NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Tuesday, December 1, 2015

For many who have been working in the social enterprise space for a long time, nothing has been quite so startling as the recent lightning fast acceleration of the so-called “impact” investing movement. In the U.S., much of the traction for the movement has been supplied by the rise of new “hybrid” legal forms such as the Benefit Corporation and the L3C, and the spread of the B Corp brand.

Some view these developments as the long-awaited key to scaling solutions to the world’s most intractable problems. I’m not so sure about that. In fact, heeding Einstein’s warning that “no problem can be solved from the same level of consciousness that created it,” I’m worried as hell.

Let me tell you why.

The Antidote To Business

Business is arguably the most powerful institution on earth. At the heart of the impact investment movement is the idea of harnessing its power for the greater good. Indeed, ongoing economic growth has broadly raised quality of life across the globe.

But it hasn’t done so fairly. Massive inequality in wealth is the fundamental justice issue of our time. Nor has it done so sustainably. By dumping the real costs of resources, labor, and emissions onto people, communities and the planet, business has enriched shareholders with ill-gained profits, and, in fact, created many of the biggest global problems that we now seek to correct.

It’s no surprise that business acts this way. American business leaders, for example, have a legal, fiduciary duty to maximize financial returns for shareholders ahead of all other considerations. These leaders aren’t bad people. They’re simply doing what the system demands.