Breaking the ice: A role for impact entrepreneurs?

By Monica Vasquez Del Solar, Head of Strategy and Impact at Social Nest Foundation

Impact-driven companies differ from traditional ones in that their social and environmental mission is their main objective or is at least as important as their profit-making aim. While the term “social enterprise” or “impact-driven company” is relatively new, it is becoming ever more widely used in a variety of sectors, ranging from financial intermediation through to food systems. One example of this is the World Economic Forum’s demand in 2021 that governments, corporations, investors, and other intermediaries unlock the power of impact-driven enterprises in order to make economies more inclusive and sustainable.

Within that context, it has been said in a variety of places that the words impact or impact-driven companies are getting overused, that they have come to mean everything and anything… in short, they have become in “buzz words”. First, there are the arguments claiming that impact-driven enterprises are merely symbolic improvements on traditional enterprises and as such, are a “soft way” of reproducing the traditional underlying logic of shareholder primacy and financial return maximization. And then there are those who argue that “impact-driven companies” are not capable of scaling and are therefore not a driving force in transforming the business system. Which is to say, they are not capable of changing practices toward an impact economy where institutions, companies and individuals give equal priority to positive impact and financial returns when making business and consumer decisions.

Despite those claims, at Social Nest Foundation, we firmly believe that impact driven companies are extremely important actors for transitioning towards an impact economy. Why? Because even though in the early stages impact driven companies are heavier on the promises than they are on performance, their interplay with consumers, providers, investors, and public entities creates a different business narrative and exert a transformative kind of power that gets demonstrated by their capacity to bring in diverse stakeholders with relevant resources to support them.

We don’t see impact entrepreneurs as “modern heroes” who bear the burden of changing the system. We do, however, see them as seeds of change, those who bring their skills, emotions, and on-the-ground connections to drive organizations that embody a new set of values, beliefs, and practices. Getting those values institutionalized across the wider economic system is a challenge, of course, and comes with its own tensions.

To address those tensions, more strategic partnerships between impact-driven companies and actors with diverse backgrounds are needed. In that sense, it is critical to strengthen collective action that not only builds a common vision of what needs to be changed, but also figures out how to make the new arrangements actionable.

Impact-driven companies should be viewed as mission-centric economic agents who, with the appropriate support (technical assistance, funding, regulation, commercial partnerships, etc.) might be considered living laboratories where alternative approaches for creating environmental, social, and economic value are to be validated. Additionally, they can be seen as those actors who help to build a hybrid logic that will lead to society shifting away from traditional prescriptions and shaping an impact economy.

Several developments show how that hybrid logic of combining impact and profitability is taking hold in different spheres. Some examples are the experiences of corporations taking an increasingly social and environmental stance, or the financial market shifting towards impact (the impact investment market is estimated to reach over one trillion dollars as shown in the most recent report of the Global Impact Investing Network (GIIN)). However, what still is needed are more solutions and capital with an intentional focus towards generating positive impact, particularly to contribute to Sustainable Development Goals (UNDP).

Even though a better future for all does not depend solely on impact entrepreneurs and their companies, they can indeed play a role as icebreakers in the traditional system and, as such, must be sought out by economic actors to collaboratively generate the hybrid logics and alternative solutions that will address the most important challenges facing humanity.