How They Give is Changing and the Implications for Japan’s Nonprofit Sector InsightsEssays: Civil Society in Japan

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Posted on February 16, 2024

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How They Give is Changing and the Implications for Japan’s Nonprofit Sector

 

Philanthrocapitalism: Achievements and Criticisms

Donors provide the nonprofit sector with the know-how and methods of for-profit companies, as well as funds, to solve social and environmental issues on a large scale and at an accelerated pace, whilst the benefactors sometimes provide hands-on guidance to the recipients, and furthermore, have them report in detail on the progress of numerical targets for the desired outcomes. This approach, known as philanthrocapitalism, was first introduced abroad nearly 20 years ago.

It appears that few disagreements exist in acknowledging that the number and severity of social and environmental issues that urgently need to be tackled are on the rise worldwide. Yet it has also been pointed out that there are an increasing number of areas that are difficult for the public sector alone to handle due to fiscal constraints it faces. As for for-profit companies, they are under increasing pressure to maximize shareholder returns, and that in many cases it is difficult for them to go into areas where they cannot expect a return that meets the cost of capital. I think it is fair to say that the notion that for-profit businesses and their founders provide both funds and expertise to the non-profit sector to increase the potential for solving social and environmental challenges has gained support based on this recognition. In fact, there are examples of projects based on this concept that have achieved significant results.

However, there are criticisms of this approach from the perspective of the nonprofit sector.

• Many of the activities of non-profit organizations do not necessarily produce tangible results in a short period of time in solving social and environmental issues.
• Some areas of activities are not suitable to be managed by numerical targets and achievements.
• Some issues that cannot be solved using these methods and some people who are left behind may be overlooked.
• The burden on recipients can be excessive due to the time and effort required to manage numerical targets and report on results.
• Program officers do not always have sufficient experience, knowledge, or resources on hand to provide appropriate guidance to recipients.
• The use of funds is often limited to those directly related to a project, leaving the recipient organization unable to invest in IT and other indirect areas or to develop human resources, leaving the organization with a weak organizational base.
• The nonprofit sector in Japan, in particular, does not often have the expertise or human resources to participate in programs based on the approach, limiting the number of organizations that are eligible for these programs.

In addition, there seems to be a deep-seated sense of rejection against bringing the ideas and methods of for-profit businesses into the nonprofit sector.

 

Rapid, Unrestricted Donations to the Grassroots Nonprofits

The Economist* recently published a feature article on philanthropy in which the endeavor of Ms. MacKenzie Scott, one of Amazon’s largest shareholders, was discussed. Her way of giving is quite different from that of philanthrocapitalists’ approaches, such as:

• Due diligence on the possible recipients is outsourced, while making the process less demanding.

The idea seems to be to trust organizations working in the field, provide funds quickly to them, allow them to spend the funds freely on what they think is necessary, reduce pointless paperwork such as preparing reports, etc., and make their activities in the field more active. The approach appears to be the antithesis of the hands-on management approach that demands outcomes from the recipients. It is interesting to note that the Rockefeller Foundation in the U.S., in its project to promote vaccination against Covid-19, shifted from its original policy of hands-on management and guidance toward the recipients of their grants to one that emphasized the autonomy of grassroots organizations that were trusted by the local communities. I believe that there is a commonality in the notion that trusting nonprofit organizations in the field and allowing them to spend the funds on what they feel appropriate will produce the desired results.

 

Implications for the Japanese Nonprofit Sector

I suspect that the attention that this form of donation is attracting may increase skepticism toward philanthrocapitalism among some in Japan’s nonprofit sector. However, considering the results accomplished to date, I believe that there will still be cases in which philanthrocapitalism is one of the quite effective ways to tackle social and environmental issues, although there may be areas within this method that need to be improved. In view of limited financial and human resources, it should continue to be utilized to maximize the philanthropic funds’ utility to society as a whole. In addition, it seems to me that there are areas in which the nonprofit sector can leverage the knowledge of for-profit companies in terms of data utilization and operational efficiency. I do not think reacting to the growing interest in the new form of philanthropy reported by the Economist with “I told you so” would be very constructive.

On the other hand, even when new problem-solving schemes are introduced, being mindful of the fact that there may be people who are left out of such support measures and staying close to these people with empathy is an area in which many grassroots nonprofit organizations excel. To remain such an existence and to work with the trust of the community is the raison d’etre of grassroots organizations. It is precisely this point that the Rockefeller Foundation recognized as the value of grassroots organizations during the Covid-19 pandemic, and I believe it may become more important to the donors in the future.

In Japan, the Central Community Chest of Japan’s “Borasapo” program has been providing rapid funding to volunteers and NPOs involved in relief activities during large-scale disasters such as the recent Noto Peninsula Earthquake. There are also examples of rapid funding based on trust within some field-specific networks of nonprofits. In addition, some corporate programs are aimed at strengthening the infrastructure of nonprofit organizations. If new forms of donation spread in Japan that emphasize speed and can be utilized to strengthen the organizational foundation of recipients with few restrictions in regard to the use of the grants – in other words, schemes similar to the one Ms. Scott is working on – then it could be a great opportunity for its nonprofit sector.

What must not be forgotten, however, is the premise and purpose of this approach. The premise is trust amongst donors and recipients. Because there is trust in the recipient, funds that allow for flexible use are provided quickly, and the required reporting of activity results is simplified. Furthermore, the purpose of this approach is to encourage grassroots organizations to use their time and energy to boost their activities instead of spending them reporting to donors. In other words, the grassroots organizations should be rooted in the local community, be trusted, conduct activities that meet the expectations of various stakeholders while incorporating the knowledge of a for-profit company, when appropriate, and post their activities in a timely and accurate manner. I think that such steady efforts will become increasingly important for the nonprofit sector.

Finally, the Noto Peninsula Earthquake caused colossal damage to the peninsula and surrounding areas that is beyond description. It is anticipated that reconstruction assistance will be required over a long period of time. The support for grassroots relief groups that are involved in rebuilding livelihoods and communities while staying close to those affected by the disaster will be needed from a medium- to long-term perspective, including strengthening their organizational foundations and human resource development. In addition to the assistance to be provided by Japan’s nonprofit sector as a whole, including the provision of knowledge and human resources, I hope that donors, including businesses, will consider supporting the activities of grassroots groups over the long term, in view of the new trend of giving.

 

Please note that the opinions expressed in this article are not those of the Japan NPO Center, to which the author belongs, but rather the author’s personal opinions. In addition, the statements and interpretations in the Economist feature article introduced in this article, particularly the summary of Ms. Scott’s donation activities, were made by the author on his own initiative without contacting the magazine or Ms. Scott. Please also note that the feature article should be read in its entirety for an accurate understanding of its contents.

 

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Original text by Masahiro Yokoyama (JNPOC staff) originally posted on February 2, 2024; translated by JNPOC.

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