Image: Ships on a Stormy Sea by Willem van de Velde the Younger (c. 1672), Royal Opera House Covent Garden via Flickr
The world of mission is changing profoundly. It’s changing in ways that significantly challenges institutions that seek to fund the achievement of mission. And that’s true whether mission is defined by faith or secular ethos, articulated environmentally or articulated culturally: presenting the arts, maintaining cultural heritage, creating social identity. It’s true whether the organisations envisage themselves as charitable ventures or as non-profit institutions or as advocacy organisations or, very often, a mix of those.
The world in which they operate is undergoing an extraordinary transformation that is as unarguable as it is largely unheralded. And of course not-for-profits themselves are active players in changing the paradigm that creates beneficial public impact.
Australia’s loose network of 600,000 not-for-profits is, to the casual listener, a sort of raucous cacophony of disparate voices. Some of these organisations are competing some collaborating, often they are studiously ignoring each other, even though they share similar goals and similar ambitions.
From good cause to social enterprise
Most of these not-for-profits are small, local, community-based organisations. What they share is a mission. They’re defined by purpose, not by profit. They’re defined by work in a world of stakeholders, not shareholders, in which philanthropic gifts of funding and bequests and donations and philanthropic gifts of time (think over 6 million volunteers) are crucial.
But increasingly, those not-for-profit organisations see themselves as social enterprises. They recognise, not only that they need to manage the delivery of their social or environmental or cultural mission efficiently and effectively, they need to focus on resource allocation and pricing and risk management, strong governance, effective public accountability. But more importantly that the delivery of mission depends on financial sustainability. They need to get started to survive, to scale up, to innovate. They increasingly regard their organisations as social ventures, themselves, as social entrepreneurs. That’s the first big change that is well underway.
Performance-based outcomes
A second wind shift is occurring in governance because for every dollar of donation you receive in the not-for-profit sector, $5 comes from government. Within a year about $5.1 billion is donated to the not-for-profit sector, $25.5 billion comes in government funding. The State, in other words, is important. The State, of course, traditionally delivered public purpose in two ways. It delivered infrastructure and services directly through public servants and it supported organisations seemed to be benefitting the public good by providing them with subsidies in for form of grants.
In the last generation, the last 25 years, that’s changed, in part through public-private partnerships but particularly in the service sector in which most social enterprises operate. It’s changed because governments now contract not-for-profit organisations to deliver government programs: human services, overseas aid, environmental programs, and I’d have to say far less often cultural events. In other words grants of subsidy, the traditional means of supporting community engagement is year by year giving way, instead, to payments by governments for delivering government services. And accompanying this impulse to outsource (although accompanying it, I think, far too slowly) comes an increasing drive to performance based outcomes to pay for results, not for process.
Shared business value (with strings attached)
The third change that is taking place is in the private sector with increasing recognition over the last generation, that businesses need an implied licence to operate in society, to exhibit themselves as good corporate citizens. The GFC nearly killed Corporate Social Responsibility (CSR). Many of those corporately socially responsible companies, it turns out, did not carry CSR into the heart of their business.
This sad truth has led to a fundamental rethink of CSR. Because if it’s just seen as an addition to corporate endeavour, if it’s just a way of guiding your brand image, it may, in fact be of limited value, creating marginal social impact. So, increasingly the companies that I see at the forefront are now moving instead to articulate what they do as shared value, a recognition that doing good shouldn’t be seen as some addition to the business or as an offset to the business. It should be the way of doing the business.
There is a recognition that businesses themselves create not just financial value, but social value and that that social value can be enhanced, and importantly, financial value with it. This focus on shared value, on corporate investment is changing the way we regard social impact in positive ways. But this may be profoundly challenging in the years ahead for those social enterprises in the cultural arena. It may mean that companies may direct their efforts more exclusively, more directly to shared value initiatives in which arts activities might be seen as more peripheral.
More challenging still, it may mean that when businesses or government bodies do continue to invest in the arts that it will be with strings attached. That strings, either in the form of explicit conditions, or implicit expectations think for example, the Western Australian Opera. The creation by business of shared financial and social value may mean that corporate providers expect their social investment to share or reflect their values, not just to add to their brand image by supporting sporting or cultural events. And even where that’s not the case social media, we now know, is giving voice to those who want to prevent arts organisations taking money from companies or from individuals who they believe are inappropriate because of the core productivities that give rise to the funding that is being proffered. At the same time the divestment movement is gathering pace. The willingness of universities and church organisations, in particular, to divest investment holdings is likely to extend and this, in my view, is very dangerous ground indeed. This, if you want, is the dark cloud that I see.
Organisations like Santos may be dumped in opposition to their coal seam gas development or their coal production even when they have taken the lead in indigenous employment and economic development or, indeed in sponsoring the arts. If the Sydney biennale can persuaded not to take money on a really dubious connection between and individual and a company operating an offshore detention centre, the next target will be to persuade arts organisations not to take money from the government which policy established the centre.
The rise of the socially responsible investor
But the good news is that this dark cloud does have a silver lining and that’s that fourth change by the way. The rise of the ethical or socially responsible investor. Because increasingly individual investors also want to balance their financial returns with social expectations. If you like, think of this as a different perspective on shared value. Individuals don’t just want to see investment companies carefully weight the environmental, social and governance arrangements in the businesses chosen for investors, they also increasingly want to put their money into vehicles that allow them to avoid investments in products that they do not wish to support, such as tobacco or gambling or munitions or yes, coal.
Until now those investors, increasingly influential, have only been able to negatively screen their investment. Now, and this is where it gets exciting, new opportunities are emerging where they can positively screen their investments. Where individual investors can say, ‘Yes, I want to invest in this product or activity which creates social value and by that action also receive a financial return’. And in a world of private ancillary funds and workplace giving, this becomes increasingly significant.
Read more: The outcome: impact investing
This article is the first in a two-part series, extracted from Impact Investment in Culture? delivered at the Currency House Business and Creativity Breakfast Series 2014 on 19 November.
