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The importance of social or hybrid companies

Last week, 167 B-corporations in Latin America were recognized internationally as “best for the world”. The way of doing business has changed. There is no longer any contradiction between making money and wanting to improve the world. More than 3,000 companies in the world are already evaluating their socio-environmental results with the same rigor with which they measure the financial ones. Our partner animaná has been recognized for having implemented good business practices related to their workers, customers, community, governance and environment. Why are social enterprises so important?

Throughout the twentieth century, we noticed a breakthrough in technological innovation that transformed and affected society; In the economic sphere, a global accelerated growth model can be observed that is based on the consumption and extraction of natural resources, which generates significant negative externalities and is unsustainable in the long term. This situation engendered the current environmental crisis. According to Inga Rhonda King, President of ECOSOC, humanity is consuming the resources of the planet at a rate 1.7 times higher than the regeneration of ecosystems in a year. This form of degenerative consumption increases the ecological footprint, harms biodiversity, and exceeds the limits of planet Earth.

In response to this unsustainable situation, new business structures known as social enterprises or hybrid companies have emerged over the past few years. They use market forces to provide solutions to the current environmental, economic, social, and cultural problems that we face. In the complex contemporary, world it is necessary to raise awareness about the importance of transforming the way of measuring business success in order to generate benefits not only at the economic level, but at the social and environmental level, solving problems such as poverty and economic and social inequality, labor irregularities, degradation and pollution of the environment and others.

In the year 2000, the UN called on companies, configuring ten universal principles on human rights, labor, the environment and the fight against corruption. Companies should follow these principles and join forces and alliances to achieve it. This is how the Global Compact (UNGC) emerged: the largest corporate sustainability initiative in the world. The Global Compact defines Corporate Social Responsibility (CSR): "a new business dimension in which the company can achieve a balance of economic, environmental and social imperatives, while at the same time meeting the expectations of shareholders and stakeholders (interest groups) in their business operations "(UNIDO).

B-corps are a type of social or hybrid companies. This is the name of a community of companies founded in 2006 in the United States, certified as B Corps by the B Lab (non-profit foundation). They are made up of 2,162 companies from 50 countries that have 130 industries (2017). The Latin American B Lab was created in 2012. The B Lab created a system based on three interconnected initiatives with the intention of generating a systemic change for the fourth sector of the economy:

  1. building a community of companies certified as B

  2. the development of public policies necessary to create an adequate legal infrastructure for this type of companies

  3. the development of a classification system for capital investments with impact.

Hybrid companies seek to be connected and integrated into the social and environmental systems in which they operate and engage with local communities, seeking to develop a deep understanding of the context and setting up business models that generate strong and lasting and mutually beneficial relationships. These relationships are formed based on the mission of each company, allowing those companies to generate a positive social change between suppliers and supplier communities, employees and customers.

Positive social change is generated through practices such as Fair Trade, ecological production and the preservation and protection of the environment, the payment of living wages and occupational safety and health, investment in the education of workers and their children, among others. In this way, hybrid organizations demonstrate a strong commitment to their suppliers and choose employees who share the same sustainability values. Close relationships are generated between employees based on mutual respect, compassion and cooperation: decision making is inclusive. In the same way, close and deep relationships are established between the companies and their customers through the products and services that the company offers, based on sustainability practices. Social companies operate under the principles of transparency and thereby encourage other companies to copy their business model.

The recognition of animaná means not only betting on a new fashion paradigm that reaps benefits for all the actors involved (artisans, nature and consumers), but also for a more sustainable daily lifestyle, with responsible consumption patterns where there is possibility of empowering local communities and MSMEs.

Translation: Tori Borlase, University of Pennsylvania.

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