Third Sector

Definition§

The third sector refers to the part of a society or an economy that comprises non-governmental, not-for-profit organizations. This term distinguishes it from both the profit-making private sector and the governmental public sector. Organizations in the third sector include charities, social enterprises, voluntary associations, and community groups that aim to address societal issues and foster social good without the primary goal of generating profits or being controlled by the state.

Examples§

1. Charities: Non-profit organizations that collect donations to fund activities like disaster relief, education, and healthcare services. Examples include the Red Cross and UNICEF.
2. Social Enterprises: Businesses that prioritize social goals over profit maximization. An example is TOMS Shoes, which donates a pair of shoes for each pair sold.
3. Voluntary Associations: Groups formed by individuals voluntarily to address common interests or promote causes, such as local sports clubs and advocacy groups.
4. Community Organizations: Local entities that focus on addressing specific community needs, like food banks and neighborhood revitalization projects.

Frequently Asked Questions (FAQs)§

What is the main objective of third sector organizations?§

• The main objective is to serve the public good, addressing social, environmental, or community issues without the primary aim of generating profits.

How is the third sector funded?§

• Funding comes from various sources, including donations, grants, memberships, service fees, and government support.

What is the difference between the third sector and the public sector?§

• The public sector is controlled and funded by the government, focusing on providing public services. In contrast, the third sector consists of independent non-governmental organizations aiming at social welfare without profit motives.

Can third sector organizations generate profits?§

• Yes, they can generate profits; however, these profits are reinvested back into their social missions rather than distributed to shareholders or owners.

What roles do volunteers play in the third sector?§

• Volunteers are crucial to many third sector organizations, providing essential services, support, and advocacy, often without financial compensation.

Related Terms§

• Social Enterprise: A business model that balances both profit generation and social objectives.
• Non-Profit Organization (NPO): An entity that uses surplus revenues to achieve its goals rather than distributing them as profit.
• Non-Governmental Organization (NGO): A nonprofit organization that operates independently of any government, usually to perform humanitarian functions or advocate for specific issues.
• Charity: An organization set up to provide help and raise money for those in need.

Online References§

1. National Council for Voluntary Organisations (NCVO)
2. Charity Navigator
3. Guidestar
4. Social Enterprise UK

Suggested Books for Further Studies§

1. “The Third Sector: Community Organizations, NGOs, and Nonprofits” by Meghan Kallman and Terry Mizrahi.
2. “The Nonprofit Sector: A Research Handbook” edited by Walter W. Powell and Patricia Bromley.
3. “Understanding Nonprofit Organizations: Governance, Leadership, and Management” by J. Steven Ott and Lisa A. Dicke.
4. “Social Enterprise: What It Is and Why It Matters” by David LePage.
5. “The Jossey-Bass Handbook of Nonprofit Leadership and Management” edited by David O. Renz.

Accounting Basics: “Third Sector” Fundamentals Quiz§

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