The invitation-only summit will bring together a seasoned leadership group of impact investors, funders, social entrepreneurs, government officials, economic development practitioners and scholars for an off-the-record discussion about how to advance a national economic development strategy to accelerate the growth of the impact economy. We will examine a range of questions from varying perspectives, with a view toward identifying points of consensus and divergence, and a bias toward collaborative action:
- What exactly distinguishes for-benefit organizations from traditional forms of business and charity? What are the different ways of defining this sector, and what are the implications of these approaches on policy and market formation?
- What opportunities does this sector of the economy present for accelerating job and enterprise creation and enhancing competitiveness at regional and national levels? What conditions need to be in place for regions to best leverage these opportunities?
- What market barriers and other obstacles do for-benefit organizations face? What enabling policies and support infrastructure are needed to address these, both regionally and nationally? What are appropriate roles for government, economic development agencies, and support organizations?
- What can be done to address the challenges of capital access from equity sources, commercial lenders, CDFIs, and other sources? How can deal flow be improved? How can capital providers support development of market infrastructure?
Background and Rationale
The past few decades have seen a number of trends that challenge conventional assumptions about the roles of our economic and social institutions. These include impact investing, social enterprise, sustainable business, corporate social responsibility, microfinance, venture philanthropy, privatization, and community development finance, among others. Amidst these trends, a rapidly growing fourth sector of hybrid organizations has been emerging at the intersection of the three traditional sectors—public, private, and nonprofit. Often referred to as for-benefit enterprises, these organizations come in a wide variety of models and legal forms, all of which leverage market-based approaches and private capital to solve social and environmental problems. They constitute a critically important sector of the U.S. economy that is contributing to job creation and economic growth, and they have recently been gaining increased attention among policymakers and economic developers at federal, state and local levels.
Several states have adopted legislation in recent years to create new for-benefit legal entities (e.g. Flexible Purpose Corporations, Low Profit Limited Liability Companies (L3C), and Benefit Corporations). A handful of federal and state level governmental offices have been established to provide support for social innovation and entrepreneurship. Some procurement and contracting policies have been expanded to recognize for-benefit entities. A few tax reforms that recognize these organizations have been enacted, and others are under consideration. And the “impact economy”—one that creates social and environmental impact while generating economic value—is becoming recognized in some domestic and foreign policy agendas.
But these reforms are not enough. Despite growing support and recognition, for-benefit enterprises still face significant market and policy barriers because they do not “fit” into traditional for-profit or nonprofit molds. Thus, they do not enjoy access to well-developed supportive ecosystems like the ones that surround for-profit and nonprofit organizations. To deliver on their full potential, for-benefits require their own specialized supportive ecosystem—capital markets that seek positive social and environmental impacts, enabling public policy, triple-bottom-line assessment tools and standards, appropriate legal advice and customized legal instruments, specialized technical assistance, access to skilled talent, etc.
The fourth sector presents a tremendous opportunity for accelerating job creation and economic growth across the U.S.—there are tens of thousands of socially motivated entrepreneurs, tens of millions of socially conscious consumers, and billions of dollars in impact investment capital that favor for-benefit enterprises. And because these enterprises tend to be intrinsically committed to values of inclusion, sustainability and community, fourth sector economic development can lead to range of positive outcomes including revitalization of economically distressed regions; more rooted local employers committed to their community and its needs; more sustainable jobs with superior wages, benefits, and employment conditions; economic participation of traditionally disadvantaged or under represented populations; poverty alleviation and middle class expansion; enhanced regional competitiveness; greater environmental sustainability; and reduced costs and burdens on government.
To effectively harness the for-benefit sector’s potential, there is a need for a more coherent and comprehensive national approach to developing the sector. Economic development policies and programs, which are currently focused primarily on growing for-profit firms, need to be refined to also support for-benefit enterprise development.
The summit goals and agenda will continue to be refined over the coming weeks with input from delegates and convening partners.
This Summit is intended to catalyze actions aimed at accelerating enterprise and job growth in the impact economy. While those in attendance will ultimately determine any future efforts and next steps that are undertaken, these are some priority needs which could be addressed going forward:
- Raising awareness among economic policy makers and economic development practitioners about the importance of broadening their strategies to leverage the for-benefit sector.
- Developing broad consensus around a set of clear definitions of different types of for-benefit enterprises, to serve as a basis for policy making and ecosystem development.
- Developing regional, cluster-based economic development initiatives focused on building supportive ecosystems for for-benefit enterprises – bringing together capital, technical assistance, legal, assessment, talent, policy, and other elements.
- Developing national economic development initiatives aimed at strengthening the supportive ecosystem for for-benefit enterprises and providing support for regional efforts.
- Developing a research agenda to address the gaps in understanding that are impeding policy and ecosystem development efforts.
About the Summit.