 and volunteer work. Issued in August of 2018, this satellite account handbook updates the 2003 UN handbook on nonprofit institutions in the system of national accounts. Bringing this earlier handbook into alignment with SNA 2008 and ESA 2010 and extending the coverage to certain related cooperative, mutual and social enterprise institutions that collectively have come to be referred to as social economy institutions. In addition, it incorporates the guidance provided in the ILO International Labor Organization, manual on the measurement of volunteer work. Taken together, these nonprofit or social economy institutions and volunteer activities are often referred to as the third sector or the third or social economy sector, which we have abbreviated as the TSE sector. This set of institutions and behaviors has been handled in a somewhat awkward way in the SNA, obscuring what turned out to represent a quite sizable economic element in countries throughout the world. This element has attracted increased policy attention in recent years, which is why this satellite account handbook has been created. The workshop we are launching today will fall into seven distinct sessions covering seven distinct topics. Session number one will take account of the background of this handbook. The statistical revolution that has been underway for the past 20 years bringing the third or social economy sector into view. Session number two will focus in on the institutional units that make up this satellite account and try to explain how they relate to the rest of the units in the SNA. Session number three focuses on volunteer work, how to define it, how to value it. Session number four focuses on the issue of classification. What are the institutional units and what are the workforce paid in volunteer elements and how can we classify them? Session number five focuses on the data elements for the institutional units. Mainly they are the traditional target data items used in SNA. In session number six, we look at the target data items for the workforce components, both paid in volunteer. And then in session seven, we go beyond the traditional focus of SNA and look at the impact of this TSE sector on our society at large. So let's turn now to the first of these sessions focusing on the background of this new TSE sector handbook. Because it turns out that we have been through a statistical revolution in this field, putting the third sector for the first time clearly on the economic map of the world. By way of background, it's important to note that up through the 1970s or 1980s, this third sector was largely ignored in our statistical system. But in reality, this sector has been going, undergoing very significant growth. We're familiar with the for-profit sector, of course. We're familiar with the government sector, but there has emerged during this period a very significant civil society sector, a third sector. The problem is that there's been little clear sense of this as a coherent sector and therefore it's been obscured. It's muddled in a whole bunch of conceptual ambiguity. There are diverse types of entities that make it up, which make it difficult to really define it with precision. The legal treatment of this sector has been awkward in many, many countries. Without a clear legal structure, it's often difficult to understand what this sector consists of. There are very cultural traditions that have been driving the variations in this sector. And then all of this has led to a multiplicity of terms and concepts, nonprofit sector, charitable sector, social economy sector. These are all terms that in various parts of the world are used to describe this same phenomenon. And then complicating things even further has been the treatment of these institutions and activities in the SNA. It turns out that the SNA structures work pretty well for corporations. They're in two sectors that are pretty clearly identified. It works pretty well for government units. There is a special general government sector that more or less captures all of the relevant units. Households too have their own sector. But when it comes to the nonprofit institutions, they turn out to be scattered throughout almost every one of the sectors of the traditional SNA of the core accounts. And worse yet, once they get put into these other sectors, they disappear from view except for a very small fragment I referred to as NPISH. And those of you who are statisticians will know NPISH stands for Nonprofit Institutions Serving Households. So what has been missing is a coherent concept that will bring these very institutions into view and identify them as something with enough commonality to be considered a identifiable economic sector. And so our metaphor for the work that I'm going to describe to you today that our center at Johns Hopkins has been very much involved in carrying out is a pair of glasses. When I take my glasses off, the world gets very blurry. I can't make out the reality that I'm looking at. The reality is there. The problem is in my eyeglasses that I just can't bring them out of the background. I put on my glasses and things that were always there but were invisible to me become much more clear. And that is what the work that we've been engaged in and that is captured in these in this new statistical handbook is attempting to do to bring a set of concepts around this third sector interview so that we have a way to see this sector much more clearly and then capture it in our economic statistics. Now to get to this point, we had to take four fairly distinct but overlapping steps. We began with a research effort called the Johns Hopkins Comparative Nonprofit Sector Project. It began in the late 1980s and its goal was to analyze the commonalities among these nonprofit institutions in different parts of the world despite the cultural differences despite the legal differences and to bring them into focus for the first time. We began this project very modestly with eight different countries many of them in Central and Western Europe but some also in Central Europe and in the developing world and in Asia and Latin America. We ultimately grew into a very massive project involving 42 different countries representing every single continent in the world every single religious tradition or every major religious tradition and every major region of the planet. And our goal was to identify as I said the commonalities among these types of entities to which we could apply this term the third sector or the TSE sector. And this basic definitional task probably took us about a year and a half in the project because we had to reconcile many different conceptions in many different countries. And we ultimately came up with a conceptualization built around five key concepts. First of all, and we did this in a bottom up fashion that is we asked all of our colleagues in these different countries we built a huge research apparatus with local associates and additional researchers in each one of the countries in which we worked. We also worked with local advisory committees to make sure we were touching the reality in a coherent way. And this led us to these five key attributes that became the defining features of this nonprofit sector that we started out working on. First of all, we focused in on organizations but a very sociological view of what is an organization did not have to be legally ratified. It simply had to exist as a set of activities that had a degree of structure to them. They had regular meetings. They existed over time. There was a leadership structure to them. These were the concepts. So they could be informal organizations but they had to be organizations. Second, these institutions were defined as being private. That is to say they were institutionally separate from government. They were distinct from the institutions of the state. And in that sense were private. Thirdly, very significantly, we focused on institutions that were nonprofit distributing. The term that's frequently referred to them is that they are nonprofit institutions but that's a little inaccurate. They're allowed to earn profits. What's disallowed, not allowed is the distribution of those profits to a set of investors or managers or participants or other stakeholders. They were nonprofit distributing and any profit they earned had to be reinvested into the organizations. The fourth feature was that they were self-governing institutions. They were not controlled from the outside. They were governed by their own internal processes. And then finally and very significantly, they had to be voluntary, non compulsory. People couldn't be required to be forced to belong nor were they clans in which people were born into or casts or any of the other structures of society in which people were not given any choice but rather are by law or by a condition of being part of a family or a cast automatically members of the institution. This project spanned a number of years and came out with a number of very striking findings. Four of those findings were particularly striking to everybody that heard them. First of all, we discovered that this was an enormous economic presence in countries throughout the world. In the 41 countries in which we were able to generate financial data on these organizations, it turned out that if you put them all together, all the organizations and the people working in them together, they would represent something bigger than the all but five of the countries of the world. In other words, if we thought of them as a nonprofit sector land made up of only nonprofits, they would be the fifth largest country in the world ahead of Russia, ahead of Germany, ahead of France, ahead of Brazil and behind only the United States, China, India and Japan in terms of their economic scale. So this is a very big sector, one that needs to be brought into focus because it is a substantial economic presence. The next thing that we discovered is that some of our popular beliefs about these organizations and where they exist turn out not to be true. In the first place, the America frequently thinks of itself as the only nonprofit sector in the world. But as you can see in this chart, the United States falls pretty far down below many other countries in terms of the scale of its civil society or nonprofit sector. This is measuring in terms of both paid and volunteer workers. The ones that are ahead of it are many of the European so-called welfare states. But what this chart shows is that the nonprofit sector is a very big actor in the Western European countries representing in the Netherlands close to 16% of the labor force in Belgium, 13% in the United Kingdom, 11%. And so what we learned out of this research project was that Europe doesn't have a welfare state, it has a welfare partnership linking the state and its funding to this nonprofit set of institutions. Then a third key finding I had to do with the surprising role of volunteers. We measured the amount of volunteer time, converted that into full-time equivalent workers and came up with a conclusion that 44% of the workforce of this nonprofit sector turn out to be volunteers. Which means that we needed to measure not only the workers but also the people who were volunteering and making contributions to the economy but without pay and as volunteers. A very striking reality that the volunteer component is almost as large as the paid worker component. Out of this first step of this research project came a whole host of products. We produced a whole set of general overview documents and books. This is one example of one of the books that we produced. We also had an entire set of books produced by Manchester University Press focused on our project, one in each country. So we had the 12 different volumes that represent the portrayal of the nonprofit sector and all of its glory in a number of countries around the world. These books were widely disseminated. The results of the project were distributed through various conferences around the world and were brought to the attention of policy makers. And it was that information that we then began to knock on the door of the statistical authorities, particularly the United Nations Statistical Division. And we went to work with them and basically said that we think that this sector deserves to be treated more prominently in the SNA statistical system that these are now buried in the SNA statistics that each country produces on their economy and that we needed to do something to bring it into better view. And this then led us to the second step which was the creation thanks to the willingness of the United Nations Statistics Division to allow us to work together with the authorities that oversee the SNA and with statistical agencies around the world to produce a handbook on the treatment of nonprofit institutions in the system of national accounts. So what did this new handbook on nonprofit institutions which was issued in 2003, what did it do? A number of key breakthroughs, five of them in particular. First of all, it called for the creation of satellite accounts on nonprofit institutions. Satellite accounts are as you all know as statisticians are efforts to pull out of the existing SNA data a spotlight on particular components of the entire economies that are somehow not as clearly portrayed in the core SNA system. And we basically got the green light to create, to recommend the creation of satellite accounts on nonprofit institutions. The second thing that this handbook did was to adopt our CNP project comparative nonprofit sector project definition of what an NPI is. There was five key characteristics that I identified before. Thirdly and very significantly the handbook incorporated the concept of measuring volunteer work as part of the SNA. This was a very significant breakthrough as some of you who are familiar with SNA will know because SNA did not do a very thorough job of focusing on and highlighting the work of volunteers. Fourthly, a little more technical. The handbook acknowledged that although nonprofit institutions are sometimes put into the market economy into the corporate economy one of the two corporate sectors financial and non-financial they also have non-market output which should be captured. This is the output that is supported not by market sales which is this feature that is fundamental in the SNA but by charitable contributions, by volunteer effort and by all these other informal means that do produce output but that's not captured in the core SNA. And then finally, as you'll hear later the handbook on nonprofit institutions in the system of national accounts adopted the classification system that we developed for nonprofit institutions and there we had developed something that provided more detail than the standard industrial classifications and we call this the international classification of nonprofit institutions. So this was a very significant breakthrough in 2003 and then it was followed up when 2008 SNA and the 2010 ESA were adopted and when a revision was brought forward of the ISIC International Standard Industrial Classification went through its own revision which came out also in 2008 it's called REV4 and so we had two new general statistical manuals the 2008 SNA and it's next of kin the 2010 ESA and the ISIC REV4 and what did this do? Well it added further authority to what the 2003 NPI handbook had already achieved first of all actually it did five things it reinforced the call for nonprofit institution satellite accounts essentially it endorsed what the 2003 nonprofit institution handbook did put forward secondly it called for the sub-sectoring of these different institutional sector accounts that had within them both NPI's and non-NPI components and it basically said let's shine a spotlight on the NPI components let's separate them out let's distinguish them in our data so that we could compare the role of nonprofit institutions and non-non-profit institutions this sector or sub-sector was sufficiently important to the economies of our countries that it deserves separate treatment in the data that is being produced under the SNA system the third thing it did was to have a complete chapter on NPI's within the core of the SNA system and therefore added a chapter to the books that came out reporting on the 2008 SNA that had a dedicated chapter on NPI's the fourth thing it did was reinforce the need for coverage of volunteer work in other words it called for improvement the treatment of volunteer work in the SNA and then finally it adopted most of the innovations that we had recommended of the classification system for NPI's made them core parts of the SNA and ICIC classification structure by providing more detail on the kinds of work that these institutions carry out all of this then led to a significant effort at implementing this new 2003 NPI handbook and many countries jumped into the task and here's some examples of four of eight of the 30 or so countries that already began to produce satellite accounts on the nonprofit institutions following the recommendations of our NPI handbook and they were all over the world they were in South America they were in Asia they were in Western Europe a very significant outpouring of interest in capturing NPI's in the SNA structure but this wasn't the end of our journey and these were two of the four steps that have made up the statistical revolution but we were on a roll the next step was to take it on the task of measuring volunteer work statistical agencies came back to us and said okay you have two documents they call on us to measure volunteer work the definitions of it around the world are very strained and very diverse we don't know what to do and what's more we're not quite sure how best to value it we need to have some international standards and so with that charge we went to knock on the door of the institution that we felt would have the most interest and most responsibility for capturing data on volunteer work and that was the International Labor Organization the ILO what we realized was that the SNA was not doing a terribly good job in capturing volunteer work first of all this work comes in two different forms some of it is based in organizations and some of it is direct citizen action not mediated by organizations and the SNA treated those two types very differently so far as organization based volunteering is concerned SNA basically said okay we'll measure we'll measure it at cost well that was a bit of a cop out a bit of a little trick the volunteer work is not paid and therefore it does not cost anything the cost of volunteer work is zero and so by announcing that it was going to be valued at cost the SNA essentially decided that it would not be valued at all and therefore all the organization based volunteer work was simply overlooked in SNA and then so far as direct volunteering is concerned that is that done by individuals but not mediated through organizations the decision was to base it on production on output but for not all volunteer work done directly produces outputs, produces facilities and therefore it does not quite have a production cost because some of it is producing services and here the SNA basically took another out and has not measured service volunteering at all essentially assuming that it is worth nothing but of course most of volunteering is probably service oriented and not facilities production so what we had in the SNA was a real mess in terms of the measurement of volunteering and it was with that an attempt to unravel that mess that we approached the international labor organization and what we ultimately were able to do is convince them to allow us to produce a manual on the measurement of volunteer work using the same approach that we used to create the NPI handbook that was issued by the US statistics division in 2003 we formed a technical advisory group made up of statisticians from around the world we ventilated the ideas throughout the entire SNA statistical system and we ultimately came to a conclusion that in this case was approved initially in 2008 international conference of labor statisticians and ultimately further validated at a 2013 session of the same international conference so out of this came another official document this one an international labor organization document published in 2011 a manual on the measurement of volunteer work and so what did it do again five key points it gave us a consensus definition of volunteer work and in particular it focused on both organization based volunteer work and direct volunteer work and this was a very significant breakthrough because many of the countries or the few countries that were measuring volunteer work tended to focus on the organizational base volunteering but not to consider the direct volunteering and we said both needed to be considered the second thing that it did was to endorse the idea of using labor force surveys or other household surveys to capture this volunteer activity and so the surveys as many of you will know are the most powerful statistical surveys that exist around the world they are so important that they are almost consistently carried out unlike some other social surveys but at any rate we got commitment to do surveying of volunteering and to do it in a household fashion and so that's what we looked at in the labor manual the concept here was that we would integrate this module into these other surveys into the labor force survey or into the household surveys and so we provided a convenient one and a half page survey instrument that we thought could capture much of what we needed to know that was not already in the labor force or other household surveys the fourth item very significant that you'll hear about later in our sequence of these workshops was how to value the volunteer work that was going on and our basic concept here was to use a replacement cost valuation replacement cost basically says you value the work of the volunteer at the cost of a replacement worker so you figure out what that volunteer does what kind of work you find the wage that is paid for that volunteer effort that activity in the country and you apply that wage to the number of hours of volunteer work in that particular activity so the replacement cost valuation and all of this was as I said formally confirmed as an activity a form of work by the 19th international conference of labor statisticians another key step in the construction of this statistical revolution so that then brings us to the final and fourth step and this step involved broadening of our conception of the world and it also connected to the sustainable development bolts that were under development as you may know by the United Nations to guide the international community in the period from 2015 through 2030 and what emerged in that effort to create these sustainable development goals was the recognition that this sector that we were focusing on called it the civil society sector which is one version of the language that's used to describe it or the social economy sector or the third sector reports coming out of the UN and this happens to be the report of the secretary general who wrote this whole concept of the sustainable development goals and in that the secretary general wrote that the 2030 development agenda needs civil society to serve as a participant joint steward and powerful engine of change and transformation and went on to praise volunteerism as another powerful and cross cutting means of implementation so this was further validation of the importance of this sector and of the need for countries to develop meaningful data on them using these new statistical handbooks and the EU Council made similar comments there the focus was on the social economy which is a somewhat broader notion than nonprofit institutions European statistical authorities Eurostat etc to consider developing and implementing satellite accounts on the social economy and this in turn motivated us to see if we could bring the social economy into our work as well and to add it to the nonprofit institution and so we began to think about what makes up the social economy and whether we needed to broaden our concept as many people in Europe were suggesting and we came to the conclusion that first of all it's true nonprofits are not alone there are other institutions that share with nonprofits three core features that are very important to the nonprofit institutions but also are important to these institutions but they are private so the concept of being private, privatism they are not part of the state and they are different from other parts of the private sector the second concept is that they have a public benefit focus so if the privatism idea differentiates them from the state the public benefit focus is on business entities and then finally the third key element is free will these are all institutions that people choose to be part of without compulsion they are not born into it they are not forced to do it by law they are freely able to take this on so this became then the charge for the fourth concept is how to bring in the components of the social economy that go beyond nonprofits but share with nonprofits these three features of privatism, public benefit focus and free will and it turns out that there were several kinds of institutions that fell into this common concept we had to identify what those features were, what the manifestations are and what kinds of institutions and we concluded there are really four identifiable clusters of potential third or social economy sector manifestations there for sure are nonprofit institutions we had already established that they make up what the Europeans at least were calling the social economy a little different but they share these three critical values and then there's this whole new world of social enterprises or social ventures these are public benefit organizations that nevertheless utilize the market to carry out their purposes they build enterprises but the enterprises are not profit-maximizing enterprises they are social purpose enterprises and then finally the fourth component is all of the volunteer activity individual activity without pay for which there are many different terms but we use the term of volunteering as a collective to refer to them we turn to the SNA and ask how does it treat these institutions a very interesting thing emerges it turns out that the same thing is true about these new institutions these additional ones as was true of the nonprofits that while the SNA structure of sectors works for corporations and government it doesn't do such a good job for these other entities and so it does okay for households too but when it comes to NPIs as we've already seen they are in almost all the sectors so once they get assigned to a sector they disappear as nonprofits but the same thing is true of cooperatives and mutuals they're in several different sectors and the same thing is true of social enterprises they are some of them are non-financial some of them are financial corporations some of them end up in fish some of them are NPIs and when they are put into these other sectors the same thing happens they all disappear from view they're in the statistics but you can't see them you can't measure them you can't understand them and so and then one more complicating feature about these other types of entities is that while some of them fit into something we could call the third or social economy sector not all of them do and therefore we had to make divisions between the in-scope and the out-scope cooperatives for example and the in-scope and the out-scope mutual associations and the in-scope and the out-scope social enterprises and so we had to find dividing lines a very difficult idea in the world of SNA but a very critical one for our preservation of this central concept in more detail was a much more complicated concept of a TSE sector it included most NPIs but it didn't include all social ventures it doesn't include all cooperatives and it doesn't include all activity without pay there is a line that had to be drawn and the circle reflects that line it essentially is all of the components that truly do meet a set of key criteria that we're going to spend a fair amount of time defining in a little more detail essentially we had to develop two sets of defining features operational features one of them for the organizational components or the institutional unit components and the other for the volunteer components of this sector so far as the organizational components and we will be going over this in much greater detail as we get through the other workshops on different days I'm sure many of the key defining features are the same as for NPIs they're organizations they're private institutions they're self-governing they're voluntary not compulsory but when it came to the final criterion relating to profit distribution we had to make some adjustments because cooperatives as you know do distribute some profit mutuals do distribute some profit social enterprise do distribute some profit to investors we re-adjusted this non-distribution constraint and imposed one that was a bit relaxed and we said that there had to be a significant limit on the distribution of profits and we ultimately set that limit it is about 50% of total profit accumulated had to be kept in the organization and not distributed to stakeholders and this became the test for what was the dividing line between the in-scope and the out-of-scope components and the same thing had to be done for what we call the individual action components these were the volunteer efforts and here we define the volunteer efforts that was in scope as having to be primarily for the benefit of others not oneself it had to be carried on for a meaningful period of time this is true of all activity in the SNA and in the ILO employment world it had to be not for pay certain reimbursements of expenses were okay but pay for the activity was forbidden in order to meet the criteria that we had to meet the criteria was forbidden in order to meet the criteria of our satellite account that this was work normally was it not carried out for oneself but it wasn't carried out for the people inside one's household so it was differentiated from household work or family effort and then finally like nonprofit institutions it had to be a non compulsory so out of this came our new United Nations satellite account on nonprofit and related institutions and volunteer work handbook call your attention to the download information about this handbook if you have not put your hands on it already and begun to study it you can go online and get the online version what did it do first of all it broadens the coverage it includes not only nonprofits and foundations but also cooperatives some cooperatives not all mutuals again some mutuals but not all social enterprises again not all of them but some of them and then direct volunteering that had been ignored in certain other statistical work done around the world so where do we stand one other thing that this handbook does that is unusual is that it introduces a method to measure the impact of the TSE sector on the sustainable development goals and so we think that this is a unique and important breakthrough for SNA that it creates a win-win partnership for statistical agencies and third sector actors and governments many countries have a huge and in scope TSE sector that's going unrecognized in the national statistics many governments are actively seeking partnerships and recognizing that the sustainable development goals will not make headway without engaging them but how can you engage them if you don't know how many there are what they do what their scale is what the capabilities are out so this has become a sector of enormous interest but the TSE sector has been largely invisible in the existing national account statistical system complicating progress major in scope entities are buried in other sectors we've seen that some of the units are missing volunteering has been out of bounds so there have been significant problems with our statistical system in capturing this sector we think that there would be enormous gains achieved by bringing the sector into better view and that the statistical system itself would be better off having these entities revealed in our core statistics major in scope better data would help foster and promote partnerships the statistical machinery to do this is already in place so the data is in place so we're talking about rearranging data not creating it anew and our statistical agencies are needed now to help get this machinery implemented and so we would appeal to you all to join us we are more than willing to be of help to you and doing further training and providing technical assistance we're already working with a number of countries to help them apply and implement this handbook it's not a simple task but it is relatively easy to do once one buys into it please contact us if we can be of help but you may also want to sign in and listen to the additional workshops that we have planned so thank you very much for your attention and for joining you for the second session of this workshop that will be set up in your country thank you