How does a downturn impact the social motivation of businesses? Does giving by individuals take a back seat during recessionary times? How hard are charities and NGOs hit when the economy takes a dip? We looked for answers – globally and in India – by studying the trends observed during the recession of 2008 and by talking to the Bangalore head of a non-profit trust.
DATA FROM THE GREAT RECESSION
Tax reporting data from the US Internal Revenue Service in 2009 revealed a definite dip in charitable donations in that country. American donors gave significantly less to charity in the first two years of the recession than in 2007. This ran counter to the belief that individual giving is not hugely impacted by recessionary cycles.
Even as economic prospects improved by 2014, donations still remained flat and insufficient to meet rising demand for social services. However, experts feel that other factors in the non-profit world may have contributed to the situation. As the head of one organization said: “[There] are fundamental flaws in the way we finance social good.” These systemic issues were likely present even before the recession set in. Industry watchers also believe that certain societal trends were partly responsible for waning individual generosity. For example, a younger generation that is less affluent than the preceding one is less likely to contribute to charity. At the same time, parents who were still providing financial support to their older children may also have rolled back their charitable contributions.
On the corporate side, the trends were not as clear-cut. The Economist noted in a 2009 article that while there had been cuts to the CSR budgets of global companies, the recession had not resulted in ‘a wholesale retreat from corporate do-gooding’ (A Stress Test for Good Intentions, The Economist, May 2009). The article also found that companies were more inclined to retain sustainability initiatives that were good for overall business while jettisoning peripheral initiatives focused on philanthropy. On the other hand, given that the financial crisis of 2008 was largely triggered by irresponsible corporate actions and decisions, many companies were eager to prove to the public that they were not entirely motivated by short-term profits and greed.
THE GROUND REALITY FOR INDIAN NGOs
As communicated by
Bangalore Branch Manager, Concern India Foundation.
At the Concern India Foundation, we help NGOs work towards capacity building of several grassroots initiatives. To that end, we are actively involved with fundraising on their behalf. The causes we support through these efforts span child education, women’s empowerment, healthcare, sustainable livelihoods and more.
During a recession, giving is affected but not significantly. It didn’t dry up completely during the last recession although some NGOs with less robust reserves had to shut shop. When it comes to charitable initiatives such as the ones run by our NGO network, individuals are more motivated contributors than corporates and this pattern holds true even through a downturn. Individual giving remained steady during the last downturn but we did see a drop in corporate philanthropy. Although most businesses have good intentions and CSR agendas, these can be affected by the necessity for cost cutting and belt tightening during a downturn. However, the mandatory CSR law has helped to buffer the impact for NGOs to some extent.
When it comes to our outreach, different approaches are required for individual and corporate donors. Stories of lives or situations that have been transformed through intervention resonate with individuals. If it strikes an emotional chord with them, they are likely to respond positively.
Organizations are a little more specific in what they seek. They have their own policies and agendas and we make an attempt to be aligned with these. The story is important but so are the numbers involved, as corporate donors look for evidence of real and quantifiable impact. They are also thinking ahead to how the affiliation will impact their image and seek happy pictures and outcomes for their websites or annual reports. Not all causes can meet these requirements.
Apart from economic cycles, giving is also impacted by seasonality and calendar events such as festivals and tax year closing. I have seen a spike in volunteering and active involvement in recent years, particularly with a more socially conscious younger generation coming into its own. Many companies want to involve their employees in cause-driven activities and boost internal engagement through this channel. This is a good trend although I do believe that, for greatest impact, individuals and businesses should pick their causes judiciously and in areas that are aligned with their strengths.
OUR CONCLUSION: Individuals are motivated by philanthropy and businesses by social responsibility initiatives that are aligned with their goals. Depending on the severity of a downturn, individual giving may or may not be greatly affected. Businesses are likely to retain a focus on sustainability and other core initiatives through the ups and downs of economic cycles.