Third Sector - Charity in Business Studies

Definition

The third sector encompasses organisations focused on societal impact rather than profit generation. In business studies, it includes charities, community groups, and social enterprises.

Charity

• A charity is an organisation established to address a specific social or humanitarian cause.

Funding Sources

• Grants: Charities often receive grants from fundraising organizations, such as the National Lottery.
• Sales and donations: Funding is generated through sales in charity shops and public donations.

Resource Allocation

• Allocation of funds: All funds raised by charities are directed towards supporting their designated cause or covering the operational costs of the charity.

Control and Management

• Trustees: Charities are controlled by elected or appointed trustees who oversee the organisation's mission and activities.
• Delegation: Trustees typically delegate the day-to-day operations to voluntary staff. In smaller charities, trustees may actively participate in running the charity.

Public Goods

Public goods are services that must be provided collectively due to characteristics like non-excludability and non-rivalry in consumption.

Examples: Public goods include flood control systems, street lighting, and national defence.

Market Failure: Public goods are prone to market failure because individuals may not willingly pay for services that can be consumed by others for free.

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Third Sector - Charity in Business Studies

Voluntary Organisations

• Aims: Voluntary organisations in the third sector have different objectives compared to private sector enterprises. They are not-for-profit entities and their primary purpose is often to support charitable causes.

• Resource Utilization: Any proceeds generated by voluntary organisations are reinvested to further their charitable objectives.

• Official Recognition: To be officially recognized as a charity, an organisation must have one or more of four main objectives: relieving poverty, advancing education, advancing religion, or carrying out activities beneficial to the community.

• Regulation: The Charity Commissioners, appointed by the government, regulate the activities of charities and maintain a Register of Charities.

• Tax Benefits: Charities with charitable status are exempt from certain taxes, such as VAT.

Examples of Charity Organisations

• Oxfam
• Save the Children
• Cancer Research UK

In the context of business studies, understanding the third sector, particularly charities is valuable as it highlights the unique characteristics, funding mechanisms, and social impact objectives of organizations that prioritize making a difference to society over profit generation.