In a previous article, we wrote about the growing imperative for not-for-profit organisations to develop a Social Return on Investment (SROI) framework to ensure they survive and thrive in a changing funding environment.

In that article, we stated that SROI, at its core, measures whether the social value created by a program or service run by an NGO outweighs its cost. Calculating the effectiveness of the social program allows the organisation to identify areas where they can improve their impact and attract alternative funding sources. 

Many NGOs struggle to measure the impact of their services and the social value they provide.  This difficulty arises from several factors, two of which are;

1. There is an ongoing and often overwhelming need to keep up with the demand for service delivery. When organisations struggle to meet the constant pressure for services and staff feel engulfed by the needs within a community, it is challenging to think critically about the outcomes and impact of the services. Within an SROI framework, the terms outcomes and impact have a particular meaning, which is explained below.

2. The problem of language. The language used when developing a methodology around SROI is often confusing. For example, what is the difference between an output and an outcome? What is the difference between an impact and an outcome? When staff are unfamiliar with the terminology used by SROI and faced with community needs, it is easy to fall into the trap of viewing SROI as theoretical mumbo-jumbo best left to academics while the “real needs of people” are dealt with. The problem of language presents an opportunity for for-profit organisations looking to engage in social impact investing (SII) to work with NGOs to understand the terminology and embed this understanding in service delivery practices.

An opportunity for for-profit organisations

We have written previously about the importance and benefits of collaboration between for-profit and not-for-profit organisations. 

Companies and brands are more aware of contributing to the greater social good. One way of contributing is through social impact investing (SII). Companies and brands work with NGOs by investing in them and working with them to address complex social needs. The NGO benefits from the investment provided by the company, and ultimately, the business has a return on its investment.

Many for-profit organisations look for NGOs that already have and are operating under an SROI framework. However, working with an NGO to develop an SROI framework presents opportunities for for-profit organisations to develop a shared vision and understanding with the NGO. This allows the for-profit organisation to be involved at the beginning of the NGO’s journey in developing an SROI framework and can lead to constructive relationships and positive outcomes in addressing community needs.

While there are opportunities for for-profit organisations to work with not-for-profits to develop their SROI strategies, equally, there are steps NGOs can take to establish an SROI framework that will put them in a better position to work with for-profit organisations who are looking to invest in addressing social and community needs.

Steps in developing an SROI framework for not-for-profit organisations

There are steps not-for-profit organisations can take to develop an SROI framework.

1.  Understanding the importance of an SROI framework for the organisation’s future

Developing an SROI framework is essential for organisations. It will be the difference between the NGOs that survive and those that either are forced to close or are taken over by larger not-for-profit organisations. The need to demonstrate the impact of the services provided by an NGO is being driven by two factors.

a)     The model of funding from governments has changed, and there is now greater demand to demonstrate that services are providing value for the funding they receive. Funding bodies often opt to go to open tender to ensure they achieve value for money. This means funding can no longer be relied on. Organisations that have provided services to the community for years are often defunded as new service providers win the contract.

b)     The demand to demonstrate value for money also impacts philanthropic funding and how donors gift their money. Donors no longer donate simply to good causes. They also want to see the value their donations provide.

Smaller to medium-sized NGOs are vulnerable to the changing funding landscape. This vulnerability is increased if they cannot clearly articulate the benefit and impact they provide.

Developing an SROI framework must be driven by the Board. Too many Board’s have a myopic understanding of the organisation’s impact and view it as a ‘feel good’ factor. In other words, the organisation has an impact because “we do good work”. There is no understanding of the broad, long-term effects created by the services provided by the organisation within a community. This is the true meaning of impact, and most Boards cannot clearly articulate these long-term benefits within the community the organisation serves.

2. Begin to understand the language of SROI

Not-for-profit organisations must begin to understand the language of SROI and start using it in their service delivery.

As mentioned, some terms that cause the most confusion initially are outputs, outcomes, and impact.

a)  Outputs

The outputs of an organisation are the activities required to support what they are trying to achieve. For example, if an organisation is providing a counselling service, the outputs are the number of staff who are counselling and the number of hours of counselling provided over a week or a month.

Outputs are usually quantitative and easy to measure whether they have been provided.

b)   Outcomes

Outcomes are what the organisation is trying to achieve. For example, in the case of the counselling service, the organisation may be trying to ensure clients are more empowered in their daily lives and feel a greater sense of resilience in managing their circumstances.

Measuring feelings of empowerment and resilience is challenging because they are based on the client’s perception and, therefore, more difficult to measure. Because of the challenge of measuring outcomes, many not-for-profit organisations are content to continue measuring outputs. Annual Reports will be filled with the number of clients assisted and the number of hours of service delivery, and these numbers will contribute to the Board’s belief that the organisation is making an impact.

However, in the example of counselling services, if 80% of clients are dissatisfied with the counselling they have received and feel they are not empowered, the organisation is not meeting its intended outcome. This is where it is essential to understand clients’ needs, the challenges they are facing and the issues, constraints and priorities that are important to them so a way can be found to measure clients’ perceptions and feelings of empowerment.

One of the other traps many not-for-profit organisations fall into around outcomes is providing a case study. A case study is used as an example of the outcomes the organisation is achieving. The problem with case studies is their individual nature. It shows the outcome of the service provided by the organisation to one person but does not accurately measure the outcome to the client cohort. Failing to measure outcomes can lead to false reporting of the organisation’s success.

c)   Impact

Outcomes are the short-term effects achieved from the outputs, whereas the impact is the broader, longer-term effect of the service provided. Using the example of the counselling service, the outcome is the ability of the client to manage their current situation that is causing distress. The impact is the ability of the client to apply the skills they have learned to other areas of their life. In other words, the client doesn’t need to keep coming back for counselling because they have learned skills they can apply to other areas of their life, resulting in greater life satisfaction.

Not everything can be measured in an SROI framework. However, it is essential to understand the terminology and consider how to apply it to the organisation’s current service delivery model. Understanding and thinking about applying the basic concepts and terms of an SROI framework is a start on the SROI journey. It also means when approached by a company or brand, the organisation can demonstrate its initiative and commitment to developing an SROI framework.

3. Developing an SROI framework is a journey

Developing an SROI framework takes time and commitment, particularly in the early stages. Becoming clear about outcomes, the impact of the service, and how to measure them takes thought and often revising what is being measured.

As the organisation becomes more confident with the SROI framework, what is measured for outcomes and impact will often be changed and refined.

It is essential to understand that developing an SROI framework is a journey so that when things get difficult and frustrating, it is not seen as failure but just another part of the journey.

The benefits of persevering are the sense of confidence and assurance that an SROI framework can provide when the organisation can clearly articulate its impact and benefit and how these benefits are cost-effective.

Is the legacy of legacy media destined to be quaint artifacts housed in museums, evidence of how news was once distributed and consumed?

The growing magnitude and complexity of socioeconomic problems facing societies worldwide mean there is an urgent need for not-for-profit and for-profit organisations to work together effectively to create sustainable communities. 

Collaboration between for-profit and not-for-profit organisations, often called cross-sector collaboration or partnerships, can yield several benefits for each organisation and contribute to the broader social, environmental, and economic well-being of communities and society. 

However, these collaborations are not without their challenges and require a shift in the mindset of both for-profit and not-for-profit organisations.

Shifting the mindset – moving from history to the present

Historically, many not-for-profit organisations were distrustful and wary of for-profit organisations. The fear was that for-profits’ need to achieve profit would negatively impact and distort the not-for-profit’s goal of addressing social issues.

Even when seeking donations from for-profits, many not-for-profit organisations wanted to keep the relationship at arm’s length.

Conversely, many for-profits viewed non-profit organisations as “not quite businesses”. Not-for-profits were considered as being managed by people attempting to do “good in society” who had limited or no business understanding or skills.

There is increasing recognition among leaders in non-profit and not-for-profit organisations that these mindsets are detrimental at both an organisational and community level. Several factors are driving the need for change.

1. Complexity of issues facing communities

The social and environmental issues impacting society and communities are more complex and interconnected than were previously recognised. For example, there is greater awareness that increasing living costs often drive people in precarious financial positions into homelessness. The rising cost of living also impacts transport and building costs required by the building industry to provide more homes or accommodation options for people who are homeless. The flow-through effect of homelessness impacts a society’s health system in terms of increased need for mental health services and increased presentations of people who are homeless at hospital emergency departments.

Hence, homelessness not only has individual ramifications for the person who is homeless but there are economic, structural and health impacts on the community and broader society that require the involvement of government, business, health and no-for-profits to address adequately.

2. Requirement for For-Profit organisations to contribute to society and the environment

This requirement has been brought about by a shift in consumer expectations, particularly from Gen Z. Consumers are no longer driven by price alone. They also want their purchases to have a positive social impact and engage with companies doing good in their communities. 

Companies and brands understand the need to contribute authentically to the greater social good. Hence, socially responsible consumerism has become a foundation that enables for-profit and not-for-profit organisations to develop meaningful relationships mutually beneficial to everyone when done successfully.

3. Greater recognition of each other’s strengths

While historically, for-profits and not-for-profits often viewed each other with distrust, there is now greater recognition of the strengths of each sector and how these strengths can contribute to each other’s success.

MODERN NOT-FOR-PROFIT ORGANISATIONS RECOGNISE THE BENEFITS OF DRAWING ON FOR-PROFIT BUSINESSES

In the past, there was a view among not-for-profit organisations that they had to do everything in-house. For example, they would employ staff to run their marketing campaigns. Whenever a need arose, the mentality was, “We need to employ a staff member”.

While this mentality still exists among many smaller to medium-sized not-for-profit organisations, there is growing awareness that employing staff for non-core functions is not an effective use of funds. It is more effective to outsource jobs and roles such as marketing, social media, and public relations to for-profit businesses for whom this is their core business and who have the skills and connections to make these partnerships successful.

WHAT NOT-FOR-PROFITS CONTRIBUTE TO FOR-PROFIT BUSINESSES

One of the main benefits not-for-profits provide to for-profit businesses is looking beyond the bottom line of profit and loss to view people and situations more holistically and create positive work environments that flow through to greater productivity.

As one person said of their not-for-profit work experience;

The nonprofit experience has actually helped me take a much different approach in the corporate world. When I started Ascend to help people with their personal finances, I was able to draw upon many of the foundational experiences from my nonprofit work to help people and make a positive impact instead of looking at everything from the lens of profit and loss.

Requirements for a successful cross-sector collaboration

Successful collaboration between for-profit and not-for-profit organisations requires thought, careful planning, clear communication, shared goals, and a mutual understanding of each other’s strengths and limitations. For this to occur, the following must be considered.

1. Is there a shared vision and goal?

Both parties must clearly understand the purpose and objectives of the collaboration. Spending time at the beginning of any collaboration, ensuring a shared vision and common goals, not only helps align efforts and create a sense of purpose but also reduces the likelihood of miscommunication and misunderstanding as the collaboration progresses.

Part of considering this shared vision is identifying each organisation’s unique expertise, resources and capabilities and identifying how the strengths of one organisation can complement the weaknesses of the other. Identifying strengths and weaknesses requires honest communication because there can be a tendency to downplay weaknesses and present a good front.

2. Open Communication

Honest and open communication is essential. This requires both sides to openly communicate their expectations, strategies, challenges, and progress. Regular check-ins and updates help ensure everyone is on the same page.

It is also essential when communicating that there is clarity about the roles and responsibilities of each organisation. Making assumptions about what each organisation will do in the glow of goodwill is easy. However, once the light has faded, unless there is clarity and agreement about roles and responsibilities, the result is often confusion and disagreement about who is doing what.

3. Mutual Respect and Alignment of Values

It is essential to approach the collaboration with mutual respect for both organisations’ values, missions, and cultures. Part of respect is being transparent about their intentions, strategies, and any potential conflict of interest.

Even though for-profit and not-for-profit organisations have different missions, it’s crucial to find common ground and values that underpin collaboration. 

This alignment, respect and transparency help build trust and enhance the partnership’s longevity by fostering positive working relationships.

4. Agreement on Outcomes

As mentioned above, there needs to be open and transparent communication, particularly around defining what success looks like for the collaboration. This could include both qualitative and quantitative outcomes. It is essential to have measurable goals that provide a clear framework for evaluating the collaboration’s impact and success.

Regularly assessing the impact of the collaboration on both organisations’ goals will enable the organisations to make informed decisions about the collaboration’s future.

5. Legal and financial considerations

Legal agreements, contracts, and financial arrangements must be clearly defined. Again, open and clear communication is required to address issues related to intellectual property, revenue sharing, funding, and liabilities.

6. Flexibility and adaptability

Collaborations can evolve due to changing circumstances; therefore, both organisations should be flexible and willing to adapt to new challenges and opportunities. Part of being flexible is to view the collaboration as a learning experience. Continuously gather feedback and insights to improve the partnership’s effectiveness and make informed decisions. 

Another aspect of being flexible and adaptable is to consider the long-term sustainability of the collaboration and plan for how the partnership will continue to thrive beyond its initial stages.

7. Leadership and support

For a collaboration to be successful, both organisations must have strong leadership support and a commitment to lead and oversee the collaboration. Strong leadership helps ensure the partnership receives the attention it needs to succeed.

8. Conflict Resolution Mechanisms

Conflict will likely occur at some stage, even with respect, values alignment, and open communication. Establishing a process for resolving disputes or disagreements that may arise during the collaboration before the conflict occurs is essential. This process should be fair and unbiased.

Successful collaborations require effort and dedication from both parties. While challenges may arise, a well-structured and thought-out collaboration can lead to positive outcomes for for-profit and not-for-profit organisations and assist in addressing many of the complex problems within society.

Do you find you are spending more and more time on your phone, scrolling through your social media feeds? 

Will the new Instagram Threads age well and continue to grow in popularity and usefulness, or will it go the way of many social media platforms and programs that have a use-by date and sink quietly into oblivion?

The World Economic Forum included using the metaverse to improve mental health outcomes for people. In other words, this is using screen time to build connections in shared virtual spaces to assist in combating the growing mental health crisis instead of contributing to it.

It is well known that excessive screen time and social media use can lower psychological well-being, particularly in adolescents and children^[1].

Yet in the 2023 Flagship Report on the Top Ten Emerging Technologies for 2023, the World Economic Forum included using the metaverse to improve mental health outcomes for people. In other words, this is using screen time to build connections in shared virtual spaces to assist in combating the growing mental health crisis instead of contributing to it.

The impact of mental health issues has increased both in Australia and in Singapore since COVID-19.

The mental health impact in Singapore

COVID-19 added to the stressors facing many young people in Singapore, with home-based learning creating a sense of isolation and the ongoing pressure to perform academically. The recession caused by the pandemic also increased the anxiety of youths as they faced an uncertain future. Hence, for many Singaporean young people, the pressure to achieve academically, social isolation and increasing anxiety about the future has contributed to rising mental health issues. In 2021, the youth suicide rate in Singapore reached a five-year high.

Graduating from the education system does not mean that Singaporeans are leaving the pressure cooker lifestyle of the education system behind. The already stressed-out youths enter an even more demanding workplace. Employees in Singapore tend to work long hours. This only worsened with COVID-19 when personal and professional boundaries became blurred with working from home. It is thus unsurprising that Singaporean workers report high levels of burnout and the associated mental health conditions of depression and burnout.

The cost of treatment, especially in the private healthcare sector, is a significant deterrent for many Singaporeans. While public mental healthcare is subsidised, where people are experiencing acute symptoms and cannot wait, many must pay hundreds of dollars out of pocket for a session with a mental health professional in private practice. This puts effective mental health treatment out of reach for many. When surveyed, Singaporeans rated the effectiveness of treatment for mental health issues such as suicide in the country as average.

The mental health impact in Australia

From the 2021 NSMHWB (ABS 2022a), it is estimated that:

●    1 in 5 (21%) people who had experienced a mental disorder in their lifetime had symptoms in the 12 months before the survey interview. For these people, anxiety disorders were the most prevalent type of disorder (17%), followed by affective disorders (8%) and substance use disorders (3%).

●    A higher proportion of females than males (45% compared with 43%) had experienced a mental disorder in their lifetime, with a higher proportion of females than males (25% compared with 18%) also experiencing symptoms in the 12 months before the survey.

●    16–24-year-olds (40%) were most likely to have experienced symptoms of a mental disorder in the previous 12 months, while those aged 75–85 years were the least likely (4%).

Hence, both Singapore and Australia share similar experiences in the mental health area that include:

a)     Increasing number of people within the community experiencing mental health issues.

b)     Rising cost of mental health care. 

c)     Mental health services unable to keep up with demand. Within the United States, it is estimated that the psychiatrist workforce will contract through 2024 to a projected low of 38,821. This equates to a shortage of between 14,280 and 31,091 psychiatrists. Although these are US figures, they are not unique because Australia and Singapore also face a shortage of trained professional staff to deal with the rising incidence of mental ill-health within the community.

Given these factors, the inclusion by the World Economic Forum of the metaverse as a virtual reality space where people can interact with a computer-generated environment and other users in real time for mental health support and well-being makes sense.

How the metaverse can assist with the delivery of mental health services

The metaverse can be utilised to provide mental health services in several ways.

1. Virtual Therapy and Counselling

The metaverse can provide a platform for virtual therapy sessions, allowing individuals to connect with mental health professionals remotely. This can improve accessibility and convenience, particularly for those with limited access to in-person therapy or who live in remote areas.

2. Immersive Relaxation and Mindfulness

Virtual reality experiences within the metaverse can offer immersive and calming environments that promote relaxation and mindfulness. These experiences can help individuals reduce stress, anxiety and improve their mental well-being.

3. Social Support and Community

The metaverse can serve as a space for people to connect with others who share similar experiences or struggles. Virtual support groups, communities, and social networks can provide a sense of belonging, reduce feelings of isolation, and allow individuals to share their stories and support each other.

4. SKILLS TRAINING AND EXPOSURE THERAPY 
Virtual reality simulations within the metaverse can be utilised for skills training and exposure therapy for various mental health conditions, such as phobias or anxiety disorders. By creating controlled virtual environments, individuals can gradually face their fears or practice new coping strategies in a safe and controlled manner.

5. Education and Psychoeducation
The metaverse can offer a platform for mental health education and psychoeducation programs. Interactive virtual environments can provide engaging and informative experiences to teach individuals about mental health, promote self-care practices, and raise awareness about different conditions.

6. Avatar-based Self-Expression

In the metaverse, individuals can create avatars that represent themselves. This can allow people to express themselves freely, explore aspects of their identity, and engage in self-discovery. Avatar-based self-expression can be empowering and supportive for those who may feel restricted or judged in their physical lives.

Gaming platforms are already being used for mental health treatment. Such platforms increase patient engagement and help destigmatise mental health issues. For example, DeepWell Therapeutics has created video games to treat depression and anxiety; UK-based Xbox studio Ninja Theory has incorporated mental health awareness into mass-market games and plans to expand into treatment with their Insight Project.

However, it is essential to note that while the metaverse can benefit mental health, there are potential issues and drawbacks that must be considered. Some of the potential risks associated with the metaverse include:

1. Lack of Human Connection

While virtual interactions, even in immersive environments, are better than nothing, they cannot fully replicate the depth and nuances of in-person human connections. This could lead to isolation or detachment, especially for individuals who rely on genuine social interactions for their mental well-being.

2. Unrealistic expectations

The metaverse might create unrealistic expectations for what mental health support can provide. Virtual reality experiences can be powerful but should not be seen as a substitute for professional therapy or medical interventions. People might expect quick fixes or immediate solutions to complex mental health issues, which can lead to disappointment or even exacerbate their conditions.

3. Accessibility and inclusivity

While the metaverse has the potential to provide support to a wide range of individuals, it also introduces new challenges related to accessibility and inclusivity. Only some people can access the necessary technology or skills to navigate virtual reality environments. This could create a digital divide, further marginalising those who already face barriers to mental health support.

4. Data privacy and security

The metaverse relies heavily on collecting and analysing user data to create personalised experiences. This raises concerns about data privacy and security, as personal information could be exposed or misused. Moreover, collecting sensitive mental health data could have long-term implications, including potential discrimination or stigmatisation.

5. Ethical concerns

The use of virtual reality for mental health support raises ethical questions. For example, there is a risk of potential exploitation or manipulation of vulnerable individuals within the metaverse. Additionally, issues related to informed consent, data ownership, and the boundaries of therapeutic relationships need careful consideration.

6. Addiction and overreliance

Immersive virtual environments have the potential to be highly engaging and addictive. If individuals start relying excessively on the metaverse for mental health support, it could lead to a neglect of real-world relationships and responsibilities, ultimately worsening their mental well-being.

Adopting a cautious and evidence-based approach is crucial when integrating the metaverse into mental health support to address these risks.

Thorough research, ethical guidelines, and the involvement of mental health professionals are necessary to ensure the responsible and safe use of these technologies. Providing these risks are recognised and managed effectively and ethically, there is the possibility that the metaverse may be a tool to assist in improving some people’s mental health.

[1] https://www.sciencedirect.com/science/article/pii/S2211335518301827

Social Impact Investment (SII), also known as Impact Investing, is an approach to investing that seeks to generate positive social and environmental impact alongside financial returns. It is fast becoming one of the world’s most significant investment trends, and in Australia, it is expected to be worth around $500 billion by 2025.

The primary goal of social impact investment is to address societal and environmental challenges by using capital to create measurable, positive outcomes for both people and the environment. This synergy between addressing societal and environmental factors and having access to financial investment makes SII attractive for many not-for-profit and social enterprise organisations.

The Rise of SII
SII investing evolved from socially responsible investing (SRI), which escalated in the 1960s when anti-Vietnam War activists lobbied for universities to screen out defence contractors from endowment funds. SRI sought to exclude unethical or harmful investments like tobacco and fossil fuels.

From the mid-2000s, as environmental, social and governance (ESG) factors began to take priority for consumers, businesses, and boards, SRI, while helpful, was limited by its emphasis on avoiding harm.

The advantage of Impact investing is that it is more closely aligned with the ESG responsibilities of businesses and brands because of the focus on investments creating measurable positive and social impacts as well as generating a financial return. Stephen Fitzgerald, an independent non-executive director of insurance company QBE, says;

“Rather than just trying to reduce the negative impact of investments you have made, [impact investing] is proactively looking to have a net positive impact, or net positive externality, as well as delivering mainstream returns.”

Benefits of SII

This emphasis on SII seeking to balance investment return with a positive impact and an organisation’s ESG responsibilities means it has some distinct benefits for companies.

1.  Positive social and environmental impact

The core advantage of SII is its ability to drive positive change by addressing pressing social and environmental issues. This can include areas such as clean energy, affordable housing, healthcare, education, poverty alleviation, and more. For example, it has been used for

• An organisation that researches cures and treatments for diseases.
• A company that rents out affordable housing.
• A bank that provides micro-loans to disabled entrepreneurs [1].

2.  Alignment with Values

SII investors often have specific values or causes they care about deeply. Impact investment allows them to align their investment decisions with personal or organisational values,

fostering a sense of purpose and the satisfaction of contributing positively to society and the environment.

3.  Financial Returns

While the primary focus of SII investment is on creating a positive impact, it’s important to

note that financial returns are still a significant consideration. Impact investments aim to

generate competitive financial returns, which makes them attractive to a broad range of investors.

4.  Innovation and Scalability

SII investing encourages innovation by funding projects, companies, and organisations creating new solutions to societal challenges. Successful models can be scaled up to have an even greater impact.

5.  Leveraging Capital

By directing investment toward socially and environmentally impactful projects, SII investors contribute to filling gaps that traditional philanthropy and government programs might not address fully.

6. LONG-TERM PERSPECTIVE

SII investors often take a longer-term view of their investments, focusing on sustainable growth and lasting impact rather than short-term profits. This can align well with creative solutions that require time to show meaningful results.

7. RISK MITIGATION 

Investments targeting social and environmental impact often involve risk mitigation strategies. For example, building strong relationships with local communities, fostering transparency, and considering broader stakeholder perspectives.

8. ACCOUNTABILITY

Impact investors typically emphasise measurable outcomes. This encourages rigorous tracking and reporting of investments’ social and environmental results, enhancing transparency and accountability.

9. COLLABORATION

Impact investing often involves collaboration among stakeholders, including investors, NGOs, governments, and local communities. This collaborative approach can lead to more holistic solutions to complex challenges.

Although impact investing has many benefits, it is essential to note that it has challenges. Some of these challenges and risks which must be considered include:

1. The challenge of accurately measuring and reporting the impact

Assessing and measuring investments’ social and environmental impact can be complex. Determining whether the intended outcomes have been achieved accurately is challenging, and inconsistent reporting practices make comparing and evaluating different investment opportunities difficult.

Avoiding “impact washing” (superficial claims of impact without evidence) and addressing potential conflicts between impact goals and profit motives are some of the complexities that impact investors must navigate.

2. Balancing trade-offs between impact and financial returns

Striking a balance between achieving positive social impact and generating competitive financial returns can be challenging. In some cases, investments prioritising impact may yield lower financial returns than traditional investments, leading to potential conflicts for investors seeking both.

3. Lack of StandardiSation

The lack of standardised definitions, metrics, and frameworks for measuring impact can lead to confusion and greenwashing (exaggerating the positive impact of investments). This lack of standardisation can hinder transparency and trust within the industry

4. Market Risk and Performance

Like any investment, social impact investments are subject to market fluctuations and economic uncertainties. The focus on impact does not eliminate these market-related risks, and investments may still experience financial losses.

5. Limited Investment Opportunities

The pool of suitable investment opportunities may be limited depending on the specific social or environmental criteria an investor seeks. This could lead to reduced diversification and potentially increased risk exposure.

6. Potential for Mission Drift

As investment strategies evolve over time or face financial pressures, there’s a risk that the initial social or environmental mission of an investment may be diluted or compromised (mission drift). This can occur if the pursuit of financial returns takes precedence over impact.

7.  Regulatory and Legal Risks

Social impact investing involves navigating complex legal and regulatory landscapes.

 In some cases, investment strategies may face legal challenges, especially if they involve

unconventional financial structures or require compliance with specific impact

standards. These legal challenges may cause investors to be risk-averse.

8. Longer investment horizons

As mentioned above at point 6 of the benefits of SII, some impact investments may require longer time horizons to achieve their intended outcomes. While this can be a positive for creative solutions that need a longer time frame to achieve results, it can also lead to liquidity problems and limit investors’ ability to reallocate their capital to other investments.

9. External factors

The success of impact investments can be influenced by external factors beyond an investor’s control, such as changes in government policies, technological developments, or shifts in public sentiment.

To mitigate these risks, investors interested in social impact investing should conduct thorough due diligence, seek expert advice, diversify their portfolios, and stay informed about impact measurement and reporting practices developments. It’s important to carefully evaluate each investment opportunity’s potential positive impact and financial risks.

All organisations, not-for-profit. social purpose or otherwise, at some point, will need external funding to enable them to grow further. Government grants, mainstream banks and financial institutions, traditionally the first point of call for this funding, is not a route open to many social purpose or not-for-profit organisations.

Traditional financiers may be unable to fund unproven business models and organisations without a profit-making track record. Also, certain financiers may require a minimum level of financial performance to be met before considering investing.

However, with the growth of the impact investing market in Australia ($1.2 billion under-investment in 2015, potentially growing to $500bn in 2025), many social purpose organisations are now finding impact investing is a potential solution to their funding requirements.

[1]  https://www.ledge.com.au/news

We build trust with our clients through the story of our brand. If our story does not connect with and motivate people, everything else we do is a wasted.

In a recent article on navigating fake news on social media, we highlighted the importance of brands being authentic and building trust with clients.

We build trust with our clients through the story of our brand. If our story does not connect with and motivate people, everything else we do is a wasted effort because people will not connect with our brand.

How do we craft the story of our brand in such a way it resonates with and connects with people?

The importance of the story is the story

This is something brands forget when creating sales funnels.

It is easy to fall into the trap of thinking the purpose of having a brand story is to create sales. While a compelling brand story may increase sales, sales are never the primary purpose of a compelling brand story.

The purpose of the story is to create a personal connection.

We have all been in sales situations where we know the salesperson only appears interested in and friendly to us to get us to buy. Equally, we have been in situations where the salesperson has been genuinely interested in us and seeks to create a connection and where the selling is secondary. In the first situation, we are unlikely to trust or buy from the person because we know the person is only using us to make a sale. In the second scenario, we feel that personal connection and trust the person.

In the same way, a brand story that is only used to generate sales is unlikely to connect with people and will often generate a sense of distrust. In contrast, brand stories that seek to connect with and deepen existing connections are more likely to be trusted.

Why do stories that we connect with create trust?

Human society and individuals have evolved as storytellers. For centuries, our ancestors have told stories. It was how history was passed down and how people made sense of the world around them.

The philosopher Descartes’s premise, “I think; therefore, I am”, and the age of rationalism and logic is a recent aberration from these long centuries of storytelling. As much as we like to believe in our rationality and logical thinking, the truth is that we are still people who tell stories.

Why?

Because stories impact our brains in ways that logic and rational thinking never do. When we think about stories we love and remember, it is likely we remember these stories because of the emotional connection they created in us [1]. We remember how the story made us feel, and it is the feeling state that helps us remember the story’s facts.

One Berkeley study found that the brain produces the neurochemical oxytocin—sometimes referred to as “the love hormone”—when people watch or hear a moving story. Oxytocin creates feelings of empathy and compassion, and higher hormone levels are shown to produce generosity and trust [2]. 

Not all stories have the same effect

Not all stories have the same effect. There are many stories we hear that we forget because we have not engaged with them. Two characteristics are needed for a compelling story. Firstly, it must capture and hold our attention, and secondly, it must transport us into the world of the characters [3].

Stories must capture and hold our attention

For stories to be compelling, they must capture our attention. Scientists often compare attention to a spotlight [4]. It has a narrow focus, and it takes energy. This means that if a story doesn’t hold our attention or “grab our interest”, our attention will move to something more interesting.

The stories that capture our attention have four themes within the story.

●    Conflict: a crisis or tension point that may change the course of the character’s path.

●    Rising action: the lead-up to the climax.

●    Climax: the defeat, rebirth, or aha moment; the inception of something new.

●    Falling action: also called dénouement or resolution [5].

These four elements are known as the dramatic arc. In the plot, there is an increase in tension as the character must face difficulties and conflicts. This leads to a climax where the actor must find resources within themselves or around them to resolve the crisis and bring about change.

Stories must transport us into the character’s world

Having captured our attention, effective stories must hold our attention long enough to enable us to resonate emotionally with the character’s experiences. This is termed “transportation” [6]. For example, we may be watching a film we know is fictional, but we begin to experience the emotions of the characters. We feel the same fear and horror the characters are going through. This is one of the reasons many people enjoy horror movies. These movies activate people’s fear and dread and, at the same time, provide a resolution to that fear.

How does all this work with brands?

It is easy to think that our brand story is outside these basic compelling storytelling principles. We may not have any point of tension or dramatic arc that we can create. Or, we are starting our story with what we want to sell.

In creating brand stories, it is essential to remember the following points:

●      Start with the desire to connect rather than sell. Remember, before you are a brand, you are a person, like your customers. Like your customers, you want to connect to stories that move you, inspire you or provide you with a solution to a problem you are experiencing.  Your brand story should reflect the desire to connect with people, first and foremost.

●      The challenge of the dramatic arc. It is easy to become caught up in the question, “What is the conflict our brand solves”. However, sometimes, the conflict isn’t a conflict. This sounds like a contradiction; however, remember, we don’t always want to live resolving conflicts. Sometimes we want to feel good about things. Sometimes we want to feel relaxed. The dramatic arc can be about how your brand allows people to enjoy those positive moments and times in their lives. Stories that create positivity feed into the oxytocin the brain is already producing with the story, heightening the impact.

●      The power of consistency and repetition. Consistency and repetition will create the environment for ‘transportation’ to occur. Clients will begin to resonate with the brand story when there is consistency and repetition.

As brands, we must understand the principles of compelling storytelling if we want the story of our brand to be compelling. The more we know the psychology of storytelling, the more effective we will be in telling our brand’s story.

^[1] https://greatergood.berkeley.edu/article/item  (Web view)

^[2] ibid

^[3] https://www.shopify.com/blog/brand  (Web view)

^[4] https://greatergood.berkeley.edu/article/item  (Web view)

[1] https://www.shopify.com/blog/brand  

[2]  https://www.shopify.com/blog/brand  

[3] https://greatergood.berkeley.edu/article/item 

[4] ibid

[5] https://www.shopify.com/blog/brand 

[6] https://greatergood.berkeley.edu/article/item 

Many not-for-profits are struggling to survive in an environment that is rapidly changing. Some of these challenges were discussed in a previous article. To adapt and remain viable in this changing environment, organisations are considering developing a profit-for-purpose model.

The profit-for-purpose model, also known as social enterprises or social businesses, is where an organisation aims to generate profits while simultaneously pursuing a social or environmental mission. The profit generated through the social enterprise or business provides an independent stream of income that provides the stability for the organisation to make a social impact. The challenge with being dependent on government funding is that when the political context changes, it impacts the funding. The consequence is a lack of long-term stability in program delivery that is required to really make a change in communities and the lives of people.

What are the key characteristics of profit-for-purpose organisations? 

There are six key characteristics of profit-for-purpose organisations.

1. Social or Environmental Mission

Profit-for-Purpose organisations have a clearly defined social or environmental purpose, such as addressing poverty, improving education, promoting environmental sustainability, or supporting community development.

2. Financial Sustainability

Profit-for-purpose organisations aim to create profits through the sale of goods or services, donations, grants, or a combination of these revenue streams. The purpose of being financially sustainable is to have the stability to make an ongoing impact in the area of their social or environmental mission.

3. Re-investing Profits

Rather than distributing profits to shareholders or owners, profit for purpose organisations reinvest a substantial portion of their profits back into the organisation to further advance their social or environmental mission.

4. Ethical Business Practices

What is meant by this, is that profit-for-purpose organisations prioritize ethical and responsible business practices. They will embrace principles such as fair trade, sustainable sourcing, transparent supply chains, and fair treatment of employees.

5. Measuring the social and environmental impact of the services provided by the organisation

Profit for purpose organisations place an emphasis on measuring and evaluating their social or environmental impact. They use metrics and indicators to assess the effectiveness of their initiatives and demonstrate accountability to their stakeholders.

 6. Hybrid legal structures

Profit for purpose organizations can adopt various legal structures depending on the country and jurisdiction. Examples include B Corporations (B Corps), social enterprises, community interest companies (CICs), and benefit corporations, among others.

A B Corp is a company that has voluntarily met the highest standards for social and environmental performance. These standards are intentionally set high and cover a company’s impact in key areas, including Governance, Workers, Community, Environment, and Customers. To receive the B Corp certification, the organisation must meet stringent requirements, including completing a comprehensive assessment of their company’s impacts on all stakeholders, and having their assessment verified by B Lab, the nonprofit behind the B Corp certification.

Given these characteristics, what are the main differences between not-for-profit and profit for purpose organisations.

What are the differences between not-for-profit and profit-for-purpose organisations?

There are several differences between both types of entities that must be considered.

The different emphasis in Mission

The mission for most not-for-profit organisations is to address specific social or environmental needs, and any surplus funds are reinvested back into their programs and activities.

Profit-for-purpose organisations have a dual mission. To generate profits and to create a positive social or environmental impact. The consequence of this dual mission is that business activities are aligned with a specific social cause or mission.

The different sources of funding

Not-for-profit organisations rely on a mix of funding sources, such as donations, grants, fundraising events, and government funding, to sustain their operations. As mentioned above, any profits are reinvested in program delivery.

Profit-for-purpose organisations generate revenue through their products or services, often in a market-driven manner. They may reinvest a portion of their profits into furthering their social objectives or contribute a percentage of their revenue to specific causes.

Different Legal statuses between both types of organisations

Not-for-profit organisations are registered as non-profit entities and are governed by specific regulations and laws. Whereas profit-for-purpose organisations can be structured as various legal entities, including for-profit companies, social enterprises, or benefit corporations, depending on the jurisdiction.

Governance and ownership between the two types of organisations

Not-for-profit organisations are typically governed by a board of directors who oversee the organisation’s activities and ensure adherence to its mission and legal obligations.

Within Profit-for-Purpose organisations, there can be shareholders who hold equity in the organisation and prioritise both the financial returns and the social or environmental impact of the business.

Things to think through when considering transforming not-for-profit organisations into profit-for-purpose entities

By blending business principles with a focus on social or environmental impact, profit for purpose organisations create sustainable and scalable solutions to societal challenges. This makes the profit-for purpose structure very appealing to many not-for-profit organisations.

However, to make this transformation, there are several important things to consider, including the following three.

The importance of having a clear revenue generation strategy

Not-for-profit organisations typically rely on donations, grants, and fundraising efforts to sustain their operations. To become profit-for-purpose, it is crucial to develop a clear revenue generation strategy. This involves identifying potential sources of income that align with your organisation’s mission and activities. For example, revenue streams such as fee-based services, product sales, partnerships with businesses, or social enterprise initiatives could be considered. It is essential to analyse the market and consider the organisation’s strengths to determine viable revenue sources that support the organisation’s purpose.

Implement effective business planning

Shifting from a not-for-profit to a profit-for-purpose model requires careful planning and strategic decision-making. This includes, developing a comprehensive business plan that outlines the organisation’s mission, objectives, target market, products or services, competitive advantage, marketing strategy, and financial projections. This plan should also consider factors like pricing, cost structure, scalability, and risk management. The business plan serves as a roadmap for the organisation’s transition and provides a framework for making informed business decisions.

Build strong governance and financial management within the organisation

Effective governance and financial management are crucial for any organisation’s success, especially when transitioning to a profit-for-purpose model. It is crucial to strengthen the organisation’s governance structure by establishing a board of directors with diverse expertise and a shared vision for the organisation. Equally important is ensuring transparency, accountability, and sound decision-making processes are in place; including robust financial management systems, accurate bookkeeping, budgeting, and financial reporting.

Having strong governance and financial management enables the organisation to monitor and track its financial health, make informed decisions, and demonstrate accountability.

If a decision is made to transition from a not-for-profit to a profit-for-purpose model careful consideration of legal and regulatory requirements, as well as potential implications for tax-exempt status and donor relationships must be made. It is advisable to consult with legal and financial professionals who specialize in non-profit organisations to ensure compliance and navigate the transition successfully.

Not-for-profit organisations and profit-for-purpose organisations are both types of entities that pursue social or environmental goals. However, there are differences in their structures, legal status, and approaches to generating revenue.

In summary, not-for-profit organisations primarily focus on their mission and rely on external funding sources, while profit-for-purpose organisations aim to generate profits while also pursuing social or environmental goals. Given the challenges faced by many not-for-profit organisations, it may be time to consider alternative structures that provide more sustainability to enable entities to achieve their social and environmental goals.

Given the potential economic advantage of digital identities and the need to protect them against identity theft, how can digital identities be managed?