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The fourth sector

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Articles - May 2014
Monday, April 28, 2014
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The fourth sector
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Redefining business
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BY LINDA BAKER | PHOTOS BY CARL KIILSGAARD*

*CHANG PHOTOS COURTESY MERCY CORPS

I. In the beginning, there were clear boundaries between the world of business and the world of nonprofits. The former revolved around financial targets like sales growth and investor returns — the latter aimed for collaboration and the social good. Then the world flattened; the economy collapsed, Internet technologies democratized entrepreneurship, and mounting anxiety about environmental degradation prompted businesses of all stripes to green their marketing, products and services. 

These shifts — some might call them seismic — set the stage for the emergence of what insiders are calling “the fourth sector” of the economy: hybrid organizations that are neither government agency, for-profit or nonprofit but contain elements of all three. The idea, and it’s still very much an idea, didn’t spring up overnight but instead grew out of several decades of change in which for-profits tried to become more socially conscious and nonprofits more market oriented, the latter often adding revenue-generating programs to supplement declining government funding.

So far the fourth sector is more theory than practice, more embryonic than fully formed, but the concept itself is yet another example of 21st-century innovation. At least on the for-profit side, it’s less about tacking a social mission onto business than an attempt to rethink the deep structure of business itself. Much as the sharing economy is less about a new product or service than a rethinking of the ownership economy, the fourth sector aims to create an entirely new model for simultaneously making money and effecting positive social change.

Skeptics might claim the idea is too good to be true, and that a hybrid model will only dilute profits while opening up new opportunities for green washing and other forms of exploitation — of consumers, the disadvantaged and the tax code. Potential drawbacks notwithstanding, one thing is clear: In Oregon a new generation of leaders is hot on the trail, launching an array of fourth-sector initiatives and projects. Impact funds, benefit corporations and social enterprise are among the jargon phrases that capture the various manifestations of their work.

Oregon Business caught up with a few of the key players in this “blended capital” space. Their goals are ambitious: to enlarge the boundaries of capitalism itself, marrying the financial returns generated by the market with the selflessness and community orientation typically linked to the nonprofit enterprise.



 

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