LifeCity was recently invited to Harvard University’s Impact Economy Summit, and brought with us a group of leaders from our community. After having the pleasure of joining this group of leaders, the New Orleans delegation returns with some important lessons learned that every entrepreneur, non-profit, and city government should know:
1) What is the Fourth Sector? Defining ourselves at the conference was tough. Even worse than your typical political party convention. But essentially, the Fourth Sector is made of organizations that break traditional roles and leverage market-based approaches and private capital to solve social and environmental problems. Take the motto of Greyston Bakery: “We don’t hire people to bake brownies, we bake brownies to hire people.”
In New Orleans, we see non-profits like Liberty’s Kitchen that also develop fee-for-service sustainable income. As well as for-profits like Joule Energy, that make significant effort to be a socially and environmentally responsible company.
2) The Fourth Sector is made of leaders. If we want to build strong local economies, we need leaders to understand and act upon our global realities. Here in NOLA, we are all too familiar with lack of global leadership: the threat of coastal wetland loss and rising sea levels that result from global economic demand are threatening our very existence. “Leaders have a choice,” says Mr. Kelly, VP with Booz Allen Hamilton in McLean, Va., a policy and strategy expert in global security. “They can choose either to maximize the immediate benefits to their own operation, or to optimize the benefits to the larger system as a whole. It turns out that even though maximization often feels more efficient, optimization serves them better.”
3) Competitive Advantage becomes Collaborative Advantage. Businesses are more likely to achieve their
goals when they collaborate. Stanford University says it best: a systematic approach “…that focuses on the relationships between organizations and the progress toward shared objectives” is far more effective in solving social problems and creating healthy economies, than isolated efforts.
For the first time in recent history, New Orleans has a five-year strategic plan for growing a sustainable economy,led by the New Orleans Business Alliance. Sustainable Industries was selected as one of the five sectors, a clear signal that New Orleans is positioned to grow its impact economy.
4) Collective Impact Requires Backbone Organizations. While systematic solutions require collaboration, they also need consistency and coordination across organizations, election-cycles, and diverse sector perspectives. “Backbone organizations” are needed to serve as the foundation for any initiative, providing supporting infrastructure for collaborative efforts when seeking to make social and environmental impact.
LifeCity serves as a backbone organization in developing our local impact economy, by facilitating the development of the Impact Economy Council and supporting individuals and organizations in collaborating across sectors to meet shared objectives.
5) Location, location, location! Study after study has shown that locally owned businesses create more jobs and wealth in the community than non-local entities. Furthermore, local companies are often more connected to the identity, culture, and relevant issues that lead to more effective local solutions. Developing the Impact Economy should not be a cookie-cutter, fast-paced, national approach, but a regional, organic, and thoughtful process. In New Orleans, Stay Local! supports the local business community by connecting residents with local businesses and helping these businesses compete more effectively.
6) Impact-driven companies do better – and even better with an ecosystem of support. Companies that
are certified in their social and environmental impact are four times more likely, on average, to have a positive correlation with successful financial and growth measures than non-certified companies; and furthermore, creating a healthy ecosystem that supports these social entrepreneurs makes their chances of success even greater. In New Orleans, social entrepreneurs are supported by Incubator programs that connect them to technical expertise, funding, and resources through programs run by Propeller, the Idea Village, Launch Pad, Tulane University, and the Building Block.
7) Legal structures and tax codes need reform. These new hybrid entities of the Fourth Sector face unique challenges in a marketplace built to serve traditional business or public sector models. What if non-profits could access equity capital markets, and what if a for-profit could give its donors tax benefits for contributing towards a social-impact organization? Government: lets stop isolating impact to one’s organizational structure, and start incentivizing impact for every organization out there.
Thanks to the work of the New Orleans Business Alliance, Propeller, and LifeCity, Louisiana is now recognizing Benefit Corporations and supporting Low Profit Limited Liability Companies as alternative structures for the “for-benefit” company; however, more reform is still needed.
8) You LOVE the Fourth Sector, but you may not even know it. Studies show that 90% of consumers want to buy from conscious companies. Need we say more?
9) Investors seek clarity. Investors want to understand performance measurement and reporting for the Fourth Sector, and new innovation is needed to help bring clarity to the true social and environmental impact that a business achieves. Metrics must be measured not only in the short-term, but also in the long-term.
10) Impact matters most. Call yourself a non-profit, a for-profit, a for-benefit, a bleeding liberal, or a raging capitalist: what matters most is your impact. How do you measure your purpose as an organization? How do you understand your relationships to the global community? How are you building a strong economy for not just today, but for the future? How sustainable and practical is your solution? Your tax status is simply a means to an end, but the impact on your community is what your investor, your consumer, and your partner will be most concerned about in the growing Fourth Sector that will dominate the 21st Century. Don’t get left behind – join us and become a leader of the Impact Economy. The Fourth Sector really isn’t a sector at all – it could be all of us.
The Louisiana delegation would like to thank Harvard University for being a leader of the Impact Economy and for encouraging our community to reflect on our opportunities in the Greater New Orleans Region. We invite everyone to visit New Orleans and join our entrepreneurial ecosystem leading efforts nationally to support a strong Impact Economy.
For more information, please contact:
- Elizabeth Shephard, LifeCity, LLC at Liz@mylifecity.com
- Emily Madero, the Idea Village, Emily@ideavillage.org
- Emilie Tenenbaum, the New Orleans Business Alliance, firstname.lastname@example.org
- Ken Schwartz, Social Innovation Program / School of Architecture, Tulane University, email@example.com
- Mark Strella, Stay Local!, Mark@staylocal.org