Understanding the Fourth Sector

10.05.2021

Typically, in most countries, there are three main sectors.

  1. The public sector 
  2. The private sector 
  3. The non-profit sector 

Although these sectors continue to have enduring appeal, they are often criticised for lacking reinvention. The Fourth Sector Group elaborates on this further, claiming that despite the progress which society has made in improving the quality of life for millions across the globe; “large-scale, urgent, and complex economic, social, and environmental challenges” have remained. A large portion of these challenges are by-products of the “outdated and unsustainable economic systems” that have become deeply integrated and normalised within society.

The Fourth Sector Group claims that “today’s dominant economic systems are centuries old, born out of the industrial age.” They advocate for a radical revision of these systems. This is not to say that the three main sectors are ineffective, instead, it is argued that they are inefficient. Meaning that although the three main sectors have provided us with many precious goods such as “trade, technologies, and infrastructure”; they have failed to do so sustainably or in a consistently collaborative way.

This line of argument is highlighted by calls for major sectoral reforms being heard from a diverse range of state and non-state actors, “from citizens and civil society to business and political leaders to academia, and global institutions.”

Hence, the emergence of the fourth sector.

But, what actually is the fourth sector?

This sector is a hybrid-like combination of the three main sectors. According to the Fourth Sector Group, “it combines market-based approaches of the private sector with the social and environmental aims of the public and non-profit sectors to address pressing problems”. This revolutionary sector attempts to innovate and transcend our understanding of traditional sector distinctions. The aim is to broaden the landscape for what is possible and create a positive, sustainable impact whilst doing so.

According to a Global Entrepreneurship Monitor report, there are millions of fourth sector start-ups, also known as for-benefit start-ups, being launched around the globe each year. This growth is expected to rapidly increase.

Endeavours in the fourth sector, are showcased in a variety of models. The Fourth Sector Group report that models range from “mission-driven businesses, social enterprises, and sustainable businesses, to cooperatives, benefit corporations, and faith-based enterprises, among many others.”

So, what’s the response?

The World Economic Forum reports that the fourth sector “is a chance to build a new economic model for the benefit of all.” It is an opportunity to radically change and address some of the most critical challenges which destabilise societies and threaten the planet. Problems such as “climate change, rising inequality, political upheaval, disruptions to labour markets and mass displacements of people” may finally receive dependable, effective solutions. They believe this is partly why the fourth sector has gained so much traction and is steadily receiving investment. 

Data from the World Economic Forum also finds that the fourth sector could account for as much as “10% of GDP as well as nearly twice the job growth rate as traditional for-profit businesses in the US and Europe.” 

Oxfam has also praised the sector, stating that the “fourth sector would operate at the heart of the economy, encapsulating businesses engineered to balance social, planetary and commercial concerns. Critically, these businesses would be geared towards mission primacy, not shareholder primacy.” And as a result of this, we can acquire widespread societal good.

Although there is a lot of positive feedback and a great deal of optimism for the fourth sector, there is also some scepticism and concern. According to BuildBetter.world, “the growth of the fourth sector is constrained by the legacy ‘three-sector thinking’.” This deprives the sector of the “coherent and cohesive supportive ecosystem” needed for it to flourish.  

However, it can be argued that this concern is not necessarily related to the fourth sector itself, but instead society’s stringent attachment to the three dominant sectors. With tools like education and leading by example, we can help break down this relationship in order to accommodate for a more progressive and impactful one. 

Sources:

https://www.fourthsector.org/what-is-the-fourth-sector
https://views-voices.oxfam.org.uk/2017/09/missing-piece-puzzle-fourth-sector/
https://www.weforum.org/agenda/2017/09/fourth-sector-chance-to-build-new-economic-model/
https://www.buildbetter.world/about-the-fourth-sector

Written by: Zahira Rafiq 

Edited by: Zahira Rafiq