If you read annual reports from young community development organizations in Africa, you will most likely encounter a new gold standard: the self-sustainability percentage. It seems that the push to inculcate for-profit business practices into charitable work has created a whole new starting point for charities less than 5 years old. From day one, they are setting goals of 50% or 75% or even 100% self-sustainability in a few years’ time.
This value proposition gives donors the ability to view their grants as charitable investments. Their initial donations are scaling social enterprises that will eventually support themselves. One of the poster children for this self-sustainability movement is One Acre Fund. Since its launch with 38 farm families in 2006, One Acre Fund has grown to serve 54,000 families in 2011. One Acre Fund is exceeding 75% self-sustainability for 2011 and is aiming for 85% self-sustainability by the end of 2012.
One of the newest development organizations to launch with a clear commitment to self-sustainability is Nuru International. Nuru’s holistic development work encompasses agriculture, economics, water & sanitation, healthcare, and education. Nuru functions as a ‘General Contractor’ that combines and scales sustainable models from other NGOs. Borrowing fruitful practices from NGOs like One Acre Fund and Living Goods resulted in 52% self-sustainability for 2010, just one year after Nuru really got started. Nuru’s goal is to be completely financially self-sustainable within 15 years.
Successful businesspersons and the foundations their profits have endowed are highly attracted to these ‘non-profit enterprises’ that promise eventual self-sustainability. More foundations, like Echoing Green and the Mulago Foundation, are appearing in this space. But what should we make of this movement? Is the new gold standard of ever-increasing self-sustainability percentages a good idea?
The main concern is organizations getting distracted from their primary social mission. If revenue-producing activities are given disproportionate attention to push up self-sustainability percentages, the public good could take a back seat. This concern is understandable. However, the probability of NGOs lowering social impact on their priority list to focus on self-sustaining revenues seems no more likely than NGO mission drift in pursuit of the next big grant.
The best solution to the tension created from dual commitments to social impact and financial self-sustainability seems to be structuring an integrated double bottom line. Increased social impact can correlate to increased earned income. For example, Living Goods is a healthcare NGO in Uganda that sells life-saving and life-changing health improvement products through a network of Community Health Promoters. The more people who purchase their goods and services, the more revenue is created to cover operational costs. As Living Goods has made strides to reduce under-5 child mortality rates by 15%, it also reached 44% self-sustainability in 2010.
Since smart integrated double bottom line models can be created, the question becomes: Should every NGO move away from donor dependency and toward an earned income model?
In my opinion, every NGO that can cover its costs while avoiding mission drift should do it. In taking this stance, I am aware of the distractions that self-sustainability can create. For example, NGOs with little to no business expertise will try to start up profitable ventures and end up wasting resources. Pretending to run a profitable venture that actually drains organizational resources rather than creating revenue is a bad idea. If an NGO’s model focuses on social impact and tries to give lip service or a side project to revenue producing initiatives, it can be worse than just frankly acknowledging donor dependency.
Despite the mistakes that pursuing higher self-sustainability percentages can foster, it is well worth it. When you think about it, if the NGO doesn’t cover its costs from profitable ventures, then someone else will be asked to do so. There is no avoiding the fact that no-profit work must come from profitable work at some point.
I am excited to see smarter, integrated, self-sustainable models appear in every sector of social impact work. Healing Waters is doing it in Guatemala with fully self-sustainable water purification. CURE International has done it with cutting-edge orthopedic surgery in Zambia. One Acre Fund figured it out with agriculture, and Living Goods has used it in the last mile of healthcare delivery. Each one of these models could be critiqued by outsiders for ‘cashing in’ under the guise of the non-profit banner, but their social impact is unmistakable.
As the move toward self-sustainability continues, I’d love to know which programme areas you think can’t go down this road.
Paul Penley is director of research at the philanthropic advisory firm Excellence in Giving and creator of IntelligentPhilanthropy.com