“The purpose-first economy will ensure that in times of crisis, businesses will be both compelled and empowered to act for the benefit of society.” – Leaders on Purpose & Fourth Sector Group Open Letter
Last month, a group of 14 global CEOs created an open letter, calling on governments and businesses to “build the economic system better”. The letter provides a roadmap for a post-COVID economy; a “purpose-first economy” that will benefit society, the planet, and shareholders for generations to come.
Backed by Leaders on Purpose and the Fourth Sector group, the letter stresses the importance of partnerships between governments and the private sector. Leveraging the support of both business leaders and policy makers, the signatories hope to encourage collaboration between the two, accelerating the development of purpose-first business and the emerging fourth sector of the economy.
The letter begins with a quotation from Antonio Guterres, Secretary-General of the United Nations:
“Everything we do during and after this crisis must be with a strong focus on building more equal, inclusive and sustainable economies and societies that are more resilient in the face of pandemics, climate change, and the many other global challenges we face.”
Rather than simply “build it back,” the letter emphasises the need to “build it better.” Building an economy that is “more equal, inclusive and sustainable” means addressing the “structural barriers” that prevent an “inclusive and sustainable economy”. Such a change will require “the full potential of all sectors” to be harnessed. This will ensure not only a “more equitable economic recovery” from the current pandemic, but will create a system that can survive in the face of future shocks.
The organisations backing purpose
One of the organisations spearheading the open letter in the push for a system rethink is the Fourth Sector Group. The Fourth Sector Group is a global multi-stakeholder platform, working to develop the fourth sector worldwide.
But what is the fourth sector? In most countries, economies are made up of three sectors: the public sector (i.e. government), the private sector (ie. business), and the nonprofit sector (ie. civil society). From the industrial age to today, this economic model has successfully transformed the quality of lives of millions of people around the world, but it has failed to keep up with the drastic global changes of the 21st century.
In the wake of COVID-19, the Fourth Sector Group believe that we can build something different. Combining the market-based approaches of the private sector with the social and environmental aims of public and non-profit sectors, the fourth sector has developed to address the large-scale and urgent economic, social and environmental challenges we face today.
Many of these problems are direct consequences of outdated systems; from increasing gaps in inequality to pandemic health threats to the global climate crisis. The emerging fourth sector reflects a push towards an economic model that is aligned with the values of a changing world. It will not only be more resilient in face of future threats, but will be positioned to address underlying flaws and vulnerabilities in our existing systems.
In the past decade, there has been an increasing blurring of boundaries between economic sectors. Many for-profit companies have expanded their purpose to pursue social and environmental goals, while many nonprofits and governmental organisations have adopted market-based approaches to advance and scale their objectives.
The fourth sector is now estimated to represent as much as 10% of GDP in the U.S. and Europe. As articulated by Build Better (a 4th sector group initiative), these organisations contribute to society by delivering everything from affordable healthcare and housing to green transportation and energy, whilst at the same time, “they create quality jobs, pay taxes, make investments, contribute to countless causes, and innovate new products in areas often unidentified or under-prioritised by traditional markets.”
However, whilst these initiatives have successfully challenged the status quo, there is still a long way to go. Without a cohesive movement and with the limitations imposed by the current systems still in place, the degree of change allowed has been limited.
Through a variety of collaborative initiatives, the Fourth Sector Group brings together businesses, civil society, governments, multilaterals, philanthropists, academia, ecosystem builders, and industry and sector leaders to create an environment where for-benefit organizations can thrive. They have been co-developing legislative proposals with the US government, California Government and some other member states that support purpose-driven businesses.
As well as government backing, developing the fourth sector equally depends on lobbying the support of business leaders. Indeed, the Fourth Sector Group collaborated with Leaders on Purpose, a community of CEOs dedicated to purpose-first performance.
Whereas the Fourth Sector Group has been working with governments, the UN and other national and international bodies to impact policies and legislation, Leaders on Purpose has been developing relations between CEOs around the globe to make business take action from within. This takes a variety of different forms, including in depth-research into corporate purpose, CEO summits – bringing together the world’s top thinkers and leaders to advance the new business logic, and consulting to help organisations transition into a purpose-first approach.
In the year of 2020, we have witnessed the unimaginable. In weeks, we watched a microscopic virus wear down entire countries – shutting down economic and social systems around the world.
The economic shockwaves of the crisis have been startling. According to the Financial Times, global government debt has reached its highest level in peacetime. The European Commission’s summer 2020 economic forecast predicts that the EU economy will shrink 8.3% in 2020; the deepest recession in the EU’s history. Meanwhile, unemployment is skyrocketing. With a vast axing of jobs across the UK during lockdown, unemployment benefits were claimed by 2.7 million between March and July, leaving many struggling to cover bills and support their families.
With the world in such disarray, it might be tempting for leaders to focus on short-term solutions. But, now more than ever, is a time for drastic systemic change.
The past few months have revealed to us that our old systems are simply not sustainable in the face of crisis. For this reason, the World Economic Forum has called for The Great Reset. Rather than “incremental measures and ad hoc fixes”, it urges for all constituents of society to be mobilised to entirely rebuild our economic and social systems. Luckily, human nature is fundamentally adaptive. For centuries, humans have thrived in their ability to adapt to challenging circumstances and changing environments.
“The level of cooperation and ambition this implies is unprecedented,” the WEF notes; yet “one silver lining of the pandemic is that it has shown how quickly we can make radical changes to our lifestyles.”
From abandoning daily commutes to city centres to replacing international travel with zoom meetings, the last few months have shown how quickly we can replace old habits with new ones. It has also shown our will to work for the greater good of society. From community support groups to adhering to social distancing guidelines, we have all made sacrifices to our own lives to protect the most vulnerable members of our society.
Businesses have also acted in such a manner. As the WEF puts it, “companies have stepped up to support their workers, customers, and local communities, in a shift toward the kind of stakeholder capitalism to which they had previously paid lip-service.” Countless organisations survived the crisis and supported society by repurposing their production lines to respond to the needs of the crisis. From gin companies producing hand sanitiser, to car makers creating face coverings.
For these reasons, the pandemic is an extraordinary chance to catalyse change. Having experienced both financial crisis and unprecedented government support and collaboration, there is now even stronger momentum to help shift the world of business to a new economic model. As articulated by Klaus Schwab, Founder & Executive Chairman of the WEF: “The pandemic represents a rare but narrow window of opportunity to reflect, reimagine and reset our world.” COVID-19 can wear us down, or we can seize something from it.
“The pandemic represents a rare but narrow window of opportunity to reflect, reimagine and reset our world.”
Build the world better
COVID-19 has shown that, in times of crisis, purpose-driven organisations are the way forward. Yet long-lasting change cannot be achieved without partnerships at every level.
“It’s not enough and it’s not sufficient for the private sector to think it can take the wall down alone,” says James Mwangi, Group CEO and Managing Director of Equity Group Holdings Limited. “We need governments to become partners to the private sector.”
Dr Mwangi was a key player in ensuring medical relief in East Africa through the pandemic, donating and raising funds to deliver PPE, testing kits and mental health care to doctors across Kenya and Rwanda.
“Covid has given us a chance collectively to decide a better world,” he states. “We can build a world that is more equal, more sustainable and more resilient.”
As Dr Mwangi puts it; – “doing good and doing well are not mutually exclusive”. Not only has the pandemic exemplified the way business can be harnessed to serve a greater good in times of crisis, but it shows how a sense of purpose can help these businesses thrive in challenging times.