The Diplomat
The so-called “purpose-driven companies” or the Fourth Sector are increasingly supported by law in Latin America, a region in which this type of activity generates more than 6% of the regional GDP and employs ten million workers.
This is the conclusion of the study Purpose-driven companies and the regulation of the Fourth Sector in Ibero-America, the first to be carried out on the subject, which was presented last week in Santo Domingo by the Ibero-American secretary general, Rebeca Grynspan; the regional director for Latin America and the Caribbean of UNDP, Luis Felipe López Calva; and the vice-president of Regions, Strategy and Policy of IDRC, Julie Shouldice.
The Fourth Sector is made up of companies that combine a social or environmental mission with financial self-sustainability based on the generation of income from the market. In this it differs from the other three sectors, the public (government entities), the private (for-profit companies) and the non-profit sector (non-governmental organizations), which already have their own legal frameworks and their own supporting ecosystems for generating economic profitability and social and environmental impact.
The “purpose-driven companies” of the Fourth Sector are increasingly supported by legislation in Ibero-American countries through the legal figure of Collective Benefit and Interest Companies, an “innovative instrument in Latin America”. At present, there are already laws on the subject in three countries (Colombia, Ecuador and Peru) and draft laws are being discussed in another seven countries (Argentina, Chile, Uruguay, Brazil, Spain, Panama and Mexico).
The study – prepared by the Ibero-American General Secretariat (SEGIB), the United Nations Development Program (UNDP) and Canada’s International Development Research Centre (IDRC) – was carried out over a year in nine Ibero-American countries (Argentina, Brazil, Chile, Colombia, Costa Rica, Spain, Mexico, Peru and Uruguay), but also analyzed other cutting-edge legislation outside the region (Canada, the United States and Europe).
Its objective is to propose to Ibero-American governments a series of public policy measures to promote companies also known as circular economy “B” companies and, therefore, it calls on the States to promote sustainable public procurement, giving preference to this type of company, and to grant tax benefits to those companies that generate a positive social and environmental impact. According to a SEGIB study made public last Thursday, by 2019 some 170,000 “purpose-driven” companies will be established in Ibero-America, where they employ 10 million people and contribute 6% of the regional Gross Domestic Product (GDP).
