According to a recent global survey, (with data from 87 countries) Canada was ranked the second best country in the world. Quality of life was one of the factors considered in the ranking. While most Canadians enjoy a relatively high quality of life compared to other peer countries, the increasing impact of inflation, the rise in cost of living, and economic stagnation has pushed more Canadians to depend on charity services to meet their basic needs.

An Ipsos Reid poll found that over the next 12 months, 22% of Canadians will rely on charities for life necessities such food, clothing and shelter—an increase of about 8% from the prior year. The charitable sector is playing an ever-increasing role in sustaining the high quality of life for Canadians, while also staving off the true impact of the economic challenges faced by the country. But the question remains: for how long?

As the charitable sector continues to insulate Canadians from declines to quality of life, it is simultaneously facing volatile headwinds, with no signs of letting off. The sector is becoming increasingly vulnerable to these forces, and without immediate attention and collective intervention from industry leaders, policy-makers and para-sector organizations, Canadians may see their quality of life diminish precipitously over the coming decade, if some haven’t already.

This three-part series takes a look at the challenges decelerating the sector’s contribution to Canadian society and explores possible interventions to ensure Canada can maintain its standing as one of the best countries in world.

Part one reviewed how the sector’s reach is contracting due to a talent shortage and the urgent need for a sector-wide labour strategy. Part two explored the chronic decline of charitable giving in Canada with more Canadians depending on charity, than are giving to charity. In the third and final part, we explore the headwinds of a newer phenomenon affecting the sector: disintermediation.

Disintermediation

In a traditional economic sense, disintermediation is defined as the reduction in the use of intermediaries between products and consumers. Common place examples include: Apple selling their products to consumers directly, while by-passing traditional retailers; or travel companies eliminating the need for a travel agent by allowing prospective travelers to book with airlines or hotels directly online. In the case of charities, disintermediation is occurring as donors reduce their need for any formal partnership with registered charities and instead choose direct-to-beneficiary approaches.

In recent years, the most ubiquitous example of disintermediation in the sector has been the rise of crowdfunding platforms such as GoFundMe. These platforms have facilitated a digital disintermediation of charities in the donor-beneficiary relationship. Recipients or donors create their own fundraisers, and quickly disburse the proceeds directly to the individuals in need.

The critics of crowdfunding platforms have pointed out deficiencies of financial control and stewardship of funds, as they lack the accountability mechanisms that are the value-add of working with registered charities. Proponents of crowdfunding argue that it allows for agility, speed and lower administrative burden. Regardless of these advantages, if charity has to pass the public benefit test, the critique still remains that crowdfunding platforms typically benefit individuals and not the larger public good.

While crowdfunding platforms have generally disintermediated charities from donors at the lower-end of giving levels, the sector is also beginning to witness disintermediation at the higher levels of giving. As explored in part two of this series, a recent survey from CanadaHelps reveals charitable giving in Canada has steadily been on the decline with an almost 40% decrease from 30 years ago. The precipitous decline has been somewhat offset by a few Canadians giving larger donations or what is commonly referred to as “major gifts.” Alarmingly, even major gift donors have recently been pursuing disintermediation solutions in their quest to help Canadians in need.

Recently, a well-regarded philanthropist, known for his significant donations to major healthcare institutions, decided to invest up to $350 million to establish the first independent, non-profit surgical clinic. The philanthropist referred to the investment as the “largest donation in Canadian health history.” Concerned with surgical wait times and how such delays impacted the quality of life of many Canadians, the philanthropist concluded the best way to help was a direct approach. In other words, he disintermediated the traditional charitable mechanism (e.g. hospital foundations) by building a direct-to-beneficiary solution.

Why are donors by-passing charities?

As disintermediation of charities spreads to all levels of giving, the sector should pause to ask itself why donors are choosing to by-pass the traditional charity in favour of new direct-to-beneficiary models. What is eroding the historical value-add of charities that donors are increasingly circumventing the sector altogether?

While there is little formal research on this topic, anecdotal discussions have revealed a number of reasons why donors are becoming disillusioned with traditional charity.

1. The constant turnover of staff in the sector, as discussed in part one of this series, has meant revolving relationships with little opportunity to build the genuine trust needed between donor and institution to facilitate a donation.
2. Often donor expectations are considerably out-of-step with the capacity and speed of what is possible to deliver by the charity, and due to the power-dynamic between donor and recipient charity, it can be difficult for charities to reset those expectations without feeling like they are risking the much-needed donation.
3. And, with the emergence of corporate social responsibility, now evolved into ESG, the conventional delineation between corporate sector as strictly profit-making and charitable sector uniquely as do-gooding are disappearing. The charitable sector no longer has the monopoly on social good and donors are realizing that.

The talent shortage, the decline in giving and the disintermediation of charities are only some of the headwinds the sector is facing. This is by no means an exhaustive list, but in looking at the convergence of these three trends alone, the question remains of what is to become of the sector over the next decade or two if solutions are not developed to reverse the impact of these headwinds. If trends continue at the same pace, by 2050, only 12.5% of Canadians will be giving to registered charity. That is hardly enough to sustain the quality-of-life Canadians currently enjoy.

What is the answer to the headwinds faced by the charitable sector?

There is only one: the sector must face the headwinds head on.

This requires the sector (as a whole) to agree that tough times are ahead. Secondly, it will require leaders to mount a coordinated and sustained sector-wide response. This includes the joint collective action of para-sector organizations, policy-makers, sector leaders and activists to work productively with government, corporations and donors to change the trajectory of charitable giving in Canada, while better acknowledging and stewarding the irreplaceable role the sector plays in the quality of life of every Canadian.

Lastly, it may require a complete rethink of philanthropy in general. This topic requires a separate discussion to do it justice, but perhaps the current systems of structures of philanthropy may need to be reassessed given that the lines between corporate, government and nonprofit have blurred entirely in recent years. And this must be done with urgency if we are to preserve the high quality of life of Canadians.

Caroline Riseboro has raised over $3 billion in her 25-year career. She currently serves as President & CEO of TrilliumHealth Partners Foundation, where she is leading a ground-breaking fundraising campaign to build the largest hospital in Canada.