Like all markets, social-benefit markets provide a platform for buyers and sellers to exchange commodities, but they are distinguished by their unique goal of improving social and environmental conditions. For example, most people are familiar with carbon trading markets, which aim to reduce greenhouse gas emissions. Social-benefit markets are not only a promising strategy to combat pressing social and environmental problems; they are also contributing significantly to the world economy, with trading volumes estimated to reach $1 trillion by 2020. Still, the problems that these social-benefit markets address are large, complex and multifaceted; their development and sustenance therefore will require novel entrepreneurial approaches.
The power of a collective
In the article “Environmental Entrepreneurship and Interorganizational Arrangements: A Model of Social-Benefit Market Creation,” recently published in Strategic Entrepreneurship Journal, Jacqueline Corbett and A. Wren Montgomery, who is a visiting scholar at the Erb Institute, propose a model for creating social-benefit markets. According to this model, the collective contributions of several key sectors provide the necessary resources and legitimacy for the new market. Specifically, Corbett and Montgomery suggest a core group of entrepreneurs “must come from three main sectors—business, government, and social movements.”
To succeed in the formation of a social-benefit market, these core entrepreneurs require characteristics typical of entrepreneurs: innovativeness, proactiveness and a willingness to take risks. The researchers explain that “a single entrepreneur lacks the skills, capabilities, and credibility necessary for social-benefit market creation.” Diverse individuals and organizations combine their expertise and resources to achieve a common objective.
One problem with social-benefit markets is that they trade in so-called public goods—such as clean air and water—which may involve no inherent private property rights. Social-benefit markets need to create different incentives for participation than traditional markets do. A potential solution is developing an IOS (interorganizational information system) that will “facilitate the creation and management of virtual property rights for public goods.” This IOS can measure and control the benefits, define tradable units and facilitate trading.
The social-benefit market’s formative processes must allow the diverse actors’ interests to be aligned and integrated into the “market artifact”: the information system that supports the interorganizational arrangement (such as hardware, software, data and procedures). Beyond the core entrepreneurial group, other supporting actors within the global community may include potential market participants, such as buyers and sellers; information intermediaries, such as technology companies; and financial intermediaries, such as banks.
Phases of social-benefit market creation
Corbett and Montgomery provide a six-phase process to align and “inscribe” the entrepreneurs’ interests into a market artifact and to form the market.
- Joint problem recognition. The actors recognize a broad-based social or environmental challenge that affects them and others.
- Joint solution design. The concept of the social-benefit market as a potential solution begins to emerge.
- “Interessement.” Actors get other actors interested in the proposed solution; refine the vision of the solution; and identify, articulate and align the benefits.
- Resource pooling. The necessary resources are identified and assembled.
- Market artifact creation. The actors’ interests become inscribed or embodied into the market artifact—through investing in hardware, for example.
- Entrepreneurial transference. The market goes live and the first transactions are conducted.
This model is both similar to and different from traditional entrepreneurial undertakings. “In particular, the complexities of social-benefit market formation demand collective action and the recombination of unique skills and resources, leading to the creation of a stable market artifact inscribed with the interests of a plurality of entrepreneur-actors,” the researchers wrote.
This research adds to the existing literature on entrepreneurs’ role in creating markets, by focusing on a new form of market that relies on environmental entrepreneurs specifically for their unique skills and knowledge. It also builds on literature that suggests “heroic” entrepreneurs are unlikely to orchestrate complex change alone.
Business, government and activist involvement is essential in developing any successful social-benefit market, the researchers say. To this end, the authors lay out actionable guidance for businesses wishing to work across sectors to develop the new ventures and markets of tomorrow. Further, the paper can also be read as a call to action for businesses and sustainability practitioners by illustrating the need to actively work together to achieve a more sustainable future.