Report shows capacity challenges for ‘vital’ community organisations

Thousands of people across the Highlands and Islands are working with community organisations, either as paid employees or volunteers, to help address inequalities and provide essential services for their local area.

However, many groups are also facing serious challenges around capacity issues and financial sustainability.

These are just some of the findings of a new report commissioned by Highlands and Islands Enterprise (HIE), which highlights the vital role community organisations play in supporting rural economies.

The study was carried out to better understand how communities across the region can maximise opportunities for wealth building and the challenges they face in doing so. The research was conducted for HIE by the Diffley Partnership in late 2024 and early 2025.

The survey part of the study received 284 responses from community organisations. Two-thirds (67%) were active in remote rural areas, and almost two fifths (38%) were island based. Three fifths (60%) had a combined total of 1,418 paid employees, with 95% paying the Real Living Wage to all (92%) or some (3%) of those employees.

Most (89%) of the organisations also rely heavily on volunteers, with around 5,000 active overall. Respondents agreed, at least to some extent, that volunteers are critical in providing skills and expertise, developing projects and providing day to day support.

As well as addressing inequalities and providing essential services, often through service level agreements, many organisations are also involved in safeguarding local assets and amenities, creating and sustaining local jobs, and supporting language, culture and heritage.

Respondents highlighted many challenges associated with achieving their aims. These include dependency on grants, uncertain or declining funding, increased operating costs and ability to maintain existing assets. A complex and cluttered environment for accessing finance and other forms of support was a commonly reported barrier.

Access to skills, advice and expertise, and the capacity to plan strategically to become more sustainable were also reported. Many groups also struggle to recruit and retain staff and volunteers, with volunteer fatigue very evident.

Despite this, almost all organisations that responded (93%) said they were confident about their viability over the next 12 months. This dropped slightly to 87% for the next one to two years, and 72% for the longer term.

Community organisations are already collaborating extensively, including with the public sector, and there is a strong appetite to strengthen this to help realise place-based priorities and opportunities.

The study examined how communities are managing local assets and operating subsidiary trading companies. Organisations involved in these activities often demonstrate higher turnover and are more closely aligned with the principles of community wealth building, which differs in emphasis from broader community-led development. These organisations are increasingly recognising the importance of being strategic in asset acquisition, while prioritising the financial sustainability of the assets they already hold.

Around half (52%) of community organisations said they felt at least somewhat prepared for the transition to net zero. This rose to 59% in island communities and 58% of groups that own three or more assets. Those with higher turnovers were also more likely to feel somewhat prepared.

A wide range of actions to reduce or offset carbon emissions was reported, with 81% having taken at least one action. Examples include using locally sourced services, recycling and repurposing biproducts, and reducing energy consumption.

Feedback suggested groups felt an urgency about net zero transition but wanted more action to be taken and to be better supported in terms of understanding what it meant for them.

Margaret McSporran, HIE’s head of community wealth building, said:

“This is a hugely valuable piece of work that will help shape how we support community organisations going forward.

“The findings, along with the recently published 2024 Social Enterprise Census, reinforce what we see on the ground. Community organisations are central to inclusive growth and local resilience. They’re delivering services, creating jobs, and managing assets in ways that benefit their communities. Those owning community assets, operating trading subsidiaries and delivering service level agreements appear to be making a disproportionate contribution but also facing very distinct challenges.

“There’s a lot of positivity around collaboration, capitalising on strategic opportunities, engaging more young people and volunteers, and working towards a net zero transition.

“While most groups appear confident in their viability, the research flags up concerns around capacity for strategic planning and securing funding. There’s also a need for better understanding of climate change and the transition to net zero, with many groups looking for more support.

“These are areas where we see potential to strengthen our work. We’re using this insight to consider how we can support more effective collaboration, build capacity and align our approach with emerging opportunities.

“This report will be very helpful to many of our stakeholders in supporting the case for more investment in community-led initiatives. We’ve already discussed the findings with the Highlands and Islands Regional Economic Partnership and will be sharing the report more widely in the coming months.”