What Actually is the Fourth Sector…Exactly?

Written by on October 10, 2012 in charity, CSR, Entrepreneurship, Funding, Non-Profit - 2 Comments

The traditional sectors of goods and service delivery, are most generally defined as private (business), public (government), and social (non-profit). Organizations within each sector, have determined legal, financial, and governance structures, and combined with the long period of an industrial age political and economic status quo- the sectors have been kept relatively in tact, separate, sustainable, and non-competing.

With the transition into the new Age of Information however- occurring within one of the lengthiest global recessions- we are witnessing entrenched manufacturing economies disassembling,  job centers relocating,  and human and financial capital shifting around a globe that has just surpassed the  seven billion person population milestone. And the tools of the Information Age broadcast these events onto our TV (and computer and tablet) screens, and into our RSS feeds, with unprecedented reach, and speed.

A 2009 Publication by the The Aspen Institute, recognized new organizations, “sprouting from the blurring of sectoral boundaries,” that were “driven by a social mission and employ business policies and practices.”  This new realm was referred to as the Fourth Sector.

Traditional Businesses in the private sector, created goods and services that “enhanced our lives, spurred innovation, and rewarded entrepreneurial effort,” according to the site FourthSector, which seeks to define and support the ‘new’ business realm with definitions, resources, and news. However, with a corporate governance model that mandates a return on investment for stockholders, in an increasingly competitive global financial market, detrimental human and environmental outputs are either increasingly commonplace, or are increasingly known, due to the broader reach of information dissemination.

Governmental organizations, that  have “presumed the responsibility to provide for the common security and…to promote the best interest of society,”  again, according to FourthSector, struggle to provide services that “match the scale of human activity.”  So that Non-profit and Non-Governemntal Organizations, missioned to serve first and foremost a specific constituency or cause, are often increasing left to fill in and fund the service gaps that government has cut back on, or cut out entirely. Yet, the organizations in this sector are challenged by the same economic and human scale factors and struggle to support their missions, with grant only, non-income generating models.

Products have been created, services have been delivered, and missions have been formulated, within the vagaries of the marketplace, and at the nexus of need and necessary innovation- and generally within organizations serving a single (financial or social) bottom line.

But environmental forces, including our heightened social consciousness,  are testing these model’s outputs, their legal frameworks, and their arena boundaries, and we are witnessing the creation of a marketplace served by multi-bottom line initiatives, organizations, and enterprises.

Social enterprises are among these pioneering organizations. They blend the sustainability of for profit earned revenue models, in the traditionally donor only nonprofit arena, with the power of innovation from the competitive for profit marketplace. With the birth of entities, such as L3C‘s and Benefit Corporations, they can legally pursue profit and purpose, which has the added benefit of opening social business up to investment- an avenue not previously available in the nonprofit sector.

While traditionally, organizations in the first three sectors may have been better able, or more constrained, by their model to deliver on their bottom line- for profit products by environmental effects, for example, nonprofit services, by innovation in a non-competitive marketplace, and government services by partisan issues- fourth sector solutions offer the ability to take the best from each model, to harness the full power of innovation, and to support a spectrum of revenue streams.

For more on Fourth Sector Solutions, see the following:

FourthSector

Social Entrepreneurship: The Emerging “Fourth” Sector | YouTube Interview: Andrew Bishop, Philanthro Teach

Social Enterprise: The Fledgling Fourth Sector | Financial Times

Develop and Nurture The DNA of a New Capitalism: The For-Benefit Enterprise | The Management Exchange Blog | Heerad Sabeti

BCorporation.net

The L3C: A More Creative Capitalism | Triple Pundit

Three Cheers for the Fourth Sector Economy | Ode Wire

The Birth of a Fourth Sector | Philadelphia Social Innovations Journal

Jen Hutchinson

Jen recently graduated with an M.A. in Social Entrepreneurship and Change from Pepperdine University Graduate School in Los Angeles, following 17 years of for profit operational and financial business management. She synthesizes this experience, into consultancy services for nonprofit leaders and organizations, to amplify brand and mission impact, and to create fiscal and organizational sustainability, including incorporating social enterprise models into their operations. She is also currently developing her own social enterprise in the K5 Visa Incubator in Orange County, CA.

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  • Carle Kopecky

    As the director of a small museum, I was particularly struck by the description of the Fourth Sector, essentially what museums have been doing for decades, as a new
    idea. Museums all, to a greater or lesser degree combine and manage
    traditional non-profit model grants and donations income with business-model
    earned income from admissions and auxiliary activities such as museum stores
    and food services. However, I can only name a few privately-owned museums
    that have actually succeeded in a purely business for-profit model, and most non-profit museums are also struggling. The
    Fourth Sector concept also brings to mind the tension between charter schools
    and public schools. I am leery of the supposition of many,
    particularly in politics and business, that we can no longer afford to do
    things that are not profitable, just for the good of society as a
    whole. People who regularly spend hundreds of dollars to attend sporting events often balk at paying admission to a museum, which they feel should be free, like a public library. Blockbuster “King Tut” exhibitions can be profitable, but are they any more relevant or important than the local exhibit of our own community or region’s history if they could be mounted with comparable budget resources and hype?

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