Thursday, January 29, 2015

Filling the Void: The Unique Role of Nonprofits in Today's Society

As with most things political, President Obama’s latest State of the Union address was met with mixed reviews by members of the nonprofit world. While the folks at Nonprofit Quarterly were irate that Obama never overtly mentioned the role of nonprofit organizations in larger society, others perked up at the President’s allusion to the implementation of a higher estate tax—a move that is predicted to “spur more charitable giving in the form of bequests and charitable trusts.” But perhaps the most notable “nonprofit moment” of Obama’s speech was his explicit shout-out to a Minneapolis-based nonprofit, the Institute for Local Self Reliance.
Founded in 1974, the Institute for Local Self Reliance, or ILSR, has championed “the need for humanly scaled institutions and economies and the widest possible distribution of ownership.” In pursuit of this mission, ILSR must both collaborate and compete with government, for-profit business, and other nonprofits, on a variety of issues, including:

  • Energy: ILSR lobbies government representatives to promote renewable energy and adopt a decentralized power grid that more equitably distributes the economic benefits of energy generation.
  • Local Business: ILSR works with local businesses to revitalize commercial districts and combat market domination by corporate conglomerates. Additionally, businesses (and their employees) provide charitable donations to fund ILSR’s work.
  • Waste Reduction: ILSR competes against other non-profit providers for federal grant funding to research a variety of waste reduction methods such as composting and recycling.

Although this is just one case example of a nonprofit’s functions, it is certainly representative of the larger scale relationship between government, nonprofits, and for-profit businesses across the country. Each of these three economic sectors is both interconnected and interdependent with respect to the others. We cannot fully understand the unique role of the nonprofit sector in today’s society without comparing and contrasting its role to that of the government and business sectors.

Nonprofits and government: Throughout our nation’s history, government has served to regulate society. However, the form and focus of government regulation fluctuates over time, contracting or expanding in response to public opinion around the appropriate limit of government intervention. However, as Berman (2002) explains, “as government’s role contracts, or remains constant, society’s needs do not contract automatically” (p. 6), requiring the nonprofit sector to consistently fill the gap between the regulations/services provided by government and the unmet social, economic, and educational needs presented by individuals and communities.

Nonprofits and business: Boards are the driving forces behind both nonprofits and businesses (Berman, 2002). These groups of members, through collective action, work toward a shared mission (2002). However, the missions of businesses and nonprofits differ with respect to motive. For-profit businesses exist to make money within the context of a market economy; nonprofits exist to serve the needs of society that cannot be met through economic competition alone (2002). While businesses can adopt a stance of corporate social responsibility, they are still inextricably tied to the goal of making a profit (2002). While nonprofits must also generate enough revenue to be sustainable, their goals, by definition, extend beyond that of making a profit, and instead function to realize society’s unmet social welfare, economic, and educational needs (2002).

Clearly, each of these three sectors plays an important role in our society. However, nonprofits are unique in their function of providing and equitably distributing collective goods and services demanded by citizens but not supplied by business or government. In this way, nonprofits essentially function to afford access to necessary resources not consistently provided by the other sectors.

Reference: Berman, H. J. (2002). Doing "Good" vs. Doing "Well:" The Role of Nonprofits in Society. Inquiry, 39, 5-11.