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Philanthropy and its Digital Awakening

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“Philanthropy today takes place in a context that is radically different from the environment in which many of its current practices and behaviors were developed.” - What's Next for Philanthropy - Monitor Institute

 There is perhaps no industry more primed for disruption than the charity sector. Advances in technology, changes in generational demographics and shifts in cultural and business perspectives towards the imminent risks of social and global crises have made transformation inevitable. This may seem surprising and counter intuitive to participants who have experienced the space’s inherent inertia. Philanthropy has a reputation for resisting change that is uniquely frustrating to its participants. But consider the following:

Web 3.0 

Decentralized Autonomous Organizations (DAOs), crypto-assets and other Blockchain based technologies will disrupt traditional business models by transforming how rapidly, transparently and effectively communities organize around social challenges.

Consider the following takeaways from Fidelity Charitable on how Technology revolutionizes our giving methods:

  • New platforms that use Big Data and AI will improve matchmaking between donors and giving opportunities
  • Technology and social media will lower the bias towards local giving by facilitating the formation of virtual networks and communities of like-minded people, exposing them to national and global causes that they otherwise might not have considered
  • Nonprofits that are unable to adapt to digital trends could struggle to succeed. As mentioned above, charities lack the resources and incentives to invest and thrive in the digital space
  • As technologies become faster, more secure, and more private, donors may seek platforms that allow them to make giving more accessible, personal and direct—by increasing the speed and transparency of the gift (cause) and its demonstrated impact (effect) cycle

The Great Wealth Transfer

Millennials and Gen Z are due to receive the largest wealth transfer in human history. According to research firm Cerulli, Americans can expect to inherit about $73T over the next quarter century of which $11.9T is projected to be transferred to philanthropies between 2021 and 2045. These digitally native generations will expect charities to display digitally savvy acumen and will respond accordingly.

Furthermore, “contrary to popular belief, today’s Millennials and Gen Z have more economic power than any generation that preceded them. They are earning more, saving more, and investing earlier and at higher rates than previous generations. They’re more likely to make purchasing and investment decisions based on personal and Environmental, Social and Governance (ESG) values and to be interested in sustainability and climate change” – Fortune Magazine. Our own research, conducted by the Giving Sciences Group at O&A, has revealed that Millennials and Gen Z exhibit much greater idealism and social good consumer behaviors than other generations. They expect to be able to communicate through digital channels, for technology to be seamlessly integrated into their lives, and for it to be personal. They demand the speed and transparency that digital platforms provide. 

Corporate and Nonprofit Synergies

The roles that nonprofits and purpose-driven brands play in addressing societal issues are becoming more intertwined. Corporate philanthropy priorities and cause-based marketing agendas are evolving, and partnerships between the public and private sector are increasingly impactful. This is a good thing. Given the scale and magnitude of the crises confronting us, it’s becoming increasingly apparent that philanthropic and for-profit organizations will need to collaborate closely and find ways to align.

There’s ample evidence that a strong corporate social responsibility (CSR) and ESG proposition creates value for corporations and their stakeholders (including shareholders), and that profit maximization can coexist with purpose.

This convergence of nonprofit and for-profit missions provides meaningful opportunities for society to leverage the core capabilities and advantages of both types of organizations in novel and powerful ways. “We can only create the world we want for the future through collaboration with others. Where civil society, governments, companies, and charities all come together, we make the most progress…” – Fast Company

Given the changing landscape of technology, donor demographics, and corporate missions and values, it seems likely that a dramatic change in the typical non-profit’s approach to innovation is necessary. The question is not if but when. Of course, none of this is to say that Philanthropy needs to become completely digital. Not at all. Rather, the point is that nonprofits need to do more than focus on their traditional core competencies and recognize that without innovation, their ability to serve society will quickly become more difficult than ever before.

Sources:

 Web 3.0 Collaboration Could Transform the Charity Sector - Griffith University

Tax-Free Inheritances Fuel America's New $73 Trillion Gilded Age - Bloomberg

Five Ways that ESG Creates Value - McKinsey & Co.

2021 Future of Philanthropy - Fidelity Charitable

Millennials and Gen Z are a Growing Force in Investing - Fortune

As companies become purpose-led, where does that leave charities? - Fast Company

Millennial and Gen Z Investors Grow to Embrace ESG Issues - Impactivate

The Case for CSR Initiatives: A Research-Driven Approach – One & All (not hyperlinked)