Systems change and the future of philanthropy

How can foundations and philanthropic organisations apply a systems change lens to their work, and what is the unique role of philanthropy in bringing about systemic change? Kyrill Hartog and Teresa O’Connell, Are We Europe, spoke to Indy Johar, Dark Matter Labs; Karin Häselbock, Ashoka; and Delphine Moralis, Philea to get their perspectives. 

Systems change and the future of philanthropy

“There is no localist story to what is now a full-scale planetary crisis,” says Indy Johar, the architect and co-founder of Dark Matter Labs, as we catch up with him online after the 2022 PEXForum in Istanbul.

Speaking from the London office of his organisation—which builds institutions, instruments and infrastructures for a more equitable, caring and sustainable future—his demeanour is remarkably calm and collected considering the somberly picture he’s painting. “We are facing a class of multipolar traps, so that even if the UK and Europe got to net zero, for example, we wouldn’t solve the problem of climate change. If Nigeria or Ghana don’t fix their systems, we’re all literally dead in the water.”

Climate change is only one aspect of the complex challenges that our generation is called upon to address. Others include ongoing humanitarian crises, eroding trust in democracy and growing inequality. Exploring these through a systems change lens and fostering collaboration among the European philanthropy sector were the focus of the 2022 PEXforum, “Driving (eco)systems change: Exploring the transformative power of collaboration in philanthropy” in Istanbul, where Johar was a keynote speaker.

“How we perceive ourselves as humans, not as discrete but entangled, how we perceive nature, not as an infinite resource to be consumed, and even how we see the future as something not to be discounted and destroyed—every one of those relationships is being transformed,” Johar says.

According to Johar, this new consciousness allows us to see and operate at the planetary scale and recognise our interdependence. But whilst awareness of the depth of transformation we’re facing is there, the infrastructure is lagging behind.

Causes, not symptoms

No matter which way you look at it, the sheer complexity and interconnectedness of the planetary crisis require a complete overhaul of not only how we do things, but how we understand them. In other words, they require a systems change approach.

“For me, this is more of a perspective, how we look at the complex challenges in our world,” explains Karin Häselbock, Vienna-based head of strategic planning at Ashoka. “It’s about how we approach problems by focusing on the root causes, not the symptoms.”

Though the term ‘system change’ has only recently gained currency in the field of social entrepreneurship, Häselbock explains, there’s nothing new about the approach. “Look at Henry Dupont, the Swiss founder of the Red Cross. For us today, it’s totally normal to have a neutral organisation supporting in a certain war whoever is there and who needs support, but this used to be very different. There was a total frame change of how situations in war zones are handled.”

She also mentions Maria Montessori, who transformed the education system all over the world by completely shifting the perspective. “Thanks to her, we treat the pupil as a human being and see how they want to grow and how we can support them in that process.”

Häselbock was herself the initiator of a significant shift in a system when working as a PR and Marketing Director for the Austrian Ski Lift Association. One day, shocked by the sight of a young girl on the slopes who was bleeding from the head, she started thinking about ways to prevent similar accidents in the future. The key to her success was defining the scope of change: “I focused on a specific system: only head injuries, only kids, only skiing.”

Häselbock then brought in different actors including insurance companies, the education ministry, helmet manufacturers and local ski heroes. “We set up all sorts of initiatives to incentivise people to wear helmets voluntarily,” she recalls. “That was crucial: to create a mindset shift for young kids.” The campaign saw the participation of an Austrian ski champion: “We wanted to show kids that it’s cool to wear a helmet because Hermann Maier was wearing one.

Her campaign was a success: today 98% of kids wear helmets on the Austrian slopes. More often than not, they persuade adults to wear helmets, too. “I didn’t know back then I was doing systemic change,” Haselböck explains. “It was only later I understood I was a social entrepreneur.”

From management to self-organisation

However unwittingly, Häselbock had identified the key to generating system change. “System change, firstly, requires us to recognise the idea that things are in systems as opposed to being managed,” says Indy Johar. “Whether it’s a school, a nursery, the garbage truck, the cars that drive through creating pollution, the drivers with the cars—there are multiple actors that collectively impact the environment and work together. What you really want to do is build the capacity of a system or a group of actors to self organise, to exchange.”

Häselbock agrees:“Systems change is very much about empowerment. By empowering especially those that seemingly have no say, you also look at how you can shift the mindset, so that something that seems impossible at a certain stage, all of a sudden becomes possible.”

But transformation takes time. “It’s about the long term,” Häselbock explains. This long term perspective goes against the quick results, direct impact logic which too often guides the operations of philanthropic foundations.

The report “Embracing Complexity”, which Ashoka worked on with other philanthropy organisations with the support of consulting firm McKinsey, examines the system of social sector funding. “Very often it’s project based and for a limited time. It’s very output focused and not outcome focused. And it’s often ‘restricted’ money, dependent on the promises of the actors” says Häselbock.

In order for funding to support the sort of systemic answers required of systemic challenges, Häselbock believes we need to shake things up: “If only we as social investors took more risks and invested in certain topics or organisations where we believe we can build up trust, giving them long-term, unrestricted funding, letting it evolve and allowing for mistakes—we would be able to shift the power dynamics between those that give and those that want or need the money, and create true partnerships.”

The responsibility of philanthropy

According to Indy Johar, we’re still at the infancy of this work and don’t yet have the tools in place to create the conditions for systems to evolve and adapt and transform themselves: “this requires a huge amount of new modalities of behaviours and new forms of organising.”

Johar believes philanthropy has the responsibility to lead the way in systems change. He emphasises the need to prove things on the ground, so that state and public actors can latch on to the power of transformation.

“Philanthropy is uniquely blessed because it operates outside current value systems and thereby it can expand the theory of value and of human and non-human rights and bring it back either into society and the markets. We need system scale demonstrations of this future. Without this, this is just language and books.”

In order to do so, however, philanthropy must focus first on building what Johar calls the “boring bits.”

“Too often, the only thing that philanthropy is really interested in is the front line of change, which is where the symptoms of the crisis that we’re feeling are. But unless we dig out and recode the boring bits—accountability, how we drive resources, how we build the innovation capacity of the system, how we build trust—the system doesn’t really change, you just do front-end symptom fixes.”

There’s a massive delta, Johar explains, between real world value and how we account for value. “That a can of coke is cheaper than an orange is a symbol of a systemic failure. That is where philanthropy has to recognise its role in really going after societal value, and how we understand value currently, and what real world value looks like. Because that delta is terminating our civilization.”

For Johar, with that freedom comes great responsibility. “This requires philanthropy to play with the same hunger, but with a deep care, as the best venture capitalists.”

European philanthropy infrastructure: a unique opportunity

The pandemic has been an opportunity to “reset” and make the Covid-19 recovery strategy a green and fair one. More and more foundations are now embracing a systems-change approach, working to tackle the root causes of the problems that became so apparent during the Covid-19 crisis.

There has been momentum towards the decolonisation of philanthropy, marked by a growing awareness of privilege, bias and power-imbalances. Increasingly, the sector is calling for a recognition of the fact that trauma sometimes exists because of how wealth has been accumulated.

According to Delphine Moralis, CEO of Philea, “foundations increasingly apply a racial equality lens to grantmaking and investing with a critical focus on inclusion, diversity, overcompensation, and reparations.” She mentions the example of Barrow Cadbury Trust, who have begun to scrutinise more closely the early commercial activities of Cadburys, specifically in relation to the labour which produced cocoa and sugar.

Another example Moralis mentions is Mama Cash, which recently switched to co-executive leadership, with one co-Executive Director from and based in the Global South, while the other is based in the Netherlands.

The past few years have also witnessed foundations coming to the fore with much more agile, flexible and trust-based approaches. Methods included greater flexibility with deadlines, converting restricted grant funding to unrestricted, and simplifying processes. The Robert Bosch Stiftung, for example, is moving from funding outputs to funding the process.

Increasingly taking an intersectional approach, understanding that issues are interrelated and should not be dealt with in silos or isolation, many foundations are using the SDGs as a framework to work together around complex and multi-layered issues – and increasing collaborations.

“We saw this first hand with Ukraine, where through collaborative responses, a community has come together to listen to those affected by the war and look for short and long term solutions,” says Moralis.

Questions have rightly been raised as to how philanthropic support could and should be used for a people-centric, fair and green reconstruction of Ukraine beyond the war.

“But we aren’t there yet,” she says. “Systems change leaders still struggle when funding practices are built to support short-term projects with predefined, measurable results rather than collaborative, evolving approaches to create lasting change.”

When it comes to supporting systems change from a funder’s perspective, Moralis believes the following points can be critical to consider:

• Including specific criteria around systemic approach in grant selection
• Providing longer term, more flexible and more core funding support
• Pooling funds with other donors
• Offering non-financial support to complement financial support
• Remembering that systems-based approaches require collaboration with local communities
  

She adds that deciding on the best way to contribute to public good also depends on the individual features and abilities of the organisation. Not all foundations per se have to become systems change actors or apply the same tactics. Diversity in approaches and tools is part of the strength of the sector too.

The future of philanthropy in Europe must be co-designed and co-created by the entire philanthropic ecosystem. It is a future where every organisational element within this ecosystem thrives by understanding and benefitting from their symbiotic relationship to one another. A future where challenges are faced up to together by the many, rather than in silos by the few.

For Moralis, this is the precisely why Philea convenes the diverse PEXcommunity, which is best thought of not as one thing, but rather a decentralised community of professionals working to support European philanthropy. With more than 70 philanthropy networks coming together and bringing the perspective of their vast and diverse membership and constituencies, they create a unique space to advance the philanthropy ecosystem in a rapidly changing world.

Drawing the interview to a close, Moralis concludes that only by continuing to learn and imagine collectively, can philanthropy continue to pioneer real change and shift entrenched structures and imbalances.