As the climate warms up and government funding cools down, some not-for-profits are finding themselves constantly battling to finance core projects. They are under pressure to restructure, haemorrhaging experienced and dedicated staff, while they struggle to sustain, let alone scale up impact within the communities they work with.
Australia currently has approximately 600,000 not-for-profits who generate income from all types of grants, philanthropic funding, membership fees, social enterprises, fundraising and corporate engagement. According to the Australian Charities Report 2016, a 43% slice of this pie comes from the government. This is an unhealthy dependence at a time where foreign aid cuts proliferate and the priorities of the government of the day seem to lean further and further away from the third sector. For most not-for-profits, it’s time to reflect on their business model, they need to diversify funding and the way partnerships are used to work towards the social good they want to see in the world.
Making money and doing good.
The idea of using the dollar in business to do good has probably been more obviously articulated in the private sector than the not-for-profit sector, from social stewardship to corporate social responsibility, then to licence to operate and shared value.
In the not-for-profit realm, perhaps the first substantial conceptual leap that intersected doing good with making money was in the humble op shop. The Salvation Army is arguably the pioneer of the second-hand retail business in Australia. What began in 1880 as a ‘recycling depot’ that provided work, food, shelter and hand-me-downs for ex-prisoners re-entering community has now become an empire. The op shop is now not only a place for people living on a tight budget but a growing segment of dedicated vintage-fashion hunters. The evolution of the op shop is such that there are now specific lines of ‘high-end’ retail stores like the Red Cross ‘Red Threads’ shops which are strategically located in the trendy parts of Melbourne such as Bridge Road. They display second-hand designer clothes as well as brand-new Country Road clothing, all in an immaculate shopfront. A far cry from the musty-smelling, clutter-filled labyrinths of the ghosts of op shops past.
Another area in which not-for-profits have made strides in marrying business with cause is in the creation of social enterprises, businesses set up specifically to address a social problem. A great example would be the catering and cleaning businesses that the Asylum Seeker Resource Centre run which gives avenues of employment for many of their members who are newly arrived and in the process of their refugee application.
But beyond the not-for-profit bubble, there are other forces at play pulling the private and public sector into a similar orbit. With the government doling out initiatives like NDIS and JobActive, not-for-profits are being contracted to deliver services and having to start talking in KPIs. While in the past, these organisations were mostly left to their own devices to feed the hungry and dress the poor without much questioning, nowadays funding and external pressures like these are driving them to re-think how to harness the power of business to meet the world’s needs.
Doing good by doing good business.
Shared value is a concept that builds on just that. A good example is Business for Development, a not-for-profit who brokers partnerships between the private sector, other sector partners and local communities in tackling extreme poverty. Take for instance their work with Base Titanium, a mining company, Cotton On Group and other NGOs to build the capacity of local farmers from Kwale, Kenya to grow cotton. Farmers who previously relied on subsistence farming of maize, beans and sorghum were introduced to growing cotton and equipped with training and resources needed to achieve commercial yields. The impact for the local community was opening up a way of making a living, beyond field to mouth, to a business that sells to an Australian multinational company like Cotton On. The success of this project helped Base fulfil their licence to operate responsibilities and contribute positively to the community they operate in. It’s also helping Cotton On achieve their goal of using 100% sustainable cotton by 2023 and Business for Development’s goal of lifting people out of poverty through the training of 10,000 farmers. A collaboration like this is a good example of how the business-savvy skills of the for-profit can come together with the cultural understanding and capacity developing expertise of a not-for-profit, to open up new lines of businesses with untapped markets, create new lines of ethical supply chains and leave lasting positive impact on people who are doing it tough.