsibility to provide for the common security and to make decisions to promote the best interest of society.
The Emerging Fourth Sector
Over the past few decades, the boundaries between the public (government), private (business), and social (non-profit) sectors have been blurring as many pioneering organizations have been blending social and environmental aims with business approaches.
There are many expressions of this trend, including corporate social responsibility, microfinance, venture philanthropy, sustainable businesses, social enterprise, privatization, community development and others.
As this activity matures, it is becoming formalized as a Fourth Sector of the economy.
Characteristics of the Fourth Sector
The defining characteristic of all Fourth Sector organizations is that they integrate social and environmental aims with business approaches. Some Fourth Sector organizations go further by embodying features like inclusive governance, transparent reporting, fair compensation, environmental responsibility, community service, and contribution of profits to the common good.
As the Fourth Sector expands and becomes more formalized, there is a need to better clarify its boundaries. To that end, a range of efforts are underway to define the criteria for the archetypal Fourth Sector organization, which is referred to as the “For-Benefit” organization or corporation
The For Benefit Corporation
As broad consensus builds around the definition of the For-Benefit archetype, it will become easier for those involved in developing various elements of the support ecosystem for the Fourth Sector – financial markets, legal forms, technical assistance, assessment and reporting standards, etc. – to focus and integrate their efforts.
This will in turn create a more conducive environment for the growth and maturation of Fourth Sector organizations.
Attributes of the Fourth Sector
The following characteristics of an archetypal For-Benefit corporation are offered as a starting vision intended to catalyze further dialogue. With this caveat, a fully realized For-Benefit could have the following core attributes:
• SOCIAL PURPOSE. The For-Benefit corporation has a core commitment to social purpose embedded in its organizational structure.
• BUSINESS METHOD. The For-Benefit corporation can conduct any lawful business activity that is consistent with its social purpose and stakeholder responsibilities.
• INCLUSIVE OWNERSHIP. The For-Benefit corporation equitably distributes ownership rights among its stakeholders in accordance with their contributions
STAKEHOLDER GOVERNANCE. The For-Benefit corporation shares information and control among stakeholder constituencies as they develop.
• FAIR COMPENSATION. The For-Benefit corporation fairly compensates employees and other stakeholders in proportion to their contributions.
• REASONABLE RETURNS. The For-Benefit corporation rewards investors subject to reasonable limitations that protect the ability of the organization to achieve its mission.
The World is Responding
For-Benefits are a new class of organization.
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 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.
For-Benefits seek to maximize benefit to all stakeholders, and because of their architecture, they can embody some of the best attributes of other organizational forms. They strive to be transparent, accountable, effective, efficient, democratic, inclusive, open, and cooperative.
For the For-Benefit corporation to move from an idealized model to widespread cultural reality, support in the law will ultimately be required. Substantive changes are likely needed in corporate, non-profit, intellectual property, tax, securities, consumer protection and other laws at federal, state, and local levels. A range of promising efforts have emerged in recent years to create such regulatory changes
The Law and Regulatory Authorities
The need is greater than government; “the people” are demanding new archetypes. We adapt and change, laws must adapt and change as well. The USA is currently adapting Fourth Sectors Principles into their vary state legislation.
The Law in Australia
Countries like Australia have now adopted laws allowing for the legislation of Profitable Gifts.
Leaf Capital Pty Ltd (Leaf), an Australian marketing company, strives to raise the level of philanthropy in Australia through The Donors Without Borders Philanthropic Initiative – the marriage of philanthropy and commerce for the betterment of both.
Helping Australians afford large donations to charity through near zero interest vendor financed gifts-in-kind, which also allows them to use the time-value of their deduction to pay for their purchase.
Enabling responsible philanthropy with 100% of donations reaching the cause, because the donations are of life-saving goods rather than money
Helping Australian charities receive these donations without charging any fundraising fees
Bringing Australian vendors a new market of sales for donation purposes, rather than for personal consumption
Giving finance professionals, accountants, & other interested parties (Accredited Representatives) a new financial strategy where they can earn revenue
The Law in Canada
Canada has its own community of Philanthropreneurs who believe in doing well by doing good through Registered Profitable Gifting Arrangements (RPGA’s).
Fourth Sector Initiatives in Canada
1. Help Canada keep their global philanthropic commitments
2. Real lives are being saved
3. CDN’s can purchase drugs for distribution
4. CDN’s can claim a charitable receipt and offset taxation
5. CDN Charity’s 97%-100% Dispersement Quotas
6. Pharmaceutical companies sell and make profits
Everyone Wins in the Fourth Sector
The three traditional economic sectors can be referred to as the Head (Business), the Heart (Non-Profits and Charities), and the Harness (Government). Today, there is a Fourth Sector emerging that ties together and lies in the overlap area of these three sectors.