Best thing I have read all year? This. Granted I am heavily biased and that letter is a few months old now, but I cannot stress enough how pivotal this could be for the social impact space. Social enterprise is the future, and by social enterprise, I don’t mean non-profits, or companies that make any little social impact, I mean companies that put social impact over everything else. They are financially sustainable not by relying on grants or donations, but instead, on a profitable business model that is not a slave to profit maximization. A 10% margin, before profit reinvestment, is all you need.
I have this draconian theory that every single organization should be a social enterprise. That letter from the CEO of BlackRock to all their portfolio companies just made my theory a little less draconian. He fully embraces the patiently blossoming stakeholder-centric model over the explicitly capitalistic and banal, shareholder-centric model. And he doesn’t embrace it just emotionally, he lays it out as a future requirement for every company that BlackRock invests in. Yes, he doesn’t explicitly call for social enterprises, but he highlights the importance of having a long-term sustainable strategy and the absolute necessity of a “positive contribution to society.” I’ll take it. This is one the kingpins of Corporate America, with almost $6 trillion in assets under management, setting a precedence, and throwing down the gauntlet. I hope others follow suit.
I think this development is on the back of a recent trend in our generation to want to make a difference. Deloitte recently came out with a study where they looked at the 2014 Fortune 500 global companies and found that 89% of them incorporated at least some sort of social impact in what they were doing. Granted, 53% of them were engaging in good-old “Corporate Social Responsibility”, but again, I’ll take it. Meanwhile, Impact Investing is the new cool kid in the equity space. An asset class of its own, it pits financial performance on par with social impact performance, which is revolutionary for the finance world — it might have a heart after all. Personally, I think the impact bit should take primacy over the financial return bit, but for now, I’ll take it.
It is not all hunky-dory though. Measuring impact is this world’s Everest — sometimes it is just way too subjective for us to be objective about, but the Effective Altruism movement is trying. Psychologically, our approach towards non-profits is a lot more critical than for-profits, and that just does not make sense, ask Dan Pallotta about it. There are still tussles over definitions and semantics. B Corps is a great start, but we still need to create a legal corporate entity classification for social enterprises and incentivize them through substantial tax-breaks. There’s a long way to go, but Mr. Fink at BlackRock just gave us a big push. Here’s to a lot more pushes.