In the current economic slump, oil and gas companies are struggling to maintain their charitable activities. The graphic suggests the "third sector" of society.By Peter McKenzie-Brown
This article appears in the June 2009 issue of Oilweek.
As this year’s GO-EXPO winds down, the Blues Brothers – a storied band – will perform at a dinner concert to benefit the Arthritis Society. Thus will the market economy enable a cultural icon to support an organization with no interest in profit, but which fights a disease that costs Canada’s economy $4.4 billion per year in lost work-days and health-care costs.
The Blues Brothers affair illustrates one of the countless ways in which the not-for-profit sector finds money to do things that contribute to civil society, but which fall outside the ambit of government and business. Charities are part of what some people call the “third sector” of society; the other two are business and government.
People trust the third sector more than they trust either business or government, according to research institute Imagine Canada (itself a not-for-profit). Third sector employees work for less than they might command in the private sector, and openly want to make society a better place. That attitude brings distinction to the sector.
One example is Steve McNair – formerly an executive vice president with the Canadian Imperial Bank of Commerce and now the Arthritis Society’s CEO. “The private sector should be supporting organizations like ours,” he says. “We supply programs, educational services and research funding. We advocate for better care, and we help people with the disease. A captain of industry would see that these are good reasons to support the Arthritis Society, since it helps his employees and customers. We don’t raise money to raise money,” he adds. “We raise money to deliver on our mission.”
Of course, health charities are only part of the not-for-profit sector, which includes homeless shelters, universities, food banks, opera companies, amateur bowling leagues, hospitals, service clubs, political parties, museums and houses of worship. Says McNair, “the third sector meets a whole lot of need, helping the other two sectors survive and thrive. For example, if our organization can find ways to cure arthritis, the first sector can function more effectively. So can government, since it would reduce the numbers collecting government benefits.”
Canada’s charitable sector, which represents eight percent of GDP, has a big impact on the economy. It’s bigger than the retail sector, bigger than manufacturing, bigger than automotive production. A million and a half people work in the sector directly – far more than in petroleum. Volunteers make up the equivalent of another two million full-time employees.
Like much of the rest of the economy, the charitable sector is caught in a perfect storm – less income as the need for its services grows. Although a recent survey of Alberta’s charities found that their experiences varied widely across the sector, several common worries were clear. Earned income, donations of stock, and corporate donations and sponsorships had already declined. Not-for-profits that charge for their services had begun increasing rates and reducing costs in an effort to maintain levels of service.
All of those organizations were uncertain about how their revenue sources this year and beyond would be affected. These worries received stark confirmation on April 7th, when the Alberta government’s budget – projected to run a $4.7 billion deficit – included deep cuts in discretionary funding for the sector. These developments are having a powerful impact on the sector.
Jim Kinnear – the founder of Pengrowth Energy Trust and a respected philanthropist – acknowledges that the financial crisis is putting a lot of pressure on the sector, but adds philosophically that “it just is what it is. There’s less capital available for charitable activities despite increasing demand for charitable services. Financial problems are affecting society across the board, and it’s putting a lot of strain on the system. Few people alive today have seen an economic downturn like this one – not unless they were alive in 1929. Hopefully, we will recover from this situation, although it may take a while.”
Although gloomy about the world’s immediate financial outlook, Kinnear believes strongly in the third sector. “Charitable organizations enable us to build for the future, for future generations. Helping to fund them has a lot of social value – it’s a value add that you just can’t quantify. The community should support and endorse not-for-profit organizations.” At present, his personal focus is the Kinnear Centre for Creativity. He has agreed to raise or personally donate $10 million to this new Banff Centre facility.
Pengrowth uses an unusual community investment model. Unlike almost any other large publically traded oil company, it gives Kinnear – its president, chairman and CEO – virtually unlimited authority to make philanthropic decisions.
By contrast, TransCanada PipeLine’s Jamie Niessen belongs to a new breed of managers responsible for corporate giving, and he believes in the importance of his job. “Imagine a day where there are no volunteers,” he says. “No tee-ball, no hockey for your kids, no choir practice. Some things run by not-for-profits are even essential services” – women’s emergency shelters, for example. “We see our work with non-profits as essential. We are committed to being a good neighbour and an employer of choice,” and that means making strategic community investments.
Like other representatives from the petroleum sector, Niessen worries about the impact of the economic downturn on the not-for-profits. Within the sector “the biggest concern is in respect to endowed funds. (Largely because they are invested in equities,) endowments are taking a huge hit. I understand that non-government organizations are holding their budgets constant for this year. That will be reevaluated for 2010. On the corporate side, most donations budgets this year are being kept constant. Because TCPL grew as a company, though, we’ve had to grow our community investment budget.”
TransCanada increased this year’s budget from $6 million to $7 million. That amount includes direct support for a host of individual projects which Niessen groups into five general categories: civic investment, education, environment, human services and health. “We generally offer funding for 3-5 years, then move on,” he says. “What we want to know is, did we move the needle? Did we make a difference in building the capacity of the organization? That’s pretty important to us.”
To give an idea of the fine detail of TCPL’s contribution plan, subcategories for health include heart and stroke, diabetes, bones and joints and stress-related illness. Much like other large corporations, TransCanada calculates its giving by factoring in its participation in the United Way campaign and its unlimited matching gift program for employee donations in the $50-$1,000 range. “To encourage volunteerism outside of work, we also make a cash donation to match the time an employee donates.”
Talisman Energy is a representative player from the producing side of big oil. According to Reg Manhas, a vice president, “We haven’t cut budgets this year. We mostly have multi-year projects, so this gives us a smoothed out budget. Community investment is more important now than it was a year ago. Our reputation, our relations with our partners, our employees find this important. We don’t want to jeopardize relationships we have built up over the years.”
Talisman focuses on education and youth, with local programs distributed from company offices around the world. Like TCPL’s Niessen, Manhas waxes eloquent about the importance of the charitable sector. “There are so many things that would not occur in society without that third railing in society. Without not-for-profits to fill in the gaps, this would not be such an interesting place to live. Not-for-profits play a huge role in creating civil society – in advocacy, in so many ways. It’s an avenue to provide societal dialogue. It gives a voice to people who would otherwise perhaps not have a voice.”
No one knows how much money the petroleum sector gives away each year, but the numbers are large. Imagine Canada, an institute that studies and provides research about the not-for-profits, reported that of 78 “oil and gas establishments” studied Canada-wide, 83 percent donate cash; 46 percent donate goods; 45 percent support employee volunteers; one third donate services.
According to Jocelyne Daw, an Imagine Canada vice president, “In Calgary businesses are more generous than are other companies across the country, and giving has moved toward partnership orientation. Companies work with their not-for-profit partners to try to achieve particular goals.”
She distinguishes between big public companies –Enbridge, EnCana, Imperial, Nexen and Shell, for example – and the industry’s many privately held companies. “Relatively speaking, our research tells us that publically listed companies are a lot more generous than privately held ones.”
With triple-negative precision, Daw says “There is not one person in Canada who is not affected by the not-for-profit sector. In terms of diversity, (the sector) has grown dramatically, especially in response to government decisions to download efforts from the bureaucracy to the community. Today there are groups for the environment, groups for literacy. Homeless shelters and food banks didn’t exist 30 years ago. If you lose your job you may get your EI, but if you want support in getting a job, you go to a non-profit. If you need food, you go to the food bank. When you need an outfit for a job interview you can go to one of these places and borrow clothes to dress for success. The diversity and scope and the role (not-for-profits) play is far greater than it was 30 years ago.”
The changes in the sector have led to big changes in the ways companies allocate their corporate gifts. “Thirty years ago companies would write the odd cheque and then they would be done with it,” she says. “Today, companies are so engaged in community that it’s a must-have that is fully integrated into the DNA of the company itself. There is greater and greater recognition that everybody needs to be working together in a different way, breaking down silos, coming together around common causes and around focused outcomes.”
While she acknowledges that philanthropy and government funding play an important part in the sector, Daw notes that a lot of not-for-profits are running small businesses to generate earned income. “There’s a lot of blurring of the lines between who does what and how it all gets done.” Adds TCPL’s Niessen, “particularly in Alberta, there are many efficiently run organizations with strong levels of self-generated revenue.”
Voice of Humanity
Not-for-profits are also changing by absorbing employees with corporate backgrounds; Steve McNair, for example, came out of retirement to lead the Arthritis Society. “The good work of third sector organizations is a form of compensation,” he says, “and that attracts many talented people. However, we must be aware that third sector organizations need to find better ways to challenge these educated, talented people so we can get the most out of them.”
McNair adds that complacent not-for-profits will be worst hit by the economic crisis. “Corporate Canada is looking for the best models to be effective in this environment. The not-for-profits have to do the same. There are more needs out there than ever before. To do well and stay funded you have to show your relevance. People will not financially support you if there is no reason to do so, so you have to make sure the reason is clear. If your relevance is there, you will sustain your operations or even grow.”
Fund-raising is now more important than ever before. For not-for-profits as for business, growth depends on revenue. The sector relies heavily on the income-generating drive of staff and volunteers, and the generosity of society – generosity which reflects a moral imperative. As a beneficiary of this sector, it matters not whether you attend a Blues Brothers charity concert or a rubber-chicken gala complete with silent auction; whether you write a cheque to your favourite charity, volunteer your time, buy at a thrift shop or purchase a Kinsmen raffle ticket. However you help, you are nourishing a better world.
In a recent presentation, Canadian Lieutenant-General and Senator Roméo Dallaire – one of the few celebrated heroes of the Rwandan Civil War – called non-government organizations “the voice of humanity.” Perhaps that says it all.