For decades, we have been witnessed dramatic changes in our world. Through these transformations, civil society has been on the front lines, helping individuals, communities and governments adapt to the new, unfamiliar landscape.
Much has been said about what the next revolution means for businesses, governments and citizens. Despite our lack of immunity to disruption, civil society, specifically nonprofit development organizations, have been absent from these considerations. A likely explanation for this oversight is civil society’s perceived intermediary role – a connector of governments, business and communities. One that helps others adapt, but doesn’t fundamentally change in nature itself.
Yet, today, we see fundamental change happening throughout the non-profit development sector with the emergence of what has been coined as the Fourth Sector. As the leader of an international development organisation, I am energized by the changes and their potential impact on the millions of people who are poor and marginalized around the world.
The Fourth Sector – a convergence of the public, private and nonprofit sectors – is changing the way we operate, approach development and relate to one another, as discussed in Accenture Development Partnerships’ report, “The Convergence Continuum towards a Fourth Sector in Global Development.”
During the course of the last five years, there has been a gradual shift in the business models of both commercial businesses and nonprofits. Traditionally income-driven businesses have progressed from donating money through corporate social responsibility programs to more substantive partnership roles with nonprofits. Today, businesses are taking the shift one step further and integrating social impact into their business models, under the rubric of shared value, encompassing both earned income and some degree of social benefit into their business model.
On the other side of the spectrum, we see an altruistic non-profit sector adopting more traditional business-minded, private-sector characteristics. While contributed income – grant-based work – remains the core of our efforts, non-profits are exploring new market-based social enterprises and impact investment – return-seeking capital – that simultaneously maximize social benefit. Finding, implementing and advocating solutions to global challenges is our mandate, but the way we go about it is fundamentally shifting.
In the middle we have governments, which are accountable to citizens for providing for their basic needs, from health to security. Government models vary widely; however, they traditionally involve earnings from various taxes structures and fees, as well as foreign aid and other types of international financial support. While governments have a long history of working with nonprofits and the private sector, today, they are members of large-scale public-private partnerships and often look to the private sector to help solve problems from infrastructure to healthcare.
While the last decade of global economic turmoil has necessitated tightening of budgets, including those of the largest funders of development programs – overseas development assistance and private foundations – global challenges have continued, growing exponentially in some cases, such as the civil war in Syria and resulting refugee crisis.
Due to growing customer demand for socially responsible products and the direct impact of poverty and instability on global supply chains, multinationals can no longer afford to be uninvolved in the well-being of communities where they operate, as well as all those who are living in poverty and are vulnerable.
Simultaneously, it is unrealistic for non-profits to continue to rely solely on traditional donor assistance if we are to achieve transformational change in people’s lives around the world. Currently, the impact investing market is estimated at $50 billion, and on a path to reach $2 trillion by 2025, which many believe to be a conservative estimate.
With an ambitious global agenda before us, this new market cannot be ignored for its potential significant contribution toward achieving the Sustainable Development Goals, which analysts estimate will cost between $3.3 trillion and $4.5 trillion a year. At Pact, we recently launched a new unit to connect with impact investors and social enterprises, complementing – not replacing – our traditional, grant-based funding. This new market has the potential to exponentially increase our impact around the world, and to introduce new, dynamic partnerships that approach traditional issues in non-traditional ways.
However, it isn’t only consumer demand and funding constraints pushing us to iterate.
The private sector and nonprofits have been working hand-in-hand for more than a decade, increasingly becoming partners in the design, implementation and impact of programs. These true partnerships have led to learnings on both sides. While we recognize that each partner has strengths and expertise that, due to their experiences, only they bring to the table, over time we’ve begun to build off one another and are converging into this new, fourth sector. One that is neither wholly profit-drive nor social impact-driven.
To survive, nonprofits must embrace this disruption and evolve. But more than that, we can actually lead and help envision and establish these new models, with the wellbeing of those we serve as our direction. We aim for transformation in the world, and we need to seize it internally, transforming into a nonprofit of the future.
This is an understandably uncomfortable position for many of us. The private sector has been iterating for decades, adapting to the changing world around it to avoid being left behind. The international development sector is sometimes intransigent. Our modus operandi has not changed much in the last 70 years. But, if we do not embrace the revolution around us, and begin us to also lead where appropriate and be relentlessly creative in how we approach our mission, we will never realize the full potential we have to offer to the world’s global problems.
We must see this revolution as an opportunity – an opportunity for us to increase our impact, helping people escape poverty and own their futures.