While religious organizations and charities have existed for
thousands of years, nonprofits as we understand them today have only become
prominent in the past few decades. Now, the world’s many nonprofit
organizations operate as a coherent sector separate from (though closely linked
to) government and business. Why does such a large third sector exist? Can’t society
get what it needs from businesses and government alone, with the government
providing social services to those in need? The short answer: absolutely not. Today, nonprofits play a key role in bolstering society and, perhaps surprisingly, the economy. The relationship that nonprofits have with business and government is one of interdependence and synergy; a quick look at these relationships will demonstrate the importance of nonprofits to our nation and world.
Business
The for-profit sector exists, at its most basic, to make money. Business owners seek to increase their own wealth, and many believe that this is where their responsibility ends. However, the idea of “corporate social responsibility” has caused many businesses to become intricately involved with the nonprofit world.
Corporate social responsibility argues that businesses should give back to the communities in which they operate, not for necessarily philanthropic reasons but because businesses need stable societies in order to make money. When a community is broken and its residents vulnerable, those residents do not seek to spend their money on the services and goods businesses provide. With this in mind, many businesses have begun to organize charity drives, provide in-kind services to nonprofits, encourage their employees to volunteer, and more.
Government
Governments also interact with nonprofits by providing grants, allowing tax deductions for charitable contributions, and providing “tax exempt” status to nonprofits regarding investment income, property tax, and sales tax. The government arranges for these concessions because it recognizes that nonprofits address a variety of social welfare issues that the government cannot fully undertake.
Business
The for-profit sector exists, at its most basic, to make money. Business owners seek to increase their own wealth, and many believe that this is where their responsibility ends. However, the idea of “corporate social responsibility” has caused many businesses to become intricately involved with the nonprofit world.
Corporate social responsibility argues that businesses should give back to the communities in which they operate, not for necessarily philanthropic reasons but because businesses need stable societies in order to make money. When a community is broken and its residents vulnerable, those residents do not seek to spend their money on the services and goods businesses provide. With this in mind, many businesses have begun to organize charity drives, provide in-kind services to nonprofits, encourage their employees to volunteer, and more.
Government
Governments also interact with nonprofits by providing grants, allowing tax deductions for charitable contributions, and providing “tax exempt” status to nonprofits regarding investment income, property tax, and sales tax. The government arranges for these concessions because it recognizes that nonprofits address a variety of social welfare issues that the government cannot fully undertake.
Businesses need stable government as well, for very similar reasons; the government, in turn, needs the nonprofit sector to help keep society anchored and strong. The government often “contracts out” services to nonprofits. For example, it may pay an adoption agency to help facilitate adoption and foster care services; in turn, the nonprofit must stick to regulations spelled out by the government. It is often more cost-effective for the government to contract out services versus attempting to provide those services in-house.
We need nonprofits not only for the social welfare services they provide to citizens, but because they strengthen and assist the two other major sectors of our world: business and government. These three sectors work together to keep society and the economy stable.
Sources:
Berman, Howard J. 2002. Doing "Good" vs. Doing "Well": The Role of Nonprofits in Society. Inquiry 39: 5-11.Renz, David O, ed. 2010. The Jossey-Bass Handbook of Nonprofit Leadership and Management. Jossey-Bass. San Francisco, CA.
