Wednesday, November 9, 2011

Are nonprofits losing their competitive edge?

At first blush, this week’s reading on competitor analysis doesn’t seem to apply to nonprofit organizations. After all, nonprofits focus on the common good and don’t compete…or do they? Certainly, nonprofits compete for limited funding. I argue, however, that nonprofit organizations compete at an even more basic level—their positioning in an ever-changing marketplace.

Take B Corporations.

B Lab, the organizing body of a new type of corporation, Benefit (or B) Corporations, has issued a manifesto that positions such companies in much the same arena as nonprofit organizations. Although it’s a bit long to quote in its entirety, I will include a few snippets from B Lab’s Declaration of Interdependence:

We envision a new sector of the economy
which harnesses the power of private enterprise to create public benefit.

This sector is comprised of a new type of corporation

– the B Corporation –
Which is purpose-driven and creates benefit for all stakeholders (1)

Purpose-driven. Creating public benefit. Sounds like a great description of nonprofits to me…yet how will nonprofits react to B Corporations and differentiate themselves?

Take the Corporate Social Responsibility movement.

An increasing focus on big business and corporations’ activities has prompted corporations to adopt a more nonprofit-like positioning statement. The Foundation for Corporate Social Responsibility’s mission, in fact, is to encourage “corporations to be Socially Responsible, and to assist them in achieving commercial success in ways that respect ethical values, people in need, their communities and the environment.” (2) Aside from the mention of “commercial success”, FCSR’s mission is eerily similar to many nonprofits’ mission statements. As CSR becomes a focus for an increasing number of companies, will they encroach on the nonprofit market space?

Take the triple bottom line.

Traditional measures of profit involve return on investment, shareholder value, and other financial analytics. The advent of the triple bottom line, coined in the late 1990s, broadens the focus on outcomes to include people, profits, and planet. This three-pronged approach incorporates social and environmental measures of success instead of purely financial dimensions. What? Corporations are now focusing not only on the financial bottom line—and are actually considering their impact on society at large? Isn’t this approach reflective of nonprofit organizations’ core values of providing benefit to individuals and communities?

Prior to the advent of the CSR movement, B Corporation status, and the widely discussed triple bottom line, nonprofit organizations were the sole providers of services that considered their impact on communities. As more and corporations position themselves as ‘do-gooders’, how will nonprofits react?

More food for thought:

How will the appearance of these socially responsible entities impact nonprofits and their position in the marketplace?

Will nonprofits begin to compete with CSR companies, B Corporations, and other companies showing a triple bottom line?

If so, what will this competition look like?

1) B Lab:

2) Foundation for Corporate Social Responsibility:

3) The Triple Bottom Line: What Is It and How Does It Work? Indiana Business Review, Spring 2011

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