NFPs look to social enterprise model



The Australian not-for-profit (NFP) sector is transitioning towards a social enterprise model driven by funding and cost pressures.

A study of applications to the Westpac Foundation's Catalyst Grant Program by Dr Danielle Logue, researcher at UTS Business School and co-author Dr Gianni Zappala, has found that 70 per cent of organisations have a three or five-year plan to become more commercial.

This has been driven primarily by a strain on resources and a desire to fill the funding gap between government and philanthropic support as well as cover the growing costs associated with increased demand for their services. 

The study identified the emergence of new types of organisations and financial products, namely impact investing, socially responsible investment and social enterprises. These are forming to create a “social economy”, the report said, with NFP structures now one model within this broader ecology. 

Social enterprise is an alternative model to traditional NFPs and charities whose operation is reliant on external funding. It focuses on ways to generate revenue while the organisational mission remains focused on social benefit, Dr Logue said.

The study identified that of the 132 grant applicants sampled, nearly 60 per cent reported financial challenges, including the rising cost of operations. One in four organisations reported challenges related to decreased government funding and support, while one in five also regarded staff retention and training as issues.

However, while NFPs are looking at more effective and sustained methods of operation, the report also uncovered challenges organisations face in integrating “customers” and “beneficiaries” into one business model.

The full report can be accessed here.