Catalyzing Social Investment in China

Authors

• BSR Staff

  

In this paper, we analyze the various forces driving social investment in China. We define social investment as the contribution of resources by business, foundations, or nonprofits toward the creation of social, environmental, and economic development (also termed strategic philanthropy or community investment). As China rapidly changes, the expectations for, and implementation of, social investment programs are changing quickly as well.

The fivefold growth in donations from 2005 to 2009 and recent surge in volunteering means that people are increasingly engaged in philanthropy, while the very wealthy are establishing private foundations as a more direct way to channel their giving. Meanwhile the influence of information and communication technologies drives increased demands for transparency in the nonprofit sector, particularly following a string of recent incidents involving the Chinese Red Cross (officially named the Red Cross Society of China).

Government-organized NGOs (GONGOs) have traditionally dominated the sector because regulations have favored them and they have received support from the government, while grassroots nonprofits have struggled to register and to raise funds. However, there is some hope for nonprofits within the current regulatory environment. The government has relaxed their policies in some regions, and some public foundations are awarding grants to grassroots nonprofits or using their favorable registration and fundraising privileges to help them. Yet the nonprofit sector still cannot meet the country's social, environmental, and economic challenges.

While businesses face risks from not understanding local sentiments favoring social investment that is manifesting in wide-scale social media campaigns, they also face opportunities to better engage staff and customers and distinguish themselves from competitors by developing innovative partnerships with nonprofit partners. They can build such partnership by leveraging their know-how, brands, products, and employees' skills.

Social media and ICT, partnerships with business, and the flexibility of local government are the three key factors shaping the future of social investment in China. These factors will help to engage the public and build trust, provide the resources for nonprofits to increase their capacity and scale-up, and create an environment for nonprofits to thrive.

Finally, we propose specific roles and actions that the various stakeholders we identify as shaping social investment in China can take. A shared vision and commitment are necessary to boldly address the tremendous social, environmental, and economic challenges facing the country. Undoubtedly progress will be defined by how successfully cross-sector partnerships use each player's resources.