Navigating the New Hybrid World of Nonprofit and For-profit Business
Sustainability issues are now on the day-to-day business agenda of most companies and organizations around the world. Business increasingly accepts that it must be part of the search for sustainability solutions on issues as diverse as environmental degradation to the unprecedented economic inequality emerging in society.
At Schulich, we’re developing future business leaders who have a strong sustainability mindset and who aspire to make a positive difference in the world. Students today want to be sustainability change agents – not just within nonprofit organizations or NGOs – but in mainstream corporations operating in industries such as finance, real estate, consumer goods and resource extraction. And forward-looking business leaders understand this. John Kousinioris, CEO of the power generation company TransAlta and a graduate of the Schulich/Osgoode JD/MBA Program, told me in a recent conversation that TransAlta’s strategy to significantly reduce its reliance on fossil fuels is not just good for the bottom line. It also allows the company to compete for the best talent who are increasingly choosing employers based on their commitment to environmental sustainability.
In this month’s column by Geoff Kistruck, the RBC Chair in Social Innovation and Impact, we look at how the once-hard lines between for-profit and non-profit organizations have dissolved, and how Schulich researchers are exploring this new hybrid landscape through social, environmental and economic lenses.
I believe they’re not only helping to discover potential solutions to pressing environmental and social problems, but also opening the door to the many untapped opportunities that lie in this still largely uncharted new terrain.
Detlev Zwick, PhD
Dean, Tanna H. Schulich Chair in Digital Marketing Strategy
Schulich School of Business
Navigating the New Hybrid World of Nonprofit and For-profit Business
Throughout much of the 20th century, the separation of responsibilities between the for-profit and the nonprofit sector were clear: for-profit corporations were expected to focus on producing economic gains, and nonprofit organizations were tasked with generating positive social and environmental impact. However, such lines of responsibilities began to significantly blur towards the turn of the century as for-profit businesses engaged in more CSR-type activities, and nonprofit entities sought out alternative ways to generate funding as government and donor support dwindled.
Fast forward to today, and the overlaps are even more significant, with the emergence of new hybrid organizations such as ‘Low-Profit Limited Liability Companies’, ‘Social Enterprises’, and ‘Community Interest Corporations’ that reflect an equal focus on financial, social, and environmental goals.
Take, for instance, Patagonia Inc., which is a large for-profit corporation that designs clothing and gear for outdoor sports enthusiasts. After being one of the first companies to pursue B-Corp Certification ten years ago as a reflection of its integral focus on environmental and social issues, Patagonia recently changed its core mission statement to read: “We’re in business to save our home planet”. Or Habitat for Humanity, which is a long-standing nonprofit organization focused on providing affordable homeownership to low-income families. In order to generate earned revenue to complement its donor funds, the nonprofit launched a chain of home improvement retail stores (‘ReStore’) that has become a significant player in the furnishings, appliances, and renovation materials industry.
This trend of hybridity is similarly reflected within new start-up organizations that seek an integrated focus on financial and social/environmental impact from the outset. Take, for example, the start-up Good Foot Delivery in Toronto, which launched a courier delivery business with the express purpose of providing stable employment to the neuro-diverse community.
This heightened integration of previously disparate sectors creates a new set of challenges for management education and training. First, managers working in hybrid organizations must re-evaluate and even re-define what can be deemed ‘good performance’. While well-established accounting principles (e.g., GAAP) already exist with respect to financial performance, their social and environmental counterparts (e.g., SROI, IRIS) are at a relatively early stage of development. Similarly, from a finance perspective, managers must understand the legal structures and institutionalized practices required to tap into the rapidly growing capital pools dedicated to impact investing and sustainable finance.
From a strategic standpoint, new tools are needed to help managers navigate decisions that present significant trade-offs between social, environmental, and economic goals, and to identify which social and environmental opportunities their organizations are best suited to pursue, and which are better addressed by others.
The Schulich School of Business is at the forefront of helping navigate this new hybrid world. During the past year, Schulich integrated its Nonprofit Management and Leadership specialization with its Business and Sustainability specialization to form one of the first formal academic areas in the world dedicated to Sustainability. Beginning this coming year, a new course on sustainability will be integrated into the MBA core to ensure our students are adept at operating within a hybrid organizational environment. Similarly, we have introduced a new core EMBA course titled ‘Innovating for Social Impact’ that will involve students working onsite at York University’s Costa Rican campus to help redesign the business model of local cooperative organizations to strengthen their environmental and social impact.
We are also launching a new PhD program dedicated exclusively to training new scholars within the topic of sustainability. And by continuing to conduct world-class research through our Centre of Excellence in Responsible Business (COERB), our multi-disciplinary faculty will seek to uncover new best practices with respect to sustainability reporting, energy transition, social entrepreneurship, and building more sustainable cities. For example, the initial results of a recent study completed in partnership with a large North American social enterprise suggested that drawing increased attention to an organization’s social impact – which would seem to be a good thing – can at times backfire. This is because promoting how the organization helps improve the lives of individuals within society can sometimes create a sense of envy and even demotivation among lower-level employees within the organization who feel, ”why not help me?”
Schulich has been, and will continue to be, well positioned as thought leaders on understanding the intersection of business and the broader society.
Professor and RBC Chair in Social Innovation & Impact
Area Coordinator, Sustainability