The Boundaries are Blurring Between Philanthropy and Business

Philanthropy is increasingly adopting business means, while business is increasingly pursuing philanthropic ends – a trend which is likely to continue and expand, writes Michael Moody, from the Dorothy A. Johnson Center for Philanthropy, as part of their 11 Trends in Philanthropy for 2019.

For as long as we have used “sectors” to define society, we’ve been particularly fixated on the boundaries between those sectors, often letting those boundaries define the sectors themselves – why else use the odd term, “nonprofit?”

Advocates for one sector or another have often warned about the blurring of these boundaries. Proponents of philanthropy have cautioned against the dangers of becoming too “businesslike” and prioritising profit over purpose (McCambridge, 2015). True believers in capitalism, like Milton Friedman, insisted that the genius of the free market would be undermined if businesses added “social responsibility” to their bottom line (Friedman, 1970).

But today, the increasing blurriness of sector boundaries is undeniable, and more and more people are embracing the potential good that more open sector borders might create. This is especially true for the boundary between for-profit and not-for-profit, between the business and philanthropic sectors.

More nonprofits are looking for profitable revenue streams and borrowing business jargon and tactics. More donors are talking about their giving and grantmaking as “social investing,” and are conducting “due diligence” on these investments.

On the corporate side, Friedman is rolling in his grave as “corporate social responsibility” is becoming a requirement for businesses of all sorts. Even Super Bowl ads are touting each company’s charitable or environmental commitments as much as the quality of their products. If you aren’t a double or triple-bottom line company, you can’t compete anymore.

Perhaps most telling is the rise of so-called “hybrid” organisations, which are often legally organised as for-profit, but which are officially committed to social purposes. While Ben and Jerry’s were pioneers in this space three decades ago, “B Corps” like Patagonia are now the norm. Social entrepreneurs with a passion for a cause are often choosing to create “social enterprises” instead of traditional nonprofits.

One of the most notable developments in the philanthropic world in the last decade was the decision by Mark Zuckerberg and Priscilla Chan to use a for-profit entity – a “charitable LLC” – to channel their vast fortune for the public good. Like many young people, they are “sector agnostics”; they believe good can arise from any sector, not just from nonprofits. This same way of thinking is behind the incredible rise in “impact investing.”

Trying to create solely financial or solely philanthropic value is now considered by many to be ineffective and old-school. Our new blurry world instead creates what Jed Emerson calls “blended value”.

In short, philanthropy is increasingly adopting business means, while business is increasingly pursuing philanthropic ends. Of course, this is not a completely “new” phenomenon. Goodwill has used business means since 1902, and John D. Rockefeller argued that the “best philanthropy” was providing good jobs. What is new is just how widespread and socially legitimate this blurriness is.

This trend is likely to continue and expand, in part because millennials are big fans of it. They want to work for and buy the products of socially responsible companies – even if it means making less money or spending more. And they don’t get why nonprofits should avoid money-making ventures just to remain “pure.” They’ve grown up in a world where mission and money-making have often been dual purposes, coexisting in harmony.

It is hard to deny the positive aspects of this trend. Innovations from business can lead to more efficiency in philanthropy, and a more socially responsible corporate sector is undoubtedly a good thing. However, the potential downsides here are worth paying more attention to as well (Ganz, et al., 2018; Daniels and Koenig, 2017).

All in all, two things are certain:

1) we need to rethink what “doing good” means, and measure it in a different way; and

2) we need to become better at defining and defending what is distinctive and legitimate about the philanthropic sector in this blurry world.

Otherwise, generations in the future might just think of philanthropy as one type, or one function of business. We will have lost something special if that happens.

About the author: Michael Moody, PhD, is the Frey Foundation Chair for Family Philanthropy at the Dorothy A. Johnson Center for Philanthropy at Grand Valley State University, in Grand Rapids, Michigan, USA. The Frey Foundation Chair is the world’s first-ever endowed chair for family philanthropy, and Dr. Moody became the first holder of the chair in 2010. He is trained as a cultural sociologist, with a Ph.D. from Princeton, and is co-author of the books Generation Impact: How Next Gen Donors Are Revolutionizing Giving (with Sharna Goldseker, 2017), The Philanthropy Reader (with Beth Breeze, 2016), and Understanding Philanthropy: Its Meaning and Mission (with Robert L. Payton, 2008).

This article was originally published as part of 11 Trends in Philanthropy for 2019 produced by the Dorothy A. Johnson Center for Philanthropy.