December 20, 2007
The business of social change – a challenge to philanthropy By Tim Ferguson, Founder, Chair and Managing Partner
For hundreds of years, people and institutions have been trying to cure the world’s social ills with money. Despite their best intentions, however, very few of these efforts have lived up to their promise, whether they’re made under the banner of philanthropy, corporate social responsibility, or socially responsible investing. To be sure, progress has been made, some of it significant. But for the most part, the return on these efforts has been appallingly low, often creating only small-scale change that is difficult to sustain. This rate of return would be unacceptable in any business setting.
My passion for this issue arises from my personal experience. I’ve been sitting on a number of nonprofit boards for years. I'm a substantial donor in my own right. Here’s what I see: the received wisdom on how to cure social ills with money is a fallacy that has sabotaged the vast majority of efforts at social change in action today. It’s time to rethink our strategy – to redefine the relationships of philanthropy, business, and investment, and their efforts to address social problems in the U.S. and around the world.
This Perspectives column looks at ways that philanthropies can make meaningful, sustainable change – today. The most promising of these is mission investing, an emerging methodology for philanthropies to go beyond grantmaking and use endowment funds to further their missions. The impact of this dynamic model promises to far exceed that of its cousins, socially responsible investing and corporate social responsibility. It’s time for philanthropies and other investors to invest the time and energy to take the next, critical step.
Charity: One Size Doesn’t Fit All
char•i•ty generous actions or donations to aid the poor, ill, or helpless: to devote one's life to charity.
The world of philanthropy is built on the assumption that money can solve social problems, primarily in the form of grants to nonprofits. I think of these efforts as “charity”: gracious gifts made with no expectation of financial returns. “Charity” seeks to make a difference for one individual at a time, starting (and often ending) on a small scale.
Large-scale change, however, requires large-scale effort. To be sure, there is a place and a time for charity as we know it. I'm not advocating the abolition of genuine charity – one size does not fit all. Yet the evidence is clear that charity alone does not change the world.
