The Future of Capitalism: A Social Economy
The Ibero-American General Secretariat (SEGIB), which is based in Madrid, has started a new project called the Fourth Sector Initiative in Ibero-America alongside the World Economic Forum (WEF) and the United Nations Development Program (UNDP). The leader of this project is an IE Professor in the International Relations department, Dr. Diego Rubio.
The fourth sector magnifies the objectives of social entrepreneurship by creating a circular economy. This sector has characteristics from the first three sectors (public, private, and NGO) that are already a part of our economy, but it changes the main objective of profit-making businesses to also benefit the environment and/or the community. This new sector was called for as early as in 2009 by Pope Benedict XVI when he spoke of social enterprises in his Encyclical letter and wrote, “it is to be hoped that these new kinds of enterprise will succeed in finding a suitable juridical and fiscal structure in every country.”
Currently, benefit-driven companies are being forced to compete with others under the same tax liability and legal framework, which is why many of them disappear shortly after their creation. The purpose of this project is to transform impact investment and social entrepreneurship in Latin America and around the world by creating an economic and legal ecosystem that would allow these enterprises to thrive. It is also perceived as a more effective way to reach the UN sustainable development goals by 2030.
A large part of this project is being focused on Latin America because it is a region with a rising economy and a lot of economic potential. The developments of this project will be presented to the heads of state of the Ibero-American countries in the Ibero-American Summit this November in Guatemala.
Although a fourth sector does not exist yet, many companies that could fit the profile of Fourth Sector have been found. In some countries, these companies are estimated to already take up 10% of GDP. A local example of this is the company AUARA. This company produces water bottles that are environmentally friendly and uses 100% of the profits on projects to bring clean water to those who live in poverty and do not have access to it.
Other examples include Cyclus in Colombia and Xinca in Argentina. Cyclus is a company that uses old truck tires to create accessories, such as handbags. Xinca´s main objective is to make shoes out of recycled items found in old landfills; however, this company does not only have an environmental objective. It also aims to help inmates in a local prison by giving them work in order to help support their personal growth while locked up. These are just some of many examples of companies that are now focused on more than just making money. Companies like these need a fourth sector in order to succeed and to be able to compete with rivals in their field.
Last semester, the Ibero-American General Secretariat hosted an event at IE in order to introduce these ideas to students. Speakers in this event included leading expert Heerad Sabeti from the World Economic Forum, and Alejandro Pacheco from the UNDP. For more information on the developments of the Fourth Sector Initiative visit www.elcuartosector.net.
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