“Globes”, July 25, 2016
The day after tomorrow, for the fifth consecutive year, non-profit organization (NPO) Midot will hold its conference in Tel Aviv on effectiveness in NPOs. Or, in other words, on NPO professional management over time. In recent decades, with the weakening of the welfare state, new forces have arisen in civil society to try and address social issues.
Over the past decades, the third sector (the associations, nonprofits, and other entities that make up the third sector) started to grow in terms of resources on a scale so large that today it turns over more than 100 billion shekels annually and has 430 thousand people in its employ. To a large extent it has replaced Israel’s governments across entire fields of responsibility and social welfare, promoting social rights and protecting values of solidarity and mutual responsibility.
But the third sector faces a constant peril: a significant portion of the capital that drives this sector is philanthropic. Philanthropy is based on principles of charity and grace, and on the goodwill of citizens, but does not have the commitment, stability and scope needed to solve problems as the welfare state did in the past. The result is that the third sector needs sustained investment over many years, while philanthropy supplies the sector a temporary cash flow for the short term. This discrepancy between the financing needs of the third sector and the reality on the ground, has led the social organizations to establish complementary means to those of philanthropy, in the form of independent revenues, whether through provision of services to government authorities, or through the establishment of social businesses.
Such moves should be welcomed as they free the social organizations from the burden of raising donations in favor of the creation of fixed sources of income. But the numbers suggest they are insufficient. Whereas the rate of self-generated income of social associations in the United States and the Scandinavian countries is around 50%, the rate in Israel is only 30%. The social organizations therefore have to find ways to generate additional sources of income to supplement the existing ones. This is not only a moral obligation – but an existential necessity.
For us, the social entrepreneurs, this has been an enormous challenge as of the dawn of our beginnings. It is a challenge that requires of us to continue developing more and more mechanisms, and more and more businesses that will transfer capital to social objectives, and which should have the capacity to reduce and minimize the reliance of social entities on philanthropy funds. This has the potential to be our finest hour. But to do so we must think business, and think it seriously. A business spirit of this kind would establish not only an additional source of income for social organizations, but would also strengthen their spirit of professionalism, which is gaining in strength in social businesses.
So, for example, economic and business thinking could lead to exploitation of the various resources already held by social organizations, be it manpower, a captive audience, or real estate, in order to create business partnerships between entrepreneurs, social enterprises and investors, all of whom would stand to gain both a financial and social return.
Anyway, the vision dictated by reality is to populate the business space with dozens of business partnerships that create stable earnings to be partially allocated to the promotion of social objectives.
Realization of this vision will lead not only to the creation of additional and complementary sources of income in the third sector, but also to a move that is no less important – it will generate far-reaching changes in the business sector. Changes such as these would not place it in conflict with the social sector, but alongside it in reducing the wealth gap, strengthening the foundations of society, and promoting social solidarity.
The writer is Founder and Chairman of impact investment fund, 2B-Community; the article was co-written with Shahar Botzer, the Fund’s Co-CEO.