For Profit? Nonprofit? What’s the difference?
Back in September of 2006, in describing plans for Google’s philanthropy, which involve investing in both traditional nonprofits organizations as well as for-profit companies that are devoted to achieving social impact, onPhilanthropy’s own Susan Raymond noted that the nonprofit and philanthropic world is entering in a new era where there will be the "end of definitions." As The New York Time’s Stephanie Strom has pointed out in a recent must-read article, "Businesses Try to Make Money and Save the World," this trend is quickly spreading:
The result is a small but budding practice — what some label the fourth
sector — composed of organizations driven by both social purpose and
financial promise that fall somewhere between traditional companies and
charities. The term “fourth sector” derives from the fact that
participants are creating hybrid organizations distinct from those
operating in the government, business and nonprofit sectors. But
because the types of participants vary widely and much of the activity
is nascent, no single name for what is occurring has gained broad use.
Strom points out that this movement faces many challenges, not least of which are the current legal and tax structures which mandate that the fiduciary mandate of for-profit companies requires them to focus on maximizing profits, not social change. So will this brave new world where profits are merged with purpose take off or fizzle out as a short-lived trend?