What the future holds for non-profits

The non-profit sector finds itself under ever-growing pressure amid accelerated demand for services in the wake of the pandemic and the current economic downturn. We consider the state of the global giving economy and some of the ways non-profit organisations (NPOs) might take advantage of evolving technological developments to better navigate rapid global change.

The non-profit sector remains invaluable to the global goals of promoting prosperity while protecting the planet. In a world where elections, public oversight agencies and the media often fall short on holding public institutions to account, it is the non-profit sector that remains steadfast, acting as social whistle-blower, advocating for the marginalised and vulnerable and forming the building blocks of civil society.

On the African continent, the anticipated population growth is adding to development pressures. The population is expected to double to 2.5 billion in the next 25 years. One in four people in the world will live in Africa and Nigeria will be the third-most populous country. This demographic shift will demand significant adjustments for the development and social innovation landscape.

In a world in flux, NPOs are having to respond rapidly to funding, capacity and digital maturity challenges to ensure they are ready to face the future.

Modest growth for the global giving economy

The Business Research Company’s NGOs and Charitable Organisations Global Market Report estimated that the global NPO and charitable organisation market size would grow from US$289 billion in revenue in 2022 to US$305 billion in 2023.

This rate of growth is likely to slow in coming years as economic sanctions, the commodity price surge and supply chain disruptions associated with the Russia-Ukraine war disrupt the chances of a global economic recovery from the Covid-19 pandemic. The market is estimated to grow to US$369 billion in 2027.

Some of this growth is expected to be sustained by increased corporate social investment as companies prioritise their support of social causes the aim to attract millennial customers and employees who prioritise brands associated with social causes.

Worldwide philanthropy, including volunteering and donations by individuals, foundations and corporates, currently equates to nearly 3% of global gross domestic product (GDP), rising to 10% or more in more advanced economies, according to Citi Global Perspectives & Solutions (Citi GPS) data. The same data estimates cash giving at more than US$550 billion.

While the philanthropic environment has shown modest improvement at the global level, the 2022 Global Philanthropy Environment Index (GPEI) says that this trend is not uniform. Despite the recognition of the increasing role of philanthropy, the ecosystem of regulations, politics, economic factors and cultures has some way to go to provide the enabling environment philanthropy needs to thrive.

Although 62% of the 91 countries and economies assessed in the study between 2018 and 2020 had favourable environments for philanthropy, nearly half of country experts reported a slowdown in economic growth due to the Covid-19 pandemic. One-third reported restrictive environments for cross-border philanthropic flows, despite emerging needs and significant funding efforts provided by major philanthropists and philanthropic organisations.

Adaptability is key for African NPOs

The available research does not necessarily paint an accurate picture of the NPO sector across the African continent. What data there is tends to be limited to, or extrapolated from, a small sample of countries that do not reflect Africa’s 54 nations.

What we do know is that the enabling environment for NPOs in Africa remains challenging. GPEI data shows that most African countries do not provide tax incentives for philanthropy, NPOs are seen as anti-government in many nations and African currency instability negatively affects giving.

African donor facts

#GivingTuesday

is growing in Africa 12% of the donors gave on #GivingTuesday in 2019, up to 9% from 2017.

80%

of donors in Africa volunteer with NGOs – The highest rate in the world. Of those 82% also donate to the NGOs for which they volunteer.

30%

OF DONORS IN AFRICA prefer to give online with a credit or debit card up from 25% in 2018. 24% prefer to give cash and 9% prefer to give via mobile money – both rates are higher than aany other region.

37%

SOCIAL  MEDIA has a significant impact on giving, with 37% of donors saying that social media is the communication tool most likely to inspire giving and 36% saying it is also the tool most likely to inspire repeat donations.

WhatsApp has the most impact upon giving at 35%, higher than any other region. YouTube has the least impact at 2%, lower than any other region.

Source

Non-profit Tech for Good’s 2020 Global Trends in Giving Report (based upon the survey results of 13468 donors worldwide, including 234 donors in 31 African countries)

Shifting the seat of power African NPOs

Historical barriers prevent African organisations from reaching their full potential, as resources and power in the sector continue to rest in the hands of the global North.

Growing calls to empower African-led organisations and reform the top-down international system of development and philanthropy, particularly from collaborative enterprises such as #ShifThePower, are gaining traction and will likely influence the developmental landscape in decades to come.

Funding remains unpredictable. The African Philanthropy Forum’s Disparities in Funding for African NGOs report shows that funding resources are more likely to go to international non-profit organisations (NPOs) and foreign-based or owned social enterprises. As little as 9% of large gifts from African donors and 14% of large gifts from non-African donors go to local NPOs. The rest goes to international NPOs based outside of Africa, foundations and the public sector.

These challenges aside, research from the Alliance for African Partnership Perspectives on the impact of Covid-19 on African civil society organisations suggests that the pandemic brought some encouraging, if unanticipated, changes to the sector. It reduced African civil society organisations’ reliance on foreign funding and built a somewhat more diversified funding base, as local businesses, individuals and foundations stepped in to plug the gaps. EPIC-Africa’s 2021 research reported greater NPO flexibility and accelerated digital technology uptake as NPOs found ways to work remotely and increase their online visibility.

Social enterprises as job creators in Africa

Africa’s growing population needs more and better jobs to create decent living conditions for a population whose working age group will reach one billion people by 2030. The Covid-19 pandemic and the widespread lack of social protection has exacerbated the challenge.

Social enterprises are demonstrating the complementary role they play in creating work on the continent, according to a Siemens Stiftung report, Social Enterprises as Job Creators in Africa.

Social enterprises tend to operate in markets that might be neglected by commercial enterprises and often intentionally seek to provide employment or income opportunities for vulnerable population groups, particularly women or people with disabilities. Estimated to currently provide some 4.4 million jobs across the continent, the study proposes that social enterprises could create an additional one million jobs by 2030 in the 12 countries it analysed.

Future forward: key NPO trends and how to navigate them

The rise of the for-profit non-profit

Businesses committed to social or environmental purpose have been gaining global traction in recent years. A British Council global study on the state of social enterprises suggests that social enterprises could currently number around 11 million internationally.

Where typical NPOs are dependent on unpredictable funding, social enterprises are creating their own, raising the question of whether this approach could be a model for NPOs seeking to future-proof themselves.

Entrepreneur advisory firm Inc.Africa recommends the steps that NPOs choosing this path would need to take to create sustainable business models. NPOs would need to identify the customers who would pay for their cause-related product, service or experience.

They would need to think more like businesses, creating sustainable business models to become self-funding and measure success like a business might. Partnering with for-profit companies might be necessary to achieve this.

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Riding the wave of future funding

Citi GPS anticipates that the cost-of-living crisis will accelerate social need beyond even that which the pandemic exposed. At the same time it will further shrink national budgets and reduce philanthropy for non-profits.

However, future trends in the form of increased philanthropic capital driven by growing wealth in emerging economies, changing aspirations of younger donors, the growing role of female philanthropists and the impact of technology, hold opportunities for NPOs seeking funding sources.

Some 2.4 billion people are expected to join the global middle class by 2030, increasing annual donations by US$319 billion annually, according to Citi GPS. Predictions of the intergenerational wealth transfer to young people hold promise for the development sector, particularly as women are set to inherit 70% of intergenerational wealth by 2035.

The same Citi GPS data found that women are more likely than men to support equality, share giving across more charities and sectors and make donations without restrictions.

Further opportunity lies in learning how to target a new and powerful group of donors – digital asset givers. Varying data suggests that cryptocurrency donations increased between six-fold and 12-fold in 2021. Where traditional donors are typically middle-aged and female, this new demographic of digital asset owners is young, male and strongly inclined towards supporting environmental causes.

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Retaining talent in tough times

Advisory firm Plante Moran cites NPO staff turnover and the scarcity of talented staff as a key challenge for the sector. The private sector is tempting for talented staff, offering higher salaries, less emotionally and physically taxing work and more job security than non-profits.

One of the ways NPOs might retain talent is by creating more appealing work environments. The Forbes Communications Council suggests that this might include more agile work models that allow remote or hybrid schedules, reduced work hours, job sharing or shorter work weeks as people seek greater balance between career and personal priorities.

Concerns that work standards might drop could be managed by implementing training and establishing clear policies and guidelines for remote workers that would include deadline scheduling and data access.

The problem extends to leadership and succession planning. NPOs are inadequately prepared to replace executive level positions and board members as the baby-boom generation leaves the workforce, according to Plante Moran. Succession plans need to consider competition in the broader job market, but also forward planning to ensure that institutional knowledge is retained.

The sector is also seeing a trend towards a different kind of leadership talent. Instead of traditional executive directors with a strong fundraising focus, there is a move towards leaders who can inspire staff and supporters and inject new energy into organisations.

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Collaborating for shared benefits

The collaborative spirit that the pandemic revealed could be a resource for greater resilience in the NPO sector. Public-private partnerships like the Solidarity Fund in South Africa helped limited resources go further, but direct collaboration between NPOs could reduce costs and help the sector to flourish.

The Forbes Nonprofit Council suggests that NPOs should consider sharing resources such as office space and human talent, hosting collaborative events and promoting each other to engage wider audiences. They suggest that successfully navigating the unprecedented challenges the sector faces will require innovative and sustainable engagement with each other.

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Taking up the tech challenge

The non-profit sector can be slow to adopt technological innovations, but the pandemic forced NPOs to be more receptive. A Forbes Communications Council assessment suggests that this willingness to modernise has transformed the way NPOs can communicate, engage donors and raise funds.

Virtual conferencing and communication chat platforms have facilitated more effective communication and planning among staff, volunteers, donors and supporter networks, while virtual project management has improved the collaboration process.

Digital technology has extended NPO outreach and engagement opportunities well beyond their local communities to raise awareness, educate and source donor funding contributions. Virtual fundraising has gained ground in several forms, from virtual auctions and crowdfunding to website donation buttons and peer-to-peer digital campaigns.

Retaining hybrid or digitally-integrated events that allow for wider attendance, incorporate mobile bidding and QR codes to facilitate education and giving, remains in the interest of NPOs, even as the world returns to in-person events.

Embracing data-driven strategies could guide better decisions while improving communication and increasing engagement. Digital data analysis has the potential to establish targeted donor and support relationships, while donor and constituent segmentation software can allow non-profits to gather and organise unwieldy data that helps them to issue automated personalised messaging.

Evolving technology is also demonstrating the value of data analytics – already entrenched in the for-profit sector – for the NPO sector. Programme data can be analysed to reveal giving patterns and trends, predict donor behaviour and provide insight into the efficacy of programmes and outreach efforts.

Navigating global challenges

Increasing social needs, exacerbated by the climate crisis, are likely to stretch the limits of the NPO sector in the coming years. While our rapidly changing world brings challenges to overcome, it also delivers some of the tools to meet these challenges.

The NPO sector is well placed to guide progress towards achieving the Sustainable Development Goals, but also contributes to societal resilience as a major employer and economic contributor. It remains to be seen what impact the rise of social enterprise and direct cash giving will have on the sector, but both trends should be monitored and taken full advantage of.

Successfully navigating the decades to come will require a sector that is open-minded, agile, collaborative and willing to embrace developments that enhance its sustainability.

Source: The original version of this article was published in the Trialogue Business in Society Handbook 2023 (26th edition).