The combined resources of government and philanthropy alone are insufficient to solve the many development challenges of the twenty first century. Over the past decade, there has been growing recognition within the private sector of the need to take a greater and more active role in promoting sustainable development globally, through generating employment for youth, empowering women and tackling challenges related to energy, water and hunger.
Corporations and investors understand the longterm benefits of contributing to development, and as such, initiatives to advance the sustainability agenda have gained strength in the recent past and will continue to play an important role in the future. However, in the quest for innovative ways to engage the private sector to bolster global sustainability further, a new approach has gained significant momentum in recent years. It is captured by two themes:
• Social enterprise development, defined as creating and nurturing micro-, small- and medium-sized businesses that aim for positive social or environmental outcomes while generating financial returns; and
• Impact investing, defined as the placement of capital (into social enterprises and other structures) with the intent to create benefits beyond financial return.
Social enterprise and impact investing, by definition, proactively intend to create positive impact as well as generate profits. Such a forprofit orientation has a twofold effect:
• Financial return potential increases the attractiveness of opportunities that produce a positive impact, drawing more private sector capital to areas that promote development.
• Private sector participation, and the opportunity to generate returns, spurs innovation and growth; commercial capital pushes enterprises to experiment with new business models, capture new opportunities and drive for greater impact.
Both private and public entities could benefit from viewing social enterprise development not only as a responsibility but as a financially or strategically valuable investment. Based on this concept, the United Nations Global Compact and The Rockefeller Foundation seek to encourage investors, corporations and policymakers to explore the potential of social enterprise. They have therefore developed this “Framework for Action” to enable the exploration process. The facets of the Framework are presented through a strategic (and often market-focused) lens, but it is important to note that the philosophy of corporate sustainability – defined as a company’s delivery of long-term value in financial, social, environmental and ethical terms – fundamentally underpins the content.
The scope of a discussion centered on social enterprise and impact investing, depending on one’s perspective, can be broad. However, this Framework for Action is focused on, but not limited to, the following:
• Activities that provide products or services to individuals in low-income populations; • Intention to proactively create positive value rather than seeking to avoid negative impact;
• Geographic focus on developing and emerging countries.