Why do we task non-profits with the largest challenges like poverty, hunger, and public health yet we suffocate them with limited resources and a fraction of the opportunities for growth and development available to for profit entities?
I think we’re beginning to make strides, in effect, loosening some of the double standards applied to entities doing service for others. Read on for more about new ways we’re giving social justice enterprises a fighting chance.
I hope this post makes you rethink how you spend and share your money. I hope this post makes you stop and reflect on how you’ve thought about charities and philanthropy in the past. I hope this post even makes you a little bit angry.
We offer the fewest resources to and set the most crippling expectations for the organizations tasked with solving some of the world’s largest problems. Simultaneously, we give immense freedom and high levels of risk tolerance (aka. flexibility for failure) to the giant corporations trying to sell us more junk.
High risk bears high reward right? And low risk, while promising limited down side, also drags along with it an almost guarantee of low reward. How do we expect non-profit organizations to effectively take on poverty, hunger, and disease world wide when they’re forced to perform under far more stifling conditions than their for-profit brethren?
As a society (the whole darn world “society”), we’ve tasked governments and not-profits with fixing the biggest and nastiest of our problems. Governments certainly have access to a large pool of resources but they’re constrained by their own set of limitations and are out of scope for today’s discussion. For now, let’s focus on what we give to non-profits and what we expect from them in return.
In 2016, non-profits received $390.05 billion in donations, which represents 2.1% of gross domestic product. That sounds like a lot, but compare that to the $12 trillion in revenues earned by the Fortune 500 companies (the 500 largest companies in the US) in the same year. The $12 trillion figure includes revenue from abroad, while the donations include only US revenue, so that distorts figures to a degree. It still, however, represents the funding available to each of the entity classes to invest in achieving their respective missions. In 2016, non profits in the United States received just 3.25% of the revenue earned by for profit companies.
Understandably, payments to the Fortune 500 are generally in exchange for some good or service whereas we often recover nothing tangible in return from a charitable contribution. Additionally, a large portion of the Fortune 500 revenue comes from buying things we need, but much of it also derives from buying things we want (and definitely don’t need).
Regardless of the genesis of the funding, we are asking non-profit organizations to solve massive and complex problems (that are far more complicated than the issues many for-profit entities are tackling) with a fraction of the resources. Furthermore, we limit the ability for non-profits to invest in themselves and their missions, use capital markets, compensate employees competitively, and market their message due to cultural expectations of non-profit entities.
In his Ted Talk, Dan Pallotta articulates these arguments far better than I do, so have a listen.
It’s Not All Bad for Non-Profits, But…
Non-profit have some benefits. Not having to pay taxes is great. Not having to provide any return on money to “investors” (a.k.a. donors) might seem advantageous on the surface. Additionally, there are some organizations that must be organized as non-profit entities for one reason or another.
Generally, however, the benefits of organizing as a non-profit entity pale in comparison to the list of opportunities for growth and development available only to for-profit enterprises.
How Are We Evening The For-Progress Playing Field?
B Lab, a non-profit organization dedicated to using the power of business as a force for good, is building a solution. They’ve married the social activist role traditionally filled by non-profits with the economic and cultural benefits of for-profit business by establishing a B Corporation certification.
B Lab established a set of rigorous standards against which companies are assessed in order to be classified as a B Corporation. The standards require a company to maintain compliance with various measures related to social and environmental performance, public transparency, and legal accountability while fulfilling a mission to use the power of the markets to solve social and environmental problems.
In short, the B Corporation certification brings together the best of both worlds for those of us looking to make the greatest impact on our world in the most efficient way. Companies have access to all of the benefits of being a for-profit organization while ensuring shareholders expect a social or environmental mission to be central to the company’s goals and objectives.
Support the B Corporations In Your Communities
More and more companies are becoming Certified B Corporations. Not only does this help ensure the companies can maintain their social and environmental missions but it also helps consumers trust that the companies are following through on their for-progress commitments.
This new certification, along with a growing understanding of the double standard to which non-profit organizations are held, helps us develop a better idea of how to fund and support the entities driving and striving for real and effective change in our world.
Next time you’re shopping, be on the lookout for the Certified B Corporation stamp of approval (or search through DoneGood, which has many Certified B Corps in their database). Do you have any favorite companies you love that are certified B corporations?