What is Impact Entrepreneurship?

The reality of the negative impact of hyper-consumerism has made it imperative for businesses to function more competitively but in a way that they can create a positive social & environmental impact

“We need to reverse three centuries of walling the for-profit and non-profit sectors off from one another. When you think for-profit and non-profit, you most often think of entities with either zero social return or zero return on capital and zero social return. Clearly, there’s some opportunity in the spectrum between those extremes. What’s missing is the for-profit finance industry coming in to that area. Look at the enormous diversity of the for-profit financial industry as opposed to monolithic nature of the non-profit world; it’s quite astonishing.”

Bill Drayton, Ashoka Foundation

Impact entrepreneurship is essentially what lies in this opportunity-laden marketplace between “for-profit sector (zero social return) and non-profit sector (zero return on capital)”. The for profit entrepreneurs operating on this line differ in one major aspect from the rest; they have a double bottom line as the end goal. Which essentially means that they aim to make profits while positively contributing to the improvement of one or more social conditions and environmental conditions.

The pressing need to create positive impact

The bedrock of impact entrepreneurship are the United Nation’s Sustainable Development Goals (UN SDGs), that form the sum total of almost all globally pressing issues into 17 tangible world development goals.

Image credit : https://www.un.org/sustainabledevelopment/wpcontent/uploads/2019/01/SDG_Guidelines_January_2019.pdf

In 2015, when the UN identified and distilled the contemporary global issues into understandable goals, it was done so with an aim to create more accountability to bolster general well-being globally. The SDGs became a call for action to individuals to break the inertia of how we have been living and to lead a more responsible life in ways that can contribute in alleviating one of these goals by 2030. In this context, the World Economic Forum observed that initially this concept might seem abstract to the bulk of the global population paying more attention to earning a livelihood than the latest climate science or gender-equality statistics. But being able to collectively ask ourselves how we’re doing, and actually having a clear-cut, measurable way to respond, is crucial for everyone.

Thus began the decoupling of “impact” from being the responsibility of solely the “non profit sector” to it becoming a mandate for the “for profit sector” as well.

5IR / Industry 5.0

It is important to understand that UN SDGs are not the only driving force behind the bourgeoning community of impact entrepreneurs. Shortly after the SDGs were formulated, in 2016, the World Economic Forum held its historic Annual Meeting under the theme “Mastering the Fourth Industrial Revolution”. Industry 4.0 as the Fourth Industrial Revolution is referred to, marked the era of developing and applying tech to existing manufacturing processes with a view to revolutionise the system. This heavy adoption of tech ushered in the age of disruption in every sector. Today experiencing a need for another transition, we find ourselves moving in a new direction.

The Fifth Industrial Revolution (5IR) or Industry 5.0 or the Cognitive age - are some monikers of our fast approaching collective future, the glimpses of which we witness everyday. In 2021, the European Commission published a report titled Industry 5.0 which fed into the wider debate on industrial transformation, which aimed to compliment and extend the tenets of Industry 4.0. It emphasised aspects that will be deciding factors, not just economic or technological, for the definition of industry in the future European society. These factors had specific environmental, social, and fundamental rights’ dimensions that could be applied internationally. It was the result of a forward-looking exercise to help framing how industry, emerging societal trends and needs can co-exist.

In essence this report recognised the power of industry to achieve societal goals beyond jobs and growth to become a resilient provider of prosperity, by making production respect the boundaries of our planet and placing the wellbeing of the industrial worker at the centre of the production process. EU led the way to give the world a framework for an ideal modern day industry based on the concepts of “tech for good”, “sustainability,” “human-centeredness,” and “resilience”. It is predicted that converging technologies like AI, Internet of Things (IoT), nanotechnology, biotechnology, will redefine automation, leading to increased efficiency and productivity.

In fact, in an analysis published in 2023, McKinsey Technology Council highlighted the development, possible uses, and industry effects of advanced technologies like Generative AI. The document highlighted that generative AI and other foundational models change the AI game by taking assistive technology to a new level, reducing application development time, and bringing powerful capabilities to nontechnical users. Generative AI is poised to add as much as $4.4 trillion in economic value from a combination of specific use cases and more diffuse uses—such as assisting with email drafts—that increase productivity. With ChatGPT and a burst of other Gen AI based applications, this metric is already believable. But the larger prediction is applicable for more nascent technologies like quantum computing as well. The analysis shows that the four industries likely to see the earliest economic impact from quantum computing—automotive, chemicals, financial services, and life sciences—stand to potentially gain up to $1.3 trillion in value by 2035.

Industry 5.0 is one of the main drivers of impact entrepreneurship as it is a call for action to imagine a human centric society, which balances economic development with the need to resolve societal and environmental challenges. It aims to iron out the challenges we faced with Industry 4.0 and gives us a vision to harmonize human and machine intelligence as this marriage is imperative for the advancement of humanity.

Aiming for Impact

Impact entrepreneurship has emerged as a logical answer to contribute to resolving the underlying issues of the UN SDGs and also to envision our future with Industry 5.0. This innovative human-centric approach to production is also disruption in its own right as it aims to disrupt the status quo of why and how we apply tech to our business.

By challenging traditional business models, impact entrepreneurship pioneers a new paradigm where technology is harnessed not merely for profit, but for positive societal change. This shift is often termed "altruistic" or "humanistic capitalism," where financial success is intertwined with measurable social, environmental, and cultural impact.

In essence, impact entrepreneurship represents a beacon of hope in an increasingly complex world. It empowers individuals and organizations to drive sustainable development by blending innovation, compassion, and a deep-seated commitment to societal betterment.

Consider the pioneering work of companies like Patagonia, which has long championed environmental sustainability and fair labor practices. By integrating these values into its business model, Patagonia has not only achieved commercial success but has also inspired a global movement towards responsible consumption. Similarly, organizations like Grameen Bank have revolutionized microfinance, empowering millions of impoverished individuals, particularly women, to break the cycle of poverty.

As we move towards Industry 5.0, impact entrepreneurship will play an even more critical role in shaping a future where technology serves humanity's highest aspirations. By fostering collaboration between diverse stakeholders, including governments, businesses, and civil society, we can harness the power of innovation to address pressing global challenges and create a more equitable and sustainable world for all.

As we conclude this episode, let's turn our attention to a profound truth: we are all vulnerable. No matter our wealth, our status, or our power, we are inherently fragile. It's a humbling realization, but one that can also be empowering.

In our pursuit of progress, we've often prioritized the environment as a singular entity, forgetting that it's a complex system that sustains us. While environmental conservation is undeniably important, let's not delude ourselves into thinking we can control nature's forces. Tsunamis, earthquakes, and other natural phenomena are testament to the immense power of the planet.

Instead, let's focus on mitigating the damage we've already inflicted. The conversation of our time should revolve around finding innovative solutions to address climate change, pollution, and resource depletion. It's about ensuring a sustainable future for generations to come.

And let's not forget the human element. As Gary Haugen wisely said -

When our grandchildren ask us where we were when the voiceless and the vulnerable in our era needed leaders of compassion and purpose, I hope we can say that we showed up, and that we showed up on time.

Impact entrepreneurship offers a beacon of hope in this regard. It's a movement that prioritizes people over profits, seeking to create a more just and equitable world. By embracing our shared vulnerability, we can foster empathy, collaboration, and a collective commitment to positive change.

Let's use our shared humanity as a catalyst for action. Together, we can build a future where everyone thrives, regardless of their background or circumstances.

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“When our grandchildren ask us where we were when the voiceless and the vulnerable in our era needed leaders of compassion and purpose, I hope we can say that we showed up, and that we showed up on time.”
– Gary Haugen, Founder of International Justice Mission