Around the world, there has been increased scrutiny of for-profit companies and the role they play in society.
There is a growing belief that the for-profit corporate sector has contributed to jobless growth and widening inequality. The reasons for this are complex and go beyond the usual explanations of globalisation and technological advancements.
Capitalism today celebrates a winner-takes-all approach. Companies are expected to maximise shareholder value, which is narrowly defined as growing profits, often with a short-term focus.
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Many also expand global supply chains, force redundancies, create few jobs and depress local wages while paying scant attention to negative externalities, such as environmental degradation, that everyone has to pay for collectively.
Non-profit organisations (NPOs) play a unique role not just in plugging the gaps left by the private sector, but in countering the long-term social impact of negative business practices.
First, NPOs can address under-served customer segments. There are often products and services that could benefit large population segments but are not supplied, either because demand factors need to be addressed or the price point is too high. Non-profits can disrupt market dynamics and provide innovative services, sometimes profitably too.
Few examples are as inspiring as Brac, which uses tools such as microfinance, education and social enterprises to serve the poor in Bangladesh and beyond. Last year, Brac’s expenditure came to US$728 million (S$924 million) and it had more than 120,000 employees.
Non-profits can fulfil an entrepreneurial function when for-profits shy away from providing public goods or from having to develop a market that has not proved to be viable.
For example, in Singapore, there is an under-consumption of eldercare rehabilitation services because of a lack of awareness about the benefits of therapy for the older person. Public education is needed to increase demand for such upstream services - but for-profits typically have little incentive to invest in public education.
Second, NPOs can serve customers in ways that companies find it difficult to.
NPOs can move beyond transactional relationships and engage the community in becoming part of holistic service provision.
For example, in providing community care for seniors, NPOs can be better placed to mobilise volunteers and build social networks for the elderly, who often suffer more from loneliness than physical dependency.
NPOs are more likely to continually do the right thing for service users. With their social mission at the core and money not an end in itself, NPOs are, in theory, better able to empower people to become more independent, exercise self-determination and demand fewer services eventually.
According to the 2014 Edelman Trust Barometer, non-government organisations (NGOs) are the most trusted institutions in Singapore. Trust in NGOs has risen 20 percentage points in five years to reach 76 per cent this year, exceeding trust in business and government, which are at 71 per cent and 75 per cent respectively. This puts NPOs in a unique position to more effectively engage customers as partners.
Third, NPOs can help grow markets as well as create jobs.
Many for-profits also expand global supply chains, force redundancies, create few jobs and depress local wages while paying scant attention to negative externalities, such as environmental degradation, that everyone has to pay for collectively. Non-profit organisations (NPOs) play a unique role not just in plugging the gaps left by the private sector, but in countering the long-term social impact of negative business practices.
In the United States, non-profits contributed products and services that added US$779 billion to its gross domestic product (GDP), or 5.4 per cent, in 2010 and employed people in more than 10 per cent of jobs in 2009.
In Singapore, charities saw income of $12.6 billion in 2012, or approximately 3 per cent of GDP.
These numbers do not even cover cooperatives, non-profit social enterprises and other non-charitable organisations, and tend to underestimate the contribution in terms of NPO value as many activities are either underpriced or given free or in-kind.
The sector has the potential to grow substantially, especially to meet rising needs in areas such as eldercare and mental wellness.
In Singapore, it saw income grow by 11.6 per cent a year in real terms from 2007 to 2012, which far outstripped GDP growth of 4.9 per cent a year over the same period.
New non-profits can be set up more quickly with a wide range of social financing tools, from grants to equity. When their strengths are leveraged well, they benefit from a lower cost structure, serve broader client segments and prioritise growth over profitability.
Singapore already has a lively non-profit sector that is growing fast. What comes next is building scale and talent.
Size matters. We need better models of NPOs, and social enterprises that are large, independent and innovative, continually making a fresh and significant impact on the social landscape in their own right, and not merely government contractors.
Non-profits also need to exercise leadership and be proactive in tackling the most difficult problems in our society and continually invest in social intrapreneurship and innovation. They need to have high aspirations to take on more game-changing ideas.
The growth of the non-profit sector is currently constrained by a critical shortage of labour. Although many more young graduates are joining the sector, it crucially needs an infusion of talent, whether from the corporate sector or even government.
The Centre for Non-Profit Leadership, of which I am the vice-chairman, plays an important role in attracting senior corporate people to move into the sector.
To get the best candidates, existing NPOs and the “sector shifters” themselves must have ambitious and challenging agendas, and NPOs need to upgrade their organisational capacities, beyond improving the pay packet.
People with an entrepreneurial bent can be social entrepreneurs. There is a certain perception that entrepreneurship is for young people. This is a myth. Studies have shown that successful entrepreneurs are more likely to be aged 40 or older. We need older, more experienced people, who can be role models for the next generation.
The typical profile of social entrepreneurs in Singapore is very young. I love their passion and energy. Unfortunately, I find that too many lack life experience and a connection with the ground. They cannot hope to save the world from Starbucks.
Older people have more prior knowledge to call on to identify opportunities. They also have deeper networks, more capability in managing teams and skills to deliver results.
People can follow the inspirational lead of pioneers such as Mr Jack Sim, who retired from business at 40 and founded the World Toilet Organisation, and Mr Eugene Seow, who was a practising architect for 10 years before becoming the executive director of Touch Community Services.
It is never too late to be a sector shifter. It is also never too late to start an NPO.
Laurence Lien is the chairman of Lien Foundation and the Community Foundation of Singapore. This post was originally published in The Straits Times and reproduced with permission from the author.