This draft is more than 1300 words long and is not acceptable.

Promising or Pointless? - Impact Investing, Social Enterprise, and the Free Software Movement

-- By AndrewIwanicki - 12 Dec 2019

Introduction

Corporations wield great power in modern society. Though many are engines of innovation and prosperity, corporations can also be callous amoral behemoths driven by shortsighted, superficial, and destructive goals. The traditionally narrow focus of corporations upon profit maximization naturally discounts impacts not reflected in accounting, regardless of their influence upon the greater good.

You're wasting space here with windup. Put your main idea out clearly and succinctly at the top of the draft, so the reader is immediately sure where you are going and can decide whether to go along with you.

For generations in capitalist society, organized protection of quality of life was largely seen as the responsibility of governments and nonprofits, not businesses. However, as evidenced by substantial bodies of business regulations, we recognize that this division need not and should not be absolute.

A movement is growing that seeks to further dissolve the partition that separates the business world from the broader reality in which it exists, to encourage businesses to incorporate new goals and duties into their constitutional documents that more accurately reflect society’s priorities.

We are now 140 words in, and all we know is that a movement exists.

Section I

In 2006, B Lab was founded to certify companies that meet its “standards of verified social and environmental performance, public transparency, and legal accountability to balance profit and purpose.” Though the B Corporation certification has no legal status, it provides a platform for companies to declare commitments to positive impacts and to signal those commitments to the public in a verifiable manner. Today, 2,500+ companies in 50+ countries are certified B Corporations.

In 2010, Maryland became the first state to pass benefit corporation legislation. Now, such legislation exists in a majority of states and several other countries. Unlike B Corporations, benefit corporations are legally bound to pursue self-defined impact goals, which may pertain to the environment, society at large, local community, or working conditions. They must also submit annual impact reports using credible third-party standards.

Other states have created non-binding corporate forms comparable to B Corporations that allow corporations to establish legally non-binding impact goals in governing documents.

Section II

Beyond such narrow stipulations, these social enterprises are identical to C corporations. Some legislation does not even include provisions for the revocation of a company’s status. No impact obligations have been tested in court. Naturally, many doubt the value of these seemingly symbolic entities.

However, legal enforceability is not necessary to establish goals, set expectations, meet commitments, or punish breaches thereof. In fact, law often lags far behind emergent trends, arising consequently.

When an impactful technology is created, its societal impacts are often unknown, making effective regulation difficult and unlikely. As the technology spreads, people become aware of its effects and social norms emerge. Those norms lead to the development of ethical standards, which, in turn, inform regulations.

An illustration would be useful. Every word in this paragraph is abstract.

This movement may be a sign of forthcoming regulation or, at least, serve as inspiration for it. Furthermore, considering this common flow of societal adaptation, these new corporate forms can catalyze positive change regardless of whether they are endowed with legal enforceability. Social enterprises are increasing transparency, raising awareness, and encouraging people to reconsider corporate responsibility.

Any evidence?

Public interest and concern are on the rise, suggesting that more drastic reactions may come.

Section III

The appearance of these new corporate forms coincides with the growth of impact investing (“investments that lead to social or environmental benefits as well as a financial return,” Global Impact Investing Network). Since 2008, when the term “impact investing” was coined,, assets under management have grown to ~$500 billion (GIIN, acknowledging potential inaccuracy due to impact's loose definition and self-reported data). A GIIN survey of 80 investors from 2014 to 2018 showed a ~17% annual growth of impact funding from ~$37 billion to ~$68 billion. The U.N.’s establishment of the 2030 Sustainable Development Goals in 2015 have motivated others to invest and has led to the SDGs becoming commonly used impact metrics. Continued growth is expected as many investors are satisfied with market or near-market returns and estimates suggesting that trillions more are needed to meet the SDGs.

However, these trends are not directly linked to concerns regarding data privacy or free software. Rather, environmental sustainability has been the largest driver of the market. That said, as Prof. Moglen and others proclaim, the second great threat of the 21st century is behavioral surveillance. Perhaps, a comparable response is on the horizon.

Section IV

The prevalence of FOSS-focused social enterprises is a far cry from the burgeoning environmentally focused market, but some examples exist:

Purism is a California-based technology company registered as a social purpose corporation (in Washington). Purism manufactures laptops and smartphones and develops Linux-based software. Within its articles of incorporation, Purism commits to conform to the philosophy of the Free Software Movement and to protect the security, privacy, and freedom of users. The company has raised ~$5 million and sold thousands of devices.

Ello is a Colorado-based social network registered as a public benefit corporation (state unknown). Ello commits to never showing ads, selling user data to third parties, or enforce a real-name policy. The company has raised $10+ million and has over one million registered users.

Osano is a Texas-based data privacy assessment and compliance company registered as a public benefit corporation (in Washington). While selling privacy assessment tools to businesses, it offers its Privacy Monitor tool, a browser add-on that displays privacy-rating scores for websites, to the public for free. Osano raised $3 million in 2018.

These businesses exist. Is there any reason to believe that their corporate form is relevant to how they raise capital or operate?

Section V

Several key differences between the free-software and environmental-sustainability markets may explain the drastic disparity in adoption rates. Some suggest that the free-software social-enterprise community will continue to grow naturally. Others provide insight into potential methods for stimulating growth.

The issue of behavioral surveillance is not yet as prevalent as climate change in politics, media, or public awareness. However, public awareness and concern are quickly growing.

While software companies’ data and practices are protected as trade secrets, environmental impacts must be disclosed. Increased transparency creates a more informed market and can change market behavior.

Environmental impact metrics are more established and widely accepted. Mutually trusted Environmental, Social, and Governance (ESG) metrics serve as a shared language through which communications may flow with greater fluency. Subjective language is not easily integrated into the data-driven behavior of investors, banks, and auditors, creating friction between potential collaborators.

Some are already working to create objective data-privacy metrics. Osano's Privacy Monitor tool scores websites based on 150-question assessments completed by its team of privacy attorneys. The Center for Humane Technology has developed an app rating system based upon their goal of measuring “time well spent” (positive outcomes minus associated time invested). Presumably, professionals have sophisticated models for measuring risks of data-centric ventures, which could inform the development of public-facing tools.

Conclusion

Though these new corporate forms and investment funds certainly are not a cure-all for the present dangers of the software industry, they may serve a meaningful purpose, catalyzing change through increased awareness and informed decision-making. They offer a bridge to businesses that wish to improve their social impact, but are unwilling to become nonprofits. They provide support for stakeholders who advocate for impact goals and protest detrimental actions.

As evidenced by the environmental sustainability movement, established industries are reluctant to pivot even when facing imminent catastrophe and widespread backlash. The convenience of formalized structures, incremental action plans, and economic incentives offer a less daunting path for those considering change.

This melding of the nonprofit and for-profit worlds does raise concerns.

Then so does Delaware corporation law, which has never distinguished the two "worlds."

While social enterprises and impact investing serve as an onramp for businesses to pursue positive impacts, so do they offer alternatives for nonprofits to migrate away from more charitable forms of giving. Furthermore, some will inevitably use these tools to warp public perception and “greenwash” their work.

At the core lies the question: what power do these statements of purpose possess? Will they meaningfully shape behavior in the absence of legal repercussions? Though history is littered with evidence that encourages skepticism, the constitutional declarations of many enduring communities raised the same questions in their infancy. The answer depends upon the will of communities to instill power in these words, enforce commitments through available means, and build upon them to achieve and sustain real change.

I should not even have commented on this draft until you got it under 1,000 words. But the sequence of rhetorical questions instead of a conclusion is part of the same overall blowsiness that fatally afflicts the draft. You need a clear thesis, more discipline in presenting the few facts you have in a terse, explanatory fashion, and an actual conclusion. Using many fewer words.