Supportive Ecosystem

 

With such a broad array of activity taking place in the emerging fourth sector, why is this sector not thriving yet? This is mainly because there are powerful institutional and structural impediments to the change that is occurring.

In order to accelerate the development of the fourth sector, a robust ecosystem of support services and infrastructure is required that is tailored to the particular needs of Fourth Sector organizations. The scope of this undertaking is considerable. Fourth sector organizations challenge conventional thinking about capital markets, legal and regulatory constructs, metrics, ownership, leadership, and more. New instruments, new institutions, and not least of all new understandings are required.

Financial Markets

Most fourth sector entrepreneurs still have to rely on the standard for-profit and non-profit channels to capital. Among the elements that may be needed – and in small ways are emerging – are new kinds of venture philanthropy funds, financial intermediaries, holding funds, or stock exchanges that facilitate a harmony of aims between investors, donors, and for-benefit enterprises.

Legal Structures and Regulation

At this time, the “legally sanctioned” fourth sector enterprise is still largely a hypothetical construct. There are only “virtual” or “quasi” fourth sector enterprises, often structured as hybrids of non-profit and for-profit forms. New legal forms may need to be created to facilitate creation of fourth sector enterprises. Other regulatory changes may also be required.

Tax Policy

Current tax policies make little allowance for fourth sector organizations. New tax laws may need to be created that reward for-benefit organizations for desirable behavior or outcomes.

Education and Training

Dissemination of fourth sector concepts and know-how requires the active participation of our formal and informal educational institutions. While still embryonic, credible educational infrastructures for transmitting knowledge about the fourth sector and training its workforce are in development.

Conflict Management

The for-benefit model calls for stakeholders to have a say in governance. Since different stakeholder groups have different and often competing interests, a healthy tension is inevitable within the organization. New mechanisms for effective dispute resolution may be needed to resolve conflicts.

Marketing and Communications Support

Fourth sector enterprises need appropriate and authentic ways to market themselves and communicate their message to customers and stakeholders. Organizations with a true, demonstrable commitment to social and environmental performance need to be able to distinguish themselves in the marketplace from those who are less sincere or effective. This will require specialized marketing, communications and public relations support as well as alternative media channels that are aligned with fourth sector values.

The fourth sector on the whole is still very much on the periphery of general public awareness. It will take some time for the concept to be absorbed into mainstream culture, but it is important that this happen in order for the sector to attract the broad participation and support required to realize its potential.

Connection and Representation

Membership and trade associations, networks, affinity groups and conferences can have an important role in connecting and supporting the various constituencies within the fourth sector. They can facilitate knowledge transfer among practitioners, advocate for changes in public policy, create visibility for the sector and organizations involved in it, and provide important services to their members. There is also a need for new networking structures that enable collaboration and interoperability among those engaged in the development of the fourth sector support ecosystem.

Research and Understanding

With few exceptions, academic and research institutions whose role it is to advance conceptual thinking have not yet focused on the fourth sector per se. Related subjects such as social enterprise, social metrics, and sustainability are getting more attention, however.

Assessment and Reporting Standards

For fourth sector enterprises to be perceived as credible and trustworthy, compelling metrics are required that accurately measure social and environmental value creation alongside financial value creation. There must also be protocols that ensure fourth sector enterprises will be fully accountable to all stakeholders, not just shareholders.

Ratings and Certification

Ratings and certification platforms are required to verify and compare operating performance and social contribution of fourth sector organizations.

Exchange Mechanisms

Conventional methods of exchange narrow value to financial value. Ideally, fourth sector enterprises would be able to use mechanisms for exchange that facilitate the direct exchange of non-financial value.

Technical Assistance

Fourth sector entrepreneurs require legal, accounting, strategic, marketing, technology and other types of support. Fourth sector specialists in these areas, while still few and far between, are beginning to emerge.

Information Technology

Fourth sector organizations will need tailored information technology to help with social accounting and other unique aspects of management.