BP Oil Spill: A Cautionary Tale on Blurring of Sector Boundaries?

I think the BP oil spill – not to mention the well-documented consequences of putting profits over safety in everything from the meat industry to mining to the toy business – should raise some questions for us about the role of philanthropy and the nonprofit sector. …  But, today, to engage these questions is to go against the grain. To many, especially those on business school campuses, the ‘blurring of the boundaries’ between sectors is seen as both unquestionably positive and a foregone conclusion – the virtues of healthy tensions downplayed, if not ignored altogether.

In recent years, as a debate has heated up about the respective roles of nonprofits and businesses in our society, I have thought and worried about the tendency to assume that a “blurring of the boundaries” between nonprofits and businesses is a good thing. The BP oil spill has me thinking more.

It is important to remember that, because they are purely mission-driven, the role of nonprofits is sometimes to stand up to, or rein in, business, as Claire Gaudiani argues in her book, The Greater Good: How Philanthropy Drives the American Economy and Can Save Capitalism. She cites examples such as the push by nonprofit environmental groups to ban DDT or get McDonald’s to cease using Styrofoam containers.

Which brings me to BP. Obviously, nonprofits aren’t responsible for the BP oil spill. BP’s greed and incompetence have been on stunning, daily display for nearly two months.

But, just as we can and should ask whether lax government oversight of the oil industry helped make this disaster possible, we can and should ask whether nonprofit environmental groups have been as outspoken as they could be – both before the spill and since. Likewise, we should ask whether funders, and in particular endowed private foundations (which enjoy freedoms other institutions don’t), are doing enough to support those nonprofits that are willing to confront corporate interests when necessary.

I don’t know the answer to these questions. But a recent Washington Post article raises some concerns, discussing in particular the relationship between BP and a major environmental nonprofit, the Nature Conservancy.

The Conservancy … has given BP a seat on its International Leadership Council and has accepted nearly $10 million in cash and land contributions from BP and affiliated corporations over the years,” the Post reports. This latest Post article follows an investigative series by the newspaper in 2003 that raised troubling questions about, among other things, the Nature Conservancy’s alliances with corporations.

I am not knowledgeable enough to judge the efficacy of the Nature Conservancy’s efforts, whether those efforts have been compromised by being too cozy with companies (Nature Conservancy argues that it achieves its goals in significant part through working with companies and that this is no secret), or the degree to which the organization has addressed the issues raised by the Post series – which were subsequently taken up by the Senate Finance Committee. It is surely the case that working closely with companies sometimes makes sense. Given its relationship with BP, my hope is that the Nature Conservancy is now seeking to apply as much pressure as it can on the company to step up its game.

I would guess it is helpful to the overall environmental movement to have organizations, like the Nature Conservancy, that explicitly pursue a non-confrontational approach and seek to work collaboratively with business, while others take different tacks. Indeed, there are important goals that can only be achieved through partnerships between philanthropy and business. The environmental movement is diverse, as are the many nonprofit organizations that are a part of it, and there are many nonprofits working hard – right now – to try in various ways both to mitigate the damage from the spill and to ensure something like this never happens again.

Yet, still, the Nature Conservancy story at the very least got me thinking again about the risks of blurring boundaries between nonprofits and corporations.

I think the BP oil spill – not to mention the well-documented consequences of putting profits over safety in everything from the meat industry to mining to the toy business – should at least raise some questions for us about the role of philanthropy and the nonprofit sector:

  • Are those of us who lead nonprofits and foundations being assertive enough in raising our voices and taking action to protect the common good when companies despoil the environment or compromise public safety in pursuit of profits? Are we asking the tough questions of business, and are we demanding that government act to set the rules of the game for industry? Are foundations being assertive enough in using the influence they have by virtue of their status as shareholders in companies in which their endowments are invested? Are foundations and nonprofits pursuing the kind of advocacy that is sometimes necessary to get government to take action? Are foundations stepping up to fund those nonprofit organizations that should maintain their independence from corporations – so that these organizations are better positioned to resist the lure of corporate funding?
  • Are we being careful enough to distinguish the vitally important ongoing drive for greater effectiveness and positive impact in the nonprofit sector from push to import so-called “business practices” (whatever that even means) into the sector that has lately become a kind of mantra? Are we articulating clearly and forcefully enough the distinctive identity of the sector?
  • Should we perhaps dial back our hopes for corporate philanthropy and corporate social responsibility? Should we emphasize first and foremost the containment of “externalities,” as Christopher Meyer and Julia Kirby argue in a recent Harvard Business Review article, rather than expecting that “corporate social responsibility can become a source of tremendous social progress,” as Michael Porter and Mark Kramer argued in the same publication in 2006? Put another way, should we call on business to do what it does best – create jobs and products and services – while containing its collateral damage instead of expecting that it can solve our most pressing social problems?
  • Is it time to hit “pause” on the rush to proclaim that there is, or will be, a tidal wave of “hybrid” social purpose businesses that will alter how business writ large operates and render  the traditional nonprofit form obsolete (as some have predicted)? It’s undoubtedly positive to see more of these businesses, but how much of a trend is it, really, and how much of an impact can they actually have? In an otherwise very thoughtful piece on trends in the nonprofit sector, LaPiana Consulting argues that “sector boundaries are blurring” and that the emergence of the L3C, or low-profit limited liability company, is a harbinger of this trend. “While the L3C form is still fairly new,” the report states, “several dozen have already been incorporated in Vermont alone.” If this is among the most compelling evidence of this “trend,” is it perhaps less of a trend than we have been led to believe?

But, today, to engage these questions is to go against the grain. To many, especially those on business school campuses, the “blurring of the boundaries” between sectors is seen as both unquestionably positive and a foregone conclusion – the virtues of healthy tensions downplayed, if not ignored altogether.

James Austin of Harvard Business School, whose class I took as a second-year MBA student in 1999, has championed this effort – highlighting the Nature Conservancy as a model. Austin, a great teacher and someone for whom I have tremendous respect despite my disagreement with him on this issue, was quoted on the HBS Working Knowledge website a decade ago predicting – enthusiastically – that, “We’ll see the stark differences between NPOs and businesses diminish, revealing a new world of integrated, rather than independent, sectors.”

I sure hope not.

But to prevent the nonprofit sector from losing its independence, we’ll need to speak up. I am struck that, even at nonprofit conferences such as Independent Sector, speakers at sessions often seem hesitant to articulate the need for nonprofits to sometimes go toe-to-toe with business. (Happily, one of the striking exceptions is CEP’s board chair, Stephen Heintz of Rockefeller Brothers Fund.)

I think it’s time to stop deifying markets and corporations and instead face, with sobriety, the limitations of each of our sectors. The nonprofit sector has a distinctive role to play (indeed, this is why we at CEP care so much about improving its effectiveness), and, sometimes, that role is to stand up against corporate power. If the mortgage meltdown and economic free-fall of 2008-2009 didn’t make this case, maybe the BP oil spill will.

I would like to thank Paul Beaudet of the Wilburforce Foundation for his comments on an earlier draft of this essay, which significantly influenced my thinking.

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Phil Buchanan is President of CEP

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