There is also growing concern over the sustainability of corporate social investment initiatives and large philanthropic funds/endowments and impact investors. While business and trade unions are increasingly at loggerheads, the climate crisis adds additional complexity.
Globally distrust of the wealthy elite is at record highs due to growing recognition, thanks to ubiquitous access to information through digital media, that capitalism and democracy increasingly serve the best interests of a powerful and wealthy few.
In addition there is growing concern over the massive income inequality that has emerged, not just in South Africa but across the world. Some estimates suggesting that 1% of the population will own two thirds of global wealth by 2030. This inequality is largely due to systemic and structural factors like financial policies, legislation, government subsidies and tax codes and the decline in purchasing power that disproportionately impact on the middle and working class. Adding to this is the rise in anti-capitalist sentiment that blames capitalism for driving exclusion and disempowerment of the vast majority of the world’s population.
What does a social compact look like?
Within this context, President Cyril Ramaphosa has emphasised the need to craft a new social compact which requires all members of society to live by a core set of values that are inclusive, acknowledge the impact of the past and build a collective vision for the future.
Developing a social compact is a complex undertaking, that requires social dialogue, the ability to compromise and build consensus to achieve goals that align with society’s vision.
But reaching consensus is just the first step, to be truly effective a social compact requires individuals, government, business and civil society to work together to deliver and advance the vision outlined in the social compact.
What does this mean for social, impact investors and philanthropists?
In this age of distrust, social and impact investors and philanthropists must respond to demands to be more accountable and transparent in how they are supporting the social compact to signal their legitimacy and support for the broader development agenda.
It is within this context that The Rockefeller Philanthropy Advisors have published a report Social Compact in a Changing World: how philanthropies are grappling with growing scrutiny and critique to assist philanthropies to engage with the emergence of this new social compact and navigate the choppy waters that the 21st century presents.
The report highlights that these philanthropists and social investors face three key challenges that are constraining their ability to implement effectively:
- Growing scrutiny. The growing scrutiny of the wealthy and politically influential is spilling over into increased scrutiny of philanthropists and social investors. Adding to credibility challenges is that fact that these organisations can be embroiled in scandals and that there are very few formal accountability structures to hold these funders to account.
- Concerns around the influence: There is also growing concern over how much power unelected individuals in foundations, corporates, philanthropists and social and impact investors hold. Many question why the ultra-wealthy should be prescribing solutions to social problems that they know little about and without consulting affected communities.
- Questions around authenticity: Some critics suggest that very often philanthropic work aims to address financial inequality but that philanthropic foundations are the direct product of this financial inequality. This is translating into pressure to adopt more strategic grant making that aims to tackle root problems rather than address symptoms of our unequal society.
With these challenges in mind, we unpack how investors, philanthropists and foundations can go about support a new social compact.
For many foundations grappling with this new context, the first critical step is to define to who and how they are held accountable. Historically these foundations were accountable to boards, founding members or regulatory authorities but now many organisations see that they are ultimately accountable to the people that they are supporting and are developing mechanisms to report back to these new stakeholders.
Expand your stakeholders
Following on from defining accountability is the need to expand the stakeholders that foundations and philanthropists engage with. This may include the public sector, the private sector, civil society, the general public and communities where programmes are implemented.
In order to build and maintain legitimacy, organisations are increasingly demonstrating accountability through transparent communications, impact measurement and impact reporting. This can be done by highlighting that their work is evidence-led, that they collaborate with key partners and stakeholders and by showcasing inclusivity and transformation with the organisation.
Focus on transparency
Social investors now see the value in showcasing the impact of their investments. This has led to the increasing importance placed on reporting and the use of high-quality content backed up with data that shows evidence of impact and the use of strategic communication to share this information.
Embrace inclusive decision-making
Many organisations are adopting inclusive decision-making processes that include participatory grant making, which includes key stakeholders and the communities served in the decision-making process. Others use specific judging/funding criteria while other organisations are turning to digital tools to bring the voices of communities into the decision-making process.
Develop robust feedback loops
A trend that is growing in prominence is that funders are now engaging communities to get their perspectives on the programmes being implemented. This is mirrored in the emergence of new terms such as ‘co-creators’, ‘partners’, ‘client’, ‘customer’ and ‘communities served’ to replace the more traditional ‘beneficiary’.
Listening to grantees
A final trend that is emerging is more robust and authentic engagement with grantees, to understand their needs, challenges and what support they truly need to be more effective at programme implementation and build non-profits capacity.
The Social Compact in a Changing World report concludes that: “In today's world, to be
an institution with influence means meeting expectations of accountability, legitimacy, and transparency that come from a growing cohort of stakeholders. And these demands are only set to intensify.”
To meet these new expectations foundations, funders and social investors must take a much more open and inclusive approach that allows organisations to learn, incorporate stakeholder and community insights and views to deliver programmes that have real impact.
To read more about how your organisation can adapt to this shifting landscape download the 2020 Research Report – Impact with Disruption, here.