The 21st century offers new opportunities and resources to tackle our most pressing social problems.
It is now estimated that the United States spends 20% of our GDP (approximately $17.5 trillion in 2014) on social issues. Innovative business models, evolving public policy, and an expanding pool of capital have created a dynamic, fluid environment. Traditional silos— whether government, nonprofit, or for-profit— are being broken down and cross-sector collaborations are the way forward.
Consider these trends:
Government contracting and outsourcing have become easier and more flexible in an effort to attract for-profit and nonprofit partners. But expectations have changed too. Payment is now increasingly linked to outcomes and strenuous compliance requirements.
A substantially more diverse and growing amount of for-profit and philanthropic resources is available for investment in promising social enterprises that provide market solutions. Private “impact capital” is a new game changer.
A growing number of nonprofits are better positioned than they have every been to scale their services and substantially increase their impact. Many are commercializing aspects of their business models and creating for-profit subsidiaries that can enable their mission-driven organizations to sustain themselves, scale up and think differently about how they maximize their impact.
Highly influential and successful financial institutions, such as Goldman Sachs and J.P. Morgan, and respected philanthropic grant makers are investing in pay-for-success financing deals. They are providing capital to the most effective and results-driven social enterprises, with an emphasis on those that deliver the one-two punch of social and economic gains and financial returns.
In the last decade, a new business entity known as the “Benefit Corporation” has been created in 28 states. Its legally defined goal embraces both profit and societal impact. More than 1,000 “B Corps” now exist.