We need new financing business models for SDGs
By: Marc De Beaucorps
Tags: Sdgs, Token, Business Models, Investment

Remunerate the positive impact with tokens, business models & new financing tools to achieve your Sustainable Development Goals.

This paper is owned by we4sdg (we4sdg.io) — impact & tokenisation advisory firm. (2019)

The world is now looking for new business models. The current situation is unsustainable with an economy leading humanity towards an ecological and social collapse, no longer able to manage the tensions of the different forms of inequality and to support the multiple technological revolutions. The world must refocus on real objectives, succeed in involving and valuing all stakeholders and rely on longer timeframes. We have been able to work on new financing business models allowing the inclusion of different actors around a common project in a long time. These business models will enable entities (companies, collectives, networks, movements, territorial and state entities) to take ownership of new financing and implementation models focus on the Sustainable Development Goals (SDGs).

We need to create new business models for organizations

a) Inclusive new business models

Launched in January 2016, the Sustainable Development Goals were developed to help accelerate the eradication of all forms of poverty, tackle inequalities and climate change. The support of all UN member countries to the 17 SDGs reflects the significant evolution of the concept of corporate social responsibility (CSR). The concrete and operational consideration of these 17 objectives and their 169 targets at the heart of the corporate strategy represents a major priority and long-term project. Their priority seems to us particularly important because their realization must mobilize all the energy of humanity to answer the current stakes

Respond to the risks of collapse related to the climate, environmental and ecological crisis.

Construct the new forms of necessary policies because of the hyper-connection and the comprehensiveness of the questions to be treated.

Develop new ways of sharing value. This creation of value will have to be less and less material because of the scarcity of resources.

States have already begun this transformation by modifying behaviours in a mandatory or incentive manner. Enterprise quotas, school program changes, and environmental measures are some of these changes. However, whatever their influence, states can not handle these problems alone, and in general no single entity can solve SDG issues alone. The United Nations has provided a framework for the SDGs, which covers the bulk of economic activities.

The next ten years will radically change organizations from an economic and organizational point of view. The majority of organizations we know need to adapt their business models to achieve their SDGs.

The future stakes of the organizations are complex and require the mobilization of all the actors who are involved around these organizations. It is an integration both in the sharing of values, in the incentive for behavioural changes or in the decision-making process. These organizational changes are possible because of new technologies.

We must include employees, communities, consumers, suppliers, associations, public bodies differently around an ecosystem dedicated to a problem. The inefficiency of an ecological decision without the involvement of individuals, all these companies that pay employees based on the result or the power of computing communities that have shaped the majority of companies in the sector are good examples of this transformation.

The Apple addicts, the creators of Internet protocols, the 400 000 ethereum developers are the first source of value of these ecosystems.

Due to a lack of flexibility or a fear of change, business models take time to adapt to the inclusivity that is fundamental for their growth and the achievement of their SDGs. In addition to new types of actors, it is also necessary to gather a multitude of individuals.

b) New business models for the multitude

The number facilitates long-term changes. The number of individuals in the economic and decision-making ecosystem is steadily increasing. Indeed the population is increasing and the organized population (member of an organization) is increasing more than proportionately. The World Bank estimates that now nearly two billion people are employed by companies. The world population has tripled in fifty years and it is estimated that the urban population will grow by one billion in twenty years.

We know that new types of actors are needed, but only the mobilization of many of these actors can have a strong long-term impact on the creation of sustainable economic values.

In “Age of Multitude”, Nicolas Collin, one of the first promoters of the notion of the multitude in the digital economy, explains with Henri Verdier that the power of the company now depends on its external organization. The crowd is a positive externality, which must be considered as an asset in the same way as intellectual property. According to the French essayist, the dominant companies are those which have established a link with the widest multitude. The power of networks, democracies or decentralized currencies are examples of the strength of the multitude.

We need new actors and numbers. The best system to include different actors around a common goal is to create an ecosystem that is easy to access, automated and scalable.

Define business models to foster long-term growth

a) The SDGs will be the first business in 2050

In the coming years, organizations will refocus their activities around the SDGs for sustainable long-term growth. So the SDGs will radically change business models of organizations.

Today, the SDGs are only a small part of the economic activity, but mentalities and the economic environment are changing very quickly. The SDGs include production, consumption, resource management and wealth distribution.

According to the BSDC (launched after the World Economic Forum), the SDG business will generate at least $ 12 trillion over the next 20 years, which will represent 380 million jobs. These new businesses require a financing system that mixes both economic growth and the achievement of common objectives. Only an inclusive business model and financing that includes other players than the company and the investor can meet this need. Pwc identifies three priority SDGs for French companies:

● Climate Action (SDG 13)

● Responsible consumption and production (SDG 12)

● Good job and economic growth (SDG 8)

b) From economic growth to sustainable economic growth

It is in human nature to seek growth, yet we live in a finite world. It is impossible to achieve growth of 15% per year over an infinite period of time with finite resources. To maintain growth, we must redefine the notion of economic growth. How to redefine the notion of growth while remaining competitive? How to encourage companies to take into account the positive impact?

This requires paying a positive impact (PI), assigning it an economic value and including it in the calculation of growth. The positive impact is defined as a significant and measured relevant contribution recognized by the stakeholders contributing directly to the achievement of all or part of the SDGs and SDG targets.

A plane ticket Paris — Rio versus a plane ticket Paris — Moscow — Rio

Individuals are economically rational and do not choose the durable solution. It is, therefore, necessary to encourage the choice of the most responsible solution by assigning a quantifiable value to the SDG gains so that the individual chooses it. The one who bears the positive impact receives in proportion the remuneration of the PI, which balances the reasonable and the economic one.

To make this transition happen, you have to redefine the growth models by modifying the existing models. Human nature does not accept stagnation and economically the decrease in growth can have adverse effects on the functioning of organizations, we must pay this IP.

Our concrete solutions for quantifying, financing and achieving the SDGs

a) Boosting and valuing SDG ecosystems through platforms

Economic or social objectives require convergence around an ecosystem.

An ecosystem is a network of economic or social actors who develop a common interest through their exchanges.

The platform is today the best tool to boost and value an ecosystem. The platform allows a large number of individuals or organizations to coordinate, create, produce, maintain, gather on a problematic in a simplified way.

Representation of a platform by Simone Cicero.

The owners are the entity that holds the vision that underlies the realization of the market and ensures that the strategy of the platform exists, evolves and develops. It can be an organization or a consortium of organizations.

Partners are professional entities that seek to create additional professional value and collaborate with platform owners in a strong way.

Peer producers or service providers are entities that want to add value to the ecosystem offering, usually seeking to hone their capabilities for better performance.

Peer consumers or users are entities interested in consumption, use, access to the value created via the platform.

Stakeholders of the platform are entities that have a particular interest in the platform, to control the externalities and results of the platform, to regulate it or to exercise rights in the governance of the platform.

The added value of such a platform is expressed through the transaction and coordination of ecosystem actors on specific and operational objectives as well as collective learning to increase efficiency.

The platform simplifies the design of the infrastructure, the development of protocols and the constitution of governance rules.

b) Quantify and remunerate positive impact with tokens

We must encourage changes in behaviour by quantifying and remunerating the positive impact. Achieving a positive impact involves mobilizing the multitude to foster (create, coordinate, monitor, maintain) commitment to achieve that impact.

Tokenization of the impact allows to

Facilitate transactions

Provide units of account to appreciate achievements

Create value related to the positive impact

Involve people in governance

Tokenization thus allows to “monetize” the ecosystem focus on the achievement of a positive impact and to benefit from the advantages of this tool. The valuation is made on the impact, the impact measure, the actions or on a conventional basis. The closer the tokenization is to the impact, the better the system is.

Tokenization can be done in fiat (fiduciary currency) or tokens. For the impacts recognized by fiat, this solution will be taken into account and favoured by weighting the effects of financialization. In the context where the use of fiat proves difficult or risky the creation of token will be promoted.

Representation of a platform including the positive impact

c) The Smart Bonding Curve: A flexible, innovative and long-term financing system that encourages individuals to develop the SDG ecosystems

How to integrate and remunerate groups of individuals around a business model? The changes organizations have to make are so important that they will impact their business models. For this reason, we support organizations in these changes and have developed a system in tokens that allows integrating into the remuneration and decision groups of individuals around a business model. This model makes it possible to finance an organization while paying for its ecosystem. Thanks to a monetary reserve that belongs to the entire ecosystem, the remuneration of all are correlated to the success of the organization. This funding model can be broken down for different organizations. It pays for the active community of an organization. It can also be used to include its employees who hold a share of the reserve, which increases according to the result of the company which allows converging the interests of both parties without diluting the capital. This system also works for a startup that wants both to establish continuous funding and to encourage people to join its ecosystem. The Smart Bonding Curve is particularly suited to the financing of SDG organizations because the inclusion of new players, the multitude, the individual and group incentive are essential elements for the success of SDGs business.

What is a bonding curve financing? A smart contract is created to manage the relationships between the members of an ecosystem and distributes organization-related tokens in an automated and transparent way. The smart contract can create, send or destroy tokens. Depending on the model, these tokens can have economic value and use value.

Investment: The investor buys tokens in cryptocurrency or fiat. These tokens are defined in relation to the desired impacts. Some of the money invested goes to the organization and part of it is held in reserve. He may withdraw his portion of the reserve at any time. The amount in reserve increases as the activity of the organization grows.

The investor buys tokens in cryptocurrency or fiat. These tokens are defined in relation to the desired impacts. Some of the money invested goes to the organization and part of it is held in reserve. He may withdraw his portion of the reserve at any time. The amount in reserve increases as the activity of the organization grows. Development: When a consumer pays the organization, the smart contract receives a payment, it uses a fraction of the amount to increase the reserve. The rest of the payment is transferred to the organization.

When a consumer pays the organization, the smart contract receives a payment, it uses a fraction of the amount to increase the reserve. The rest of the payment is transferred to the organization. Return on investment: When a token-holder sells his tokens, they are burned by the smart contract, and he receives in exchange his reserve share.

When a token-holder sells his tokens, they are burned by the smart contract, and he receives in exchange his reserve share. Compensation: The organization can invest in the ecosystem by sending money to the reserve, which is a way for it to pay token holders.

The reserve functions as an escrow account, but automated. The reserve receives a share of each investment and each sale. The more the business activity grows, the more it grows. This system allows crypto tokens valuation correlated to the activity of the company excluding most instability of the supply and demand market.

Example: Financing a startup with and without a bonding curve

Classic financing by investment and income

Financing by bonding curve

The reserve rate (share of investment and income in reserve) is defined in advance by the organization according to its needs and the financing will follow the bonding curve model (More details to come). This system encourages early adopters who can recover or resell their share of the reserve after it has increased due to the growth of the economic activity of the organization. This mechanism encourages all members to promote the ecosystem they are part of. The organization can focus on its business, financially it benefits from a continuous investment system based on the results of activities.

Smart Bonding Curve advantages

Economic benefits:

Sustainable and Controlled Growth: Continuous financing provides a long-term business model. The curves encourage long-term investment because the growth of the price of tokens is fixed in advance. In addition, the shared reserve system encourages token holders to promote the ecosystem of which they are part.

Continuous financing provides a long-term business model. The curves encourage long-term investment because the growth of the price of tokens is fixed in advance. In addition, the shared reserve system encourages token holders to promote the ecosystem of which they are part. Resolving business cash flow issues: The funding for the organization is more regular than a capital investment one because the organization also holds a share of the reserve. In case of need for liquidity, she can sell her tokens at any time. Moreover, when a token-holder withdraws his share of the reserve there are no consequences on the cash-flow of the company.

The funding for the organization is more regular than a capital investment one because the organization also holds a share of the reserve. In case of need for liquidity, she can sell her tokens at any time. Moreover, when a token-holder withdraws his share of the reserve there are no consequences on the cash-flow of the company. Liquidity and continuous growth of the return on investment: From the investor’s point of view, instead of periodically valuing his investment, the continuous reserve allows him to estimate in real time the value of his investment (his tokens). It is a liquid investment, it can also withdraw its share of the reserve when it wishes without impacting the company.

From the investor’s point of view, instead of periodically valuing his investment, the continuous reserve allows him to estimate in real time the value of his investment (his tokens). It is a liquid investment, it can also withdraw its share of the reserve when it wishes without impacting the company. Adaptable financing system: This system is adaptable to any business model, it may be suitable for a startup looking to finance itself, a company that wants to include its employees by giving them tokens or a non-profit seeking to bring together different actors around a common goal.

Benefits for the ecosystem:

Inclusion of multiple players: The Smart Bonding Curve brings together the community, consumers, employees, investors and all stakeholders in an automated ecosystem activity.

The Smart Bonding Curve brings together the community, consumers, employees, investors and all stakeholders in an automated ecosystem activity. Transparency and sharing of resources: The remuneration of a token-holder depends on the success of the organization weighted to its personal involvement (characterized by its share of tokens). The distribution of tokens is transparent on the blockchain.

The remuneration of a token-holder depends on the success of the organization weighted to its personal involvement (characterized by its share of tokens). The distribution of tokens is transparent on the blockchain. Incentive to involvement and positive impact: The inclusion of new actors, the multitude, the individual and group incentive are fundamental conditions for achieving the SDGs.

Technological advantages: