Climate crisis and insurance woes create challenges, donation trends are mixed, flexible work models create opportunities
In this edition of our quarterly blog series, we discuss the challenges charities and nonprofits are facing as a result of the climate crisis and a hard insurance market. The former is a long-term challenge that will likely change core aspects of how our sector operates. The latter is a short-term challenge but one that is nevertheless having an impact on many organizations. We also discuss recent data on donation trends, which is giving us a clearer picture of how this important source of revenue was affected by the pandemic. Finally, we discuss the opportunities for our sector in changing models of work.
Climate crisis creating new challenges & increased demand for nonprofit sector
The world’s leading climate scientists recently gave a stark ‘final’ warning to the world: act now on the climate crisis or it will be too late. However, we’re already feeling the effects of the climate crisis. Over the past several years, the world has experienced a seemingly endless cycle of climate-related catastrophes and upheavals including flooding, drought, heat waves, forest fires, ice storms, hurricanes, and tornadoes. These events not only devastate the affected communities but have wide-ranging implications for the nonprofit sector.
Demand for humanitarian and disaster relief, both at home and around the globe, will increase as the incidence of climate catastrophes increases. According to projections by The International Federation of Red Cross and Red Crescent Societies, the number of people who require humanitarian aid due to the climate crisis could double to 200 million by 2050. At home, nonprofits are responding to climate-related incidents with both immediate assistance (Global Medic sent food, clean-up and hygiene kits to families impacted by Hurricane Fiona) and longer-term planning (United For BC Wildfire Recovery Fund).
Other types of demands are also likely to emerge as a result of climate change. For instance, while heat waves and ice storms may not require humanitarian aid, nonprofits are likely to be called upon to provide cooling and warming centres and do wellbeing checks on vulnerable clients. The climate crisis is also likely to spur migration, which will increase the need for immigrant and refugee settlement services here in Canada.
Nonprofits themselves may also be directly impacted by climate disasters. When the region a nonprofit is located in or serves is hit by floods or fires, their physical assets may sustain damage, their staff may be unable to work for extended periods of time, and their insurance rates may rise. The latest results of the Canadian Survey of Business Conditions show that 8% of nonprofits are concerned that climate change or weather will be an obstacle over the next three months.1
Insurance concerns: increasing costs and decreasing availability
Many nonprofits are already indirectly affected by the climate crisis through its impact on insurance costs and availability. We are in the midst of what the insurance industry calls a “hard market”. In a hard market, insurance rates are increasing and coverage is both more restricted and more difficult to find. Some individuals, businesses and nonprofits may find it impossible to obtain insurance coverage at any cost.
Hard markets occur whenever insurance companies adopt measures to deal with increased claims and low investment returns. The first signs of the current hard market appeared in 2019 and accelerated in 2020. The impacts are now starting to be felt by nonprofits. The most recent Canadian Survey of Business Conditions found that 33% of nonprofits are concerned about rising insurance costs over the next three months, up from 29% in the previous quarter.2
Donations are up but increasingly going to the largest charities
Statistics Canada recently released preliminary estimates of charitable giving for 2021, based on donations claimed by taxfilers on their T1 personal income tax returns. The data shows that taxfilers claimed a total of $11.8 billion in donations in 2021, up from $10.9 claimed in 2020. Adjusted for inflation, this is an increase of almost 8%. Increased donations are, of course, always welcome. However, the picture for the sector as a whole is not entirely rosy.
One challenge is that the donor base continues to shrink. In 2021, only 17.7% of taxfilers claimed donations on their income tax returns.3 This is the lowest percentage ever recorded. The other concern is that an increasingly large piece of the donation pie is going to the largest charities. T3010 data show that since 2013 the percentage of receipted donations going to charities with annual revenues of $25 million or more has jumped from 32% to 42%. Over the same period, the percentage of donations going to charities with annual revenues under $2 million has dropped from 36% to 28%.
Rise in flexible work arrangements creates new opportunities for nonprofits
Three years ago, the pandemic created a strong impetus for remote work and flexible scheduling and this trend seems to be sticking around. Data from the most recent Canadian Survey of Business Conditions shows that, on average, only 64% of the Canadian workforce was expected to work exclusively on-site in early 2023.4
A recent Canadian survey showed that flexible work arrangements impact the decision of 81% of workers to stay at or leave a job. An increasing number of organizations (including us!) are experimenting with a four-day work week. In the context of a labour shortage, providing flexibility is a competitive advantage for employers.
While nonprofits often struggle to offer competitive wages and benefits, in many cases offering more flexible working arrangements is within reach. In the economy overall, 32% of nonprofit employers plan to offer flexible scheduling over the next year, compared to 22% of all employers.5 Similarly, 24% of nonprofit employers plan to offer the option to work remotely compared to 10% of all employers.6
This trend is also giving rise to what the New York Times recently termed the “afternoon fun economy.” Exercise, cosmetic and leisure activities are seeing dramatic increases in business. A recent study from Stanford showed that 143% more people played golf on Wednesdays in 2022 compared with 2019. Nonprofits should consider whether there are opportunities for them to capitalize on this trend in their fundraising efforts or to change up their program and service delivery schedules to better meet the needs of their communities. For instance, weekday afternoon charity fun runs and golf tournaments may become viable options for fundraising. Offering some programs, such as art classes, during the traditional 9 to 5 working hours may attract the remote work crowd.
2 Statistics Canada. Table 33-10-0635-01: Business or organization obstacles over the next three months, first quarter of 2023 and Table 33-10-0603-01: Business or organization obstacles over the next three months, fourth quarter of 2022.
3 Statistics Canada. Table 11-10-0130-01 Summary of charitable donors.
