(Photo by Ryan McGuire, gratisography)

The onset of the COVID-19 pandemic in the first quarter of 2020 put an end to a decade of global economic recovery. Governments have stepped in to help stabilize things; in the United States alone, the monetary and fiscal stimulus stands at more than $6 trillion and counting. But we entered the COVID-19 crisis with global debt over 322 percent of gross domestic product (GDP)thats 40 percent, or $87 trillion, higher than at the onset of the 2008 financial crisisand well need to return to sustainable spending eventually.

Meanwhile, the full extent of the pandemics tragic human impact isnt yet known, but we can already see dramatic implications, particularly for low-income communities. In the social sector, the public eye is mostly on the nonprofits that support emergency health response and offer services to the many populations that fall through the cracks of standard public servicesincluding elderly people and minorities; people experiencing poverty, unemployment, or homelessness; and asylum-seekers.

Amid these economic, human, and institutional pressures, the need for philanthropy has increased, but its plain to see the crisis is shaking the sector. From March to May 2020, US nonprofits cut 1.6 million jobsthats 13 percent of all nonprofit jobs in America. Funders are trying to ease the blow; the Ford Foundations call to action during the pandemic, for example, exemplifies the type of grantor commitment every philanthropic foundation should aspire to, and foundations like the ones I serve have worked quickly to establish a dialogue with grantees on current and future needs, relaxed restrictions on current grants, reduced reporting burdens, and designed a dedicated COVID-19 initiative to make targeted new grants. But not all nonprofits have this kind of support. Whats more, established fundraising channels such as events arent currently viable, and donors are harder to mobilizeand will continue to be until the economy recovers. By managing their liquidity, cutting costsand non-core programs, appealing to important donors, and accessing lines of credit, many nonprofits will succeed in leaning against the wind. But the unfortunate fact is that many others wont.

When the dust settles, the social sector will need to take strategic steps to restore its capacity and strength, and to effectively contribute to a post-COVID-19 social contract.

When the sector eventually turns its attention to rebuilding, an important part of the way forward will be revisiting how to create systems change. When foundations review how COVID-19 has affected grantees operating models, as well as their ability to deliver impact, liquidity, and solvency, it will become clearer than ever that viewing social change from a single-organization perspective is insufficient. To create change will require that foundations fund a set of organizations that act on different levers, including direct service, research into new solutions, capacity building, and advocacy. Indeed, starting now, funders and nonprofits need to begin thinking about what a vibrant, post-COVID-19 civil society could look like; which actions are conducive to (re)building it; and how to finance its different elements, including research and development, capital investment in nonprofit upgrading, and operating support. The role of civil society and science in forging the 2015 Paris Agreement on climate offers an example from which to learn.

The sector will also need to revisit its legitimacy. Already before the pandemic, big philanthropywhich Stanford professor Rob Reich has defined as an exercise of power by the wealthy that is unaccountable, non-transparent, donor-directed, perpetual, and tax-subsidizedwas beginning to come under pressure. Indeed, voices that accuse philanthropy of being secretive, undemocratic, and often unable to show its value are multiplying. While these voices are finding less of an audience during the pandemic, they are sure to come back with a vengeance once the emergency need for stimulus gives way to concern for balancing budgets. At some point, philanthropy will need to more clearly demonstrate its value to society, show greater inclusivity and transparency, and prove that its using scarce resources effectively. Emerging narratives questioning the value of philanthropy will be compounded by major economic-institutional collapse, but there are multiple paths forward. One leads to a philanthropic sector diminished by the crisis, and one to a sector with the necessary legitimacy, resources, and freedom needed to drive social change.

Before devising ambitious plans for how to build a better philanthropic sector, its worth taking stock of the factors that influence it and identifying strategic opportunities to enhance its dynamism. A useful concept here is philanthropic vitality, or what makes the sector efficient, impact-focused, and trustworthy. Gauging the philanthropic sector in any given region by its vitality can help us identify whats working and whats not, and then create a strategy for achieving vitality.

My colleagues and I defined the sectors core vitality dimensions in a recent pilot study as including adequate financial capital, a robust regulatory context and accountability practices, talent and human capital development, and high levels of public trust. We believe good collaboration practices, as well as a well-developed network of intermediaries that connects funders with nonprofits and provides professional services, also enhance vitality.

Based on this, the pilot study set out to assess the vitality of the philanthropic sector in Switzerlands Lake Geneva regionhome to more than 2,500 public utility foundations, and 450 international organizations and NGOs. The regions philanthropic sector showed strong vitality in its core dimensions, including a robust regulatory context and significant financial capital. In addition, foundations in the region benefitted from high levels of public trust, ahead of government, business, and the media.

But while there was a healthy intermediary sector, we found that public utility foundations need to make more progress on factors such as human capital development and diversity, accountability practices and transparency, and local collaboration to increase their value to society. To systematically improve these conditions and, thus, the sectors ability to drive change, we recommended that the sector establish a coalition of funders interested in promoting the regions philanthropic vitality, and align local and regional government best practices and procedures.

As explained above, when the emergency stage of COVID-19 has passed, the sector will face massive additional social need, depleted government coffers, a reduction in total donations, and additional uncertainty in financial markets. It will also likely face greater need for systems-level work, and renewed scrutiny over its legitimacy and effectiveness. However, the rebuilding phase also offers four opportunities thatif approached holistically and strategicallycan enhance the vitality of philanthropy and civil society. These opportunities include rethinking fiscal incentives, improving transparency, investing in technology, and taking collaboration to the next level.

First, the sector needs to draw in more philanthropic capital through well-targeted fiscal incentives and tax exemptions of philanthropic foundations. This will motivate institutions to invest in social impact. Some philanthropic foundations may even choose to pay taxes in exchange for greater freedom to select who they invest in and how (via grants or for-profit investments). In cases where a foundation already co-finances projects with the public sector, providing direct support to government is another motivation.

As one example, Genevas largest foundationthe Fondation Hans Wilsdorf, whose primary asset is ownership of the luxury watch brand Rolexrecently shared its philanthropic footprint for the first time publicly. It pays out 250 million Swiss francs per year (approximately $260 million), exclusively dedicated to public interest projects in the Canton of Geneva. The foundation also announced that as of fiscal year 2020, it would give up its charitable tax exemption and pay an estimated additional 30 million Swiss francs ($31 million) per year in taxes. (Rolex already pays company taxes.)

Second, the sector needs to improve transparency about what works. Using data to ground decision making has become foundational to strategy and operations in most industries. The social sector similarly needs easily available, high-quality, machine-readable data so that it can quantify issues and understand what drives outcomesat reasonable cost.

For example, the Inter-university Consortium for Political and Social Research, an international consortium of nearly 800 institutions, runs the Measures of Effective Teaching (MET) project with 3,000 teacher volunteers and independent research teams. It builds and tests effective teaching methods to help teachers develop their practice and thereby improve student success. Though some consider a methodology that assesses teacher effectiveness through the lens of student test scores too narrow, the consortium nevertheless believes test scores codetermine students life prospects. Systematically identifyingand sharinghow teaching can improve them across a variety of subjects offers a way forward. Offering free access to published findings and reports, as well as researcher access to data sets, democratizes insight and enables testing alternative research assumptions.

Third, the sector needs to invest in technology. COVID-19 is accelerating the transformation of nonprofits into digital knowledge organizations that collect and process valuable information about projects, funding, and partners. Nonprofits need to promote data gathering on social issues and projects, as well as be ready to use the data and handle it according to cybersecurity and privacy requirements.

A 2016 survey of nonprofits in Los Angeles, California, found that 95 percent of the organizations were aware that technology was important to their work and future. Notwithstanding, 60 percent did not have the staff in place to support their technology needs. Moreover, 54 percent believed their staff were not trained well enough to use technology effectively in their day-to-day work. The big five tech companiesAlphabet, Amazon, Apple, Facebook, and Microsoftalready run pro-bono programs to help nonprofits integrate digital technology and data-driven decision-making. Funders have the opportunity to use their money and influence to secure in-kind and pro bono support (including product license donations, platform development, and staff training) for nonprofits, enabling them to digitize and automate business processes, use digital platforms, and leverage data and analytics in new ways that enhance their efficiency and social impact.

Finally, the sector needs to approach collaboration with a new level of ambition. Take the issues of habitat loss, wildlife trade, clean air, agriculture, sustainable food systems, and climate change. In thinking of them altogether, it becomes clear that health and the environment are interdependent, and that we need to tackle all of them at the same time. Collaboration pools knowledge and resources in an otherwise fragmented philanthropic landscape, enabling greater impact. And again here, its important to develop strong, explicit incentives to working together.

For example, few programs that address violence against women in the Global South have formed partnerships to transfer the most effective intervention models. To help stimulate the spread of high-impact approaches and adapt them to new local contexts, the Womanity Foundation created an award to encourage collaboration between an innovation partner (a nonprofit that has developed a successful program) with a scale-up partner (a nonprofit that contextualizes, adapts, and rolls out the approach in a new location). By providing funding, capacity building, and access to networks, the award provides an incentive to replicate proven intervention models in new geographies. The partners of the awards most recent edition, My Safetipin in India and Soul City Institute for Social Justice in South Africa are working on making a free application that provides geospatial data and information to make public spaces safer, more accessible, and more relevant to women in South Africa.

Although the sector is still responding to the emergency, it behooves us all to start preparing to rebuild. Here are eight things funders can do now to lay the groundwork for future philanthropic vitality.

There will be no one-size-fits-all solution, but collectively, philanthropy will be judged not only on the contribution it makes now to solving the COVID-19 crisis, but also on how it rebuilds itself after the emergency and whether it can ultimately create systemic change. By measuring and optimizing the conditions that contribute to philanthropic vitality and by taking advantage of the opportunities that lie ahead, forward-thinking funders and nonprofit leaders can meaningfully improve the sectors ability to drive change.

Read more:

Reestablishing Philanthropic Vitality After the Emergency - Stanford Social Innovation Review