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How Nonprofits Can Work With the Private Sector to Scale Impact

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The past year and a half has been a time of extraordinary social mobilization in the United States. From the protests for racial equality to the heightened awareness of vast disparities in access to health care, education, and other basic necessities during the COVD-19 pandemic, Americans have never been more acutely aware of the most urgent problems our society faces. 

The ground was already prepared for these shifts. Charitable giving has been rising consistently in the United States, while consumer behavior has become more and more socially and environmentally conscious. These trends have driven and coincided with rapidly shifting attitudes in the private sector—companies increasingly recognize that they can’t afford to ignore pressing social issues. Executives are joining nonprofit boards; customers and employees are pushing company leaders to become more engaged in communities throughout the country, and corporate social responsibility (CSR) is becoming a top priority. 

It’s essential for nonprofits to recognize that the trend toward private-sector giving is only going to pick up momentum, which is why they need to be capable of seizing opportunities for private-sector collaboration. 

Nonprofits are vital partners for companies that want to make a difference.
Consumers believe companies should share their values and take action on the issues that matter to them. Employees (primarily Millennials and Gen-Z) are the same way. According to research conducted by Edelman within the past few months, companies have never been under more pressure to reflect the values of consumers and employees. Nonprofits are in an ideal position to help them do so. 

Edelman reports that 86% of consumers expect companies to take action beyond promoting their own business, which could mean “addressing societal challenges,” “supporting local communities,” and “giving money to good causes.” Another report found that 71% of employees expect opportunities to have a social impact at work. 

As the business case for engaging with the nonprofit sector and working toward social change becomes stronger, organizations should proactively reach out to companies about how their services can help them meet the demands of their consumers and employees. Companies often have significant resources to invest in their communities, but they have no idea where to begin. Nonprofits have an on-the-ground perspective that can help companies determine where investments will do the most good. 

Nonprofits can facilitate Corporate Social Responsibility initiatives. 
It’s difficult for companies to move from planning to execution with their CSR initiatives. For example, research published in MIT Sloan Management Review found no correlation “between the values a company emphasizes in its official corporate culture and how well the company lives up to those same values in the eyes of employees.” Nonprofits can help companies live up to their values by providing information about their focus areas and suggesting possible interventions that will address the most pressing problems communities face. Nonprofits also give employees a chance to volunteer, which is particularly useful as organizations report an increasing demand for their services and need all the help they can get. 

Establishing a network of contacts in the nonprofit sector and among community stakeholders can be invaluable for companies that want to build CSR into their operations. As Columbia University professors Howard W. Buffett and William B. Eimicke explain, their research has identified “many examples where CEOs benefit their businesses by partnering across sectors with public officials, nonprofit managers, and community members.” For example, employees and company leaders can join nonprofit boards, which allows companies to engage with the community and create social change at a grassroots level. 

It’s crucial for companies to make sure that their CSR efforts are always oriented toward real-world action, and there’s no better way to do this than by working with the nonprofit organizations that have extensive experience working to alleviate systemic inequalities in their communities—from a lack of socioeconomic opportunity to vast disparities in health and educational outcomes. In many cases, these organizations have also spent years (or even decades) earning the trust of community stakeholders, which is invaluable to any effort to scale impact sustainably. 

How Nonprofits Can Attract Private Sector Support
Nonprofits can take the lead in forging private-sector relationships by identifying opportunities for collaboration with companies that have a presence in their communities. However, for organizations to attract funding, they have to demonstrate their effectiveness – something 50% of nonprofits say they struggle to do. Meanwhile, more than two-thirds of nonprofits say the demand for transparency regarding funding has increased. 

While new funding sources are opening up in the private sector, accountability is also becoming more important. Nonprofits have to improve outcome tracking and reporting if they want to present a compelling case to potential private-sector grantors. This begins with determining which goals your organization is working toward and how it will measure progress—42% of nonprofits say they lack a “consistent framework for measuring and recording” outcomes. 

These goals and measurement criteria should be consistent with your overall mission and help you craft a narrative about the difference your organization is making in the community. At a time when 86% of employees say they prefer to work for companies that care about the same issues they do, and the vast majority of consumers are more cognizant than ever of brands’ positions on social issues, nonprofits should take full advantage of these shifting priorities. Over the next few years, we could see unprecedented cooperation between the private and nonprofit sectors—a development that will have a dramatic impact on the well-being of communities across the country.

Marta FerroMarta Ferro founded Starfish Impact in 2005 to connect nonprofits and philanthropic organizations with resources in a strategic and effective way. She is also a managing director at Angeles Wealth Management, leading their Philanthropic Families practice. Prior to Starfish, she worked with Goldman Sachs’ investment management division and was a member of the firm’s Diversity Committee. In the greater Los Angeles community where she lives, Marta is involved with multiple nonprofit organizations, including her current role as co-founder of AngelesArtFund. Learn more about Marta and Starfish Impact.

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