The Fourth Sector Group wants to transform the future of business

Heerad Sabeti, CEO of the Fourth Sector Group. Photo by: World Economic Forum / Ben Hider / CC BY-NC-SA

SAN FRANCISCO — It is not uncommon to see business executives wearing Sustainable Development Goal lapel pins, with a wheel of colors representing the 17 SDGs.  

But all too often, these companies see the SDGs as a way to brand their corporate social responsibility initiatives, rather than a reason to change the way they do business, said Heerad Sabeti, CEO at the multistakeholder platform the Fourth Sector Group. In order to achieve these goals by 2030, the private sector needs to go beyond incremental progress on a few sustainability targets, and instead seek to generate a positive impact for society throughout their operations.

“There’s growing awareness that doing more of the same is not good enough.”

— Heerad Sabeti, CEO, Fourth Sector Group

The Fourth Sector Group is one effort to help companies make this shift. It seeks to support for-benefit enterprises — companies that balance social and environmental priorities with financial objectives, rather than prioritizing the maximization of profits.

These businesses go beyond business as usual and belong in their own category, outside of the traditional three sectors of private, public, and nonprofit organizations, Sabeti said. At this month’s High-level Political Forum in New York City, the Fourth Sector Group shared updates and gathered feedback on its work to develop supportive ecosystems to help these businesses reach the scale and pace of change required in the next decade.  

“We’re in this spiral where the more we grow the economy to solve the problems of society, the more we scale the problems that it’s causing,” Sabeti said at an event on private sector partnerships the Fourth Sector Group hosted together with the Global Partnership for Effective Development Cooperation on the sidelines of the HLPF.

From the HLPF this month, to the United Nations General Assembly in September, to the World Economic Forum Meetings in Davos, Switzerland, in January, Sabeti and others involved in the Fourth Sector Group are engaging with stakeholders from across sectors to gather feedback on the best ways to support for-benefit enterprises.

“I think there’s growing awareness that doing more of the same is not good enough,” Sabeti told Devex.

“Fundamentally, you have to rethink business models at their core. It’s not enough to just adopt some good practices or pick a couple of SDGs that align with what you’re already doing and report against them … Unless we create an ecosystem to support sustainable business models — financial markets and how we measure and report and what kind of performance is rewarded — I don’t see how we’re going to make the mark.”

Crafting guidance

Once people understand the systemic nature of transformation that needs to happen, they want guidance on how to make those changes.

“The case for systemic change is clearer than ever and fortunately demand for it is growing, but there’s a lot of confusion and lack of clarity about what companies, governments, investors, and other actors need to do, so that’s what we’re focused on addressing now,” Sabeti said.

With support from the U.K. Department for International Development, the Fourth Sector Group is launching an initiative called Fourth Sector 2030, which will develop guidance for businesses, governments, and investors; develop data infrastructure for the sector; and support the transformation of corporate value chains.

The international humanitarian organization CARE is working with the Fourth Sector Group as a partner in the For-Benefit Value Chains Initiative. The goal is to shift corporate procurement preferences toward for-benefit enterprises, influencing more than $100 billion by 2020.

​CARE is developing a procurement guide with a particular focus on the cocoa sector in West Africa, per a grant from DFID.

This initiative has “potential to really move the needle towards more sustainable, market-based solutions that can lead to a more equitable distribution of value across large supply chains,” said Rebecca Holliday, who leads CARE’s advisory services arm and is working on a guide to help companies source from for-benefit enterprises in their supply chains.

The Fourth Sector Group has also recruited a range of business leaders — from large companies including Salesforce, Unilever, and Philips — to join its Fourth Sector Council.

Robert Metzke, global head of sustainability at Philips, said the company has made changes to its supply chains that it thinks could be an example for other businesses interested in moving toward for-benefit suppliers.

“We engage deeply with our suppliers beyond auditing,” he said of the company’s 50,000 suppliers globally. “We take a risk-based approach. We want to understand the key challenges our suppliers face. Then we engage in a long-term trajectory helping with their capabilities.”

This approach helps these companies improve key parameters on sustainability, as compared to auditing, which tends to be about ticking boxes, Metzke said.

But companies cannot make this shift alone, which is why the Fourth Sector Group is working with businesses as well as governments, investors, and other stakeholders. For example, the Ibero-American General Secretariat, or SEGIB — in partnership with the Fourth Sector Group, the U.N. Development Programme, and the World Economic Forum — is exploring how new laws and regulations could support for-benefit enterprises in the region.

For the Fourth Sector Group to realize its vision, there has to be change across the supportive ecosystem, from ratings and certification to education and training to assessment and reporting standards.

In order to achieve the SDGs, the world needs to figure out a pattern of development “where growth is not coupled with social and environmental destruction,” Sabeti said at the event at the HLPF.

Purpose-driven businesses, which have a different objective and function than profit maximization, offer a way forward. But the problem is that “no economies provide a level playing field for the kinds of businesses we need,” Sabeti said.

Matthew Bishop, a managing director on the global policy and advocacy team at The Rockefeller Foundation, brought leaders working on a range of initiatives to support for-benefit enterprises together at Rockefeller’s Bellagio Center in February.

There, Sabeti, Metzke, Rebeca Grynspan, secretary-general at SEGIB and other leaders from across sectors gathered under the theme “Scaling for-benefit enterprises: Shaping an economy that benefits all stakeholders” and talked about strategies to turn this vision into a reality.

"The grand challenge at the moment is how we get all these different pieces, all these different groups and initiatives to come together and agree broadly on a common approach,” he said. “The real enemy, in the long run, is you just get a lot of competing initiatives, none of which goes to scale."

A number of trends, and a wide range of initiatives from Conscious Capitalism to the Global Impact Investing Network to benefit corporations are linked to the vision of the Fourth Sector Group, even if not explicitly, Bishop said.

But Sabeti said the problem is not that there are too many initiatives: “We certainly need much more coordination and coherence, but the sum total of what is happening today is a tiny fraction of what needs to be happening,” he said.

The Fourth Sector Group wants to recognize, elevate, and support the range of innovations that will be needed to scale the growth of for-benefit businesses, he added.

About the author

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    Catherine Cheney

    Catherine Cheney is a Senior Reporter for Devex. She covers the West Coast of the U.S., focusing on the role of technology, innovation, and philanthropy in achieving the Sustainable Development Goals. And she frequently represents Devex as a speaker and moderator. Prior to joining Devex, Catherine earned her bachelor’s and master’s degrees from Yale University, worked as a web producer for POLITICO and reporter for World Politics Review, and helped to launch NationSwell. Catherine has reported domestically and internationally for outlets including The Atlantic and the Washington Post. Outside of her own reporting, Catherine also supports other journalists to cover what is working, through her work with the Solutions Journalism Network.