Creating Shared Value: What does it mean for the nonprofit sector?

When JS Daw & Associates announced our new role as certified Shared Value consultants, it prompted much feedback – from notes of congratulations to specific questions and queries about specialized services. But one email stood out – “What does this mean for the nonprofit sector? How will it affect fundraising? How will it affect our role in community?” These are important questions. I firmly believe that Creating Shared Value (CSV) offers exciting new opportunities for nonprofits to collaborate with companies for mutual benefit, to build truly meaningful and impactful partnerships and advance positive social change. If you plan on starting a nonprofit organization check out how to get a 501c3.

Creating deeper strategic partnerships

shared_value puzzle

c/o Jeroen de Flander

Today most nonprofits view corporations as funders. Even though many nonprofits call their funding relationships “partnerships,” they simply are not. Funding relationships are transactional exchanges in which financial support is given to fund community work. Occasionally in-kind talent and time is provided from employee volunteers. While these relationships are important and beneficial, the full value of a mutually beneficial partnership, which is based around common goals, is not realized.

Creating Shared Value is a new form of corporate community involvement. Shared value is created when companies generate economic value for themselves in a way that simultaneously produces value for society by addressing social and environmental challenges. Companies that undertake shared value initiatives need community partners to help them reconceive markets and services; build clusters; or reduce the costs in their value chain. Shared value initiatives require the expertise, experience and knowledge of the community sector. At its heart, shared value requires cross-sector collaboration and deep partnerships.

Providing new support beyond philanthropy

Shared value initiatives represent new resource development opportunities for nonprofits. However, CSV will never replace traditional philanthropy and strategic giving. The billions of dollars companies already contribute to community organizations will not be lost, nor are these contributions likely to shrink.

Shared value initiatives will be an addition to what most companies already do in community. Shared value allows companies to generate value for themselves as they identify the immense human needs that must be met, large new markets to be served, and the internal costs of social deficits—as well as the competitive advantages available from addressing them. Their nonprofit partners, vital to the success of shared value initiatives, will benefit from additional resources spent by companies to build value for themselves and the community.

Accelerating social value and impact

Shared value engages companies more deeply around social issues. It holds the promise of greater resources for the nonprofit sector and a multitude of innovations to address today’s most urgent social needs. It also accelerates and expands the potential for social impact as major corporations launch initiatives that reach millions of people at a pace and scale that have rarely been achieved by the nonprofit sector alone.

Nonprofits are a critical piece in identifying opportunities for social change, but they are often not able to scale to the appropriate size. Most NGOs are not set up to affect millions of lives. If you combine NGOs’ local knowledge with a company’s ability to scale up, you can really create value on both sides of the equation. By the same token, companies must listen to NGOs so that they take local circumstances into account, and they don’t go to the wrong places or do the wrong thing.

Seize the opportunity

Shared value is a management strategy for companies that are focused on creating measurable business value by identifying and addressing social problems that intersect with their business needs. The shared value framework creates new opportunities for companies, non-profits and governmental organizations to leverage the power of market-based competition to address social problems.

Creating Shared Value will enhance the relationship between companies and nonprofit organizations. It creates a mutual interdependence and heightened accountability for delivering results. In the end, companies are part of a broader ecosystem that contributes to creating societal value. Business must work with governments and with NGOs to build better societies and better communities.

Creating shared value is here to stay. Its growth and wide spread adoption is inevitable. Nonprofits can seize this opportunity. They can embrace the change and realize new advantages for their organizations and their communities! At the same time, shared value demands a delicate balance between social needs and corporate profitability that must be carefully monitored and challenged when necessary.

Keep an eye out for a related future blog posting on the JS Daw Blog: Can nonprofits create their own CSV initiatives?

Editor’s Note: This blog originally appeared on the JS Daw Blog. It has been reposted here with permission from the author.

Fair Exchange: Public funding for social impact through the non-profit sector

Screen Shot 2013-07-09 at 11.21.13 AMAfter more than three decades writing grant proposals in the non-profit sector, I switched sides to work as a public funder. For many years I held a granting portfolio with the Ontario Trillium Foundation, and participated in the funding reform discussions of the federal and Ontario governments. In the text Fair Exchange: public funding for social impact through the non-profit sector,  I offer the result of those experiences – a funder’s perspective on how we might do the work of public funding more effectively and increase the potential for impact as a result of our investments.

The world is changing faster than before. Civic organizations, often swifter than government policy, are emerging as the knowledge brokers pointing the way to the future and offering solutions to the “wicked” problems facing communities. How they finance that work – their access to public capital to generate public benefit – is a critical preoccupation. Governments and citizens’ organizations have a shared interest in ensuring that public funds flow in a way that best creates the conditions for recipient organizations to achieve social impact. This matters more than ever now in times of constrained public funds and increasing social need.

Good funding process is a matter of public trust

Public funders bear the responsibility of ensuring that what we fund is the best option on the table – but also of ensuring that how we fund is directly focused on enabling social impact. It simply makes no sense to spend more on the funding process than necessary, to create delays, limit other funding opportunities, or increase recipient costs with excessive red tape. It is a matter of public trust that funding processes and practices be cost efficient and geared to support outcomes of public benefit.

The case for public funding reform

Although we have an almost two decade history of discussion on public funding reform – and a comprehensive literature of sector critique – no single organization champions the reform discussion. There is no little red schoolhouse for public funders to learn their trade, few opportunities to look across programs for the best ways of doing business, and almost no theory of good design for funding programs. Also, funders seldom generate cost-to-disbursement ratios – a basic accountability measure that tracks how efficient funding processes are at distributing funds entrusted to their care. As a result, practice reform efforts have been far from stellar. Now, when every nickel in the treasury counts, high disbursements costs mean less money out the door to solve social problems.

As civic organizations begin to tap into a much broader funding economy of social finance, corporate social responsibility, crowdsourcing and the like, organizations are diversifying their revenue sources, some drawing funds from as many as a hundred different sources. Consequently, their needs as recipients have changed. Often they are also working collaboratively, bringing unusual partners to the table to increase innovation in their approaches to public issues, taking up opportunities as they arise. You can see these emerging resourcing trends through Ajah’s Fundtracker initiative, a web based directory of who is funding who. As the non-profit sector’s opportunities to contribute increase, funding practices must shift to account for the more complex financial environment in which they work. 

Evaluating funding programs for how they disburse funds

Funders often evaluate recipient’s efforts at outcome achievement, but seldom examine their own processes for how they enable, or hamper, efforts to produce social impact. Taking a design approach to funding programs enables us to be deliberate about the elements of process, and evaluate the effectiveness of administrative processes, risk management, and the funding relationship. Recipient critique tells us that funding programs must be more predictable, more flexible, reduce administrative burden, and develop stronger relationships with applicants and grantees. These elements of program performance can be measured.  Too much red-tape, for example, is an almost inevitable result of longevity of a funding program. We can predict it, track it, and shift practices to reduce it. “Streamlining” is not just about web portals, but also about how good people working in well-designed programs make use of strong relationships to understand the sector they fund and constantly evaluate how their work contributes to the ability of organizations to generate impact.

A Fair Exchange

In Fair Exchange, I offer a beginning theory of practice for public funders in Canada. I suggest language and frameworks common to all public funders and consolidate the most effective practices from prior reviews. It is my hope that this paper will help public funders to build a richer theory of design and practice that not only accounts for internal risk management but also evaluates funding processes for practices that are most effective in supporting the production of social outcomes, which is the reason why we fund.