Strengthening the Philanthropic Supply Chain

(Photo by Unsplash/boris misevic)

Among COVID-19’s most startling revelations has been the centrality of supply chains to everything: One link breaks down, and suddenly we’re hoarding toilet paper, turning T-shirts into masks, or paying over top dollar for a used car. Philanthropy’s supply chain—the path from funder to fundee—has shown its vulnerability too, as foundations and other major donors, especially in the pandemic’s early months, have scrambled to get money quickly yet thoughtfully to grassroots organizations serving the hardest-hit communities.

For philanthropy, though, the revelation hasn’t been the shocking breakdown of a seemingly high-performing supply chain, but the underdevelopment of the supply chain’s midsection. The sector’s supply chain isn’t something it’s thought about systematically, and we should use this moment to build some muscle into it.

If it were easy to move philanthropic funding to the people and places where it will do the most good, with enough due diligence and oversight to ensure timely impact, we’d already be doing it all the time. The good news is that it’s not as hard as it seems. We are hitting the mark some of the time, and we can make our supply chain more effective and efficient—with an eye toward racial and economic justice—by building out its under-recognized middle.

Big philanthropic institutions have enormous capacity, but they’re not designed to be nimble, and they are sitting increasingly uncomfortably in their power positions. Spurred by last year’s economic shutdown and racial justice protests, funders are re-examining their grantmaking processes, creating opportunities for an emerging class of supply-chain partners that go beyond simply moving money. At the accelerator Multiplier, we describe these partners as “activators,” because they have a more propulsive, impact-focused approach compared to traditional, transactional philanthropic intermediaries. Philanthropic activators create ongoing relationships with both ends of the supply chain, providing purpose-built structures for funders to deploy charitable funds intelligently and quickly, and helping grantees build the capacity and infrastructure to use funds effectively. Like the catalysts of chemical reactions, they set a transformation in motion, in this case turning gift money into an engine for social and environmental impact. Activators are perfectly situated in the philanthropy supply chain’s midsection to change big amounts of money into small grants and loans, create open competition for funds in a just and equitable way, mobilize money for grassroots advocacy, and forge better connections between funders and communities.

Activator Advantages: Equity, Innovation, and Efficiency

Importantly, activators can help address inequitable access to funding: Funders don’t always know about grassroots leaders outside their networks, and those leaders don’t always know about grant opportunities. Corporate and foundation funders looking for fresh ideas may issue requests for proposals (RFPs) that open the doors to new ideas, but those too tend to go to organizations the funders already know. That has some efficiency attributes; getting to know organizations and providing long-term support can amplify impact. But it doesn’t bring in newcomers and people who traditionally haven’t had a seat at the table, so funders continue to miss out on novel solutions and replicate an exclusionary process.

Activators that are closer to the ground and have networks in communities the funder wants to reach can overcome this dynamic by creating and managing truly competitive RFP processes. Foundations have long outsourced this work for big prizes, sometimes to a fiscal sponsor. (New Venture Fund, for example, handles projects like this.) We can use the same approach to get money to communities.

From its intermediary position, the activator has enough contact with both the funder and the grassroots organizations to build trust with both ends of the chain. That allows the activator to choose, disburse, and oversee a slew of small grants with the goals of the funder in mind, while offering more flexibility and access to a broader pool of grant recipients—including emergent groups that lack the capacity to effectively use large grants. A good activator can manage a hundred $10,000 grants, while the funder evaluates the activator on how it stewards the whole $1 million.

While power dynamics also exist between activators and grantees, effective activators are skilled at creating reciprocal, trusted relationships with communities and activists, and can bring transparency to the process to prevent the appearance of cronyism or conflicts of interest.

What Makes a Good Activator?

An activator is best poised for success when it’s a neutral, Switzerland-type organization that’s not competing for the funding pot it’s distributing. Within that parameter, many types of organizations can play the role. Any nonprofit that has a foot in both the funder and fundee worlds and is unencumbered by institutional bureaucracy can serve as an activator, as could a for-profit consultancy.

Fiscal sponsors, especially those that offer capacity support beyond back-office administration or use an accelerator model, are particularly well suited to the activator role. Many intentionally serve both ends of the supply chain already, and an accelerator can move funding while bolstering grantees’ capacity and impact strategy.

Community foundations can be activators too, especially for geographically focused funders. Their program officers have the relationships with grassroots leaders and knowledge of innovative projects in their communities needed to efficiently move relatively small grants to multiple organizations. City and county governments often contract with community foundations to disburse and manage grants, but large private foundations aren’t using community foundations’ capabilities in this way often enough.

Activators in Action

Catch Together, a Multiplier project I know well through my work directing strategic partnerships, provides one example of how working with an activator can boost project impact and effectiveness. To support sustainable fisheries and fishing practices, Catch Together creates and launches community-owned permit banks, which purchase rights to a percentage of catch in a fishery and lease that quota to small, local fishing businesses at affordable rates. Economic fallout from the pandemic hit local fishing communities hard when shuttered restaurants stopped buying fish, leaving small-scale fishers with few places to sell their catch. One of Catch Together’s funders, a major supporter of sustainable seafood initiatives, thought the gains it had made in improving the long-term economic and environmental prospects for North American fisheries might disappear. The foundation couldn’t move money to coastal communities fast enough to stop their economic freefall. Instead, it responded through Catch Together.

The funder provided a $5.8 million emergency grant, and Multiplier quickly worked with the funder and Catch Together’s team to craft a relief program for fishing communities across the United States that extended well beyond Catch Together’s loan program for permit banks. The relief program subsidized permit banks’ purchase of fresh local seafood, which the banks then donated directly to food pantries and other regional hunger relief efforts, or processed into more shelf-stable seafood products for donation. Multiplier made 50 regrants to permit banks that supported about 10,000 individual fishers and provided 1.5 million meals over eight months, mostly in the summer and fall of 2020. The effort not only fed local families in the short term, but also opened new channels for sustainable seafood sales down the road. It worked because Multiplier understood both the funder’s goals and fisheries’ needs, and because Catch Together project leaders had deep relationships in the affected communities.

Another example from the Multiplier portfolio is the Alter Eco Foundation. The charitable arm of Alter Eco Foods provides resources to help cacao farmers improve their quality of life by transitioning to dynamic agroforestry methods. Multiplier researched the field to broaden the foundation’s knowledge beyond the small subset of cacao farming co-ops it was familiar with, and then worked with the Alter Eco Foundation to run an open selection process for relatively small grants. Multiplier also worked with the foundation’s managing director to build proposal criteria, ensuring that farm co-op members would have a say in co-op operations, and that grants would have both economic and environmental impact.

Mosaic Momentum—a collaborative of grassroots, nongovernmental organizations and foundation leaders—similarly serves both funder and community needs via Mosaic Connect. This activator works with funders to issue small, capacity-building grants to a multitude of projects supporting clean air and water, a safe climate, healthy and just communities, and thriving natural systems. In 2020, it vetted hundreds of requests for funding and efficiently issued grants from a pool of $3 million to 91 co-applicants collaborating on 21 projects across 27 states.

The Transformative Potential of a Stronger Supply Chain

The examples above offer just a taste of how large funders could efficiently support a broader range of community-driven solutions and address equity concerns in the process. To make these successes common, we need to strengthen the middle of the supply chain. Organizations that can serve as activators are out there, but foundations can’t just materialize fully fledged ones in a crisis—as we’ve seen. Would-be activators need the right human capital and technology to serve as agile mid-supply chain partners that can provide adaptability, disaster proofing, and general resiliency.

To develop this capability, the sector needs to support more organizations like Social Impact Commons, which is providing shared resources and capacity-building support to fiscal sponsors and organizations that manage multiple missions or entities under one nonprofit umbrella.

Effective activators prioritize faster, more reliable impact while building justice, equity, diversity, and inclusion principles into their internal culture and decision-making processes—especially when seeking to support projects with community-defined and -driven missions.

The fight for a just, equitable, and livable world is happening now, and that means the time to strengthen philanthropy’s supply chain is also now. We should see commercial supply chains, with their bottlenecks, misdirected resources, and other vulnerabilities, as a cautionary tale. The nonprofit sector can do better—and we must.

Read more stories by Ben Jones.