The third sector must be more businesslike to survive in an era of austerity, spending cuts and donor fatigue

I've got a big year this year. I'm planning to walk coast to coast, do the Great North Run and go trekking in Iceland. Nothing like a few challenging new year resolutions to get you off your backside after weeks of over-indulgence.

These are important personal challenges for me, but they also have charitable elements to them: I'm supposed to use them to raise money for good causes. I'm all for helping worthy causes, but feel uncomfortable asking people to sponsor me to do things that I will thoroughly enjoy and will give me an enormous sense of achievement. So I will fund my adventures myself and/or make a donation to charity.

Charity treks, runs and the like represented a real step change in fundraising when they were first introduced, by cleverly aligning the interests of participants, sponsors and beneficiaries. But I suspect this once-innovative idea might be about to hit a wall of donor fatigue.

A combination of cuts in public sector services, reductions in government grants to third-sector organisations and (the same) government's expectation that the third sector will play a major role in its much-vaunted Big Society will place unprecedented pressure on an arena that for many years has been subject to growing competition for funds.

So while public and corporate donations are more important than ever, in this era of austerity both corporate and individual budgets will be squeezed, meaning that more charities will be competing for fewer funds—a state of affairs that is clearly unsustainable.

The UK Giving 2010 report, published last month by the Charities Aid Foundation (CAF) and the National Council for Voluntary Organisations (NCVO), shows that public donations to charity rose by nearly four per cent last year, but have not recovered to their pre-recession levels after a drop of 11 per cent in 2008-09. More worryingly, the number of people who give to charity is in long-term decline.

The CAF and NCVO suggest policy changes, such as modernising the Gift Aid system and providing tax incentives to stimulate more charitable giving. Meanwhile, the Institute of Fundraising is working hard to help fundraisers become more "professional".

True, we don't want charities to behave as businesses, as that would undermine their entire ethos, but some of the bigger ones seem unforgiveably inept. I understand my 75-year-old father's irritation at the amount of direct mail he receives asking for donations to old people's charities, for example.

Yet tax breaks, more professional fundraising and technological innovations such as Just Giving, while important, are largely about increasing efficiency rather than effectiveness. The third sector, though stuffed with clever, caring, creative people achieving fantastic results, needs radical new thinking if it is to encourage donations in the most difficult environment it has ever faced.

Martin Brookes, chief executive of New Philanthropy Capital (NPC), a leading adviser to some of Britain's biggest philanthropists, is not short of radical ideas, but many of them are anathema to charity bosses. He caused a furore recently by proposing that charities should be ranked according to their benefit to society in order to discourage ill-informed giving. And he suggested to me that charities' visibility and ability to raise funds would be considerably enhanced through more mergers.

Charities need to take such hard-nosed suggestions seriously, and may be more likely to do so if more businesspeople became involved as trustees and, crucially, brought their business brains to the charity rather than leaving them at the door and going all warm and cuddly. In truth, charities must become more businesslike and entrepreneurial. But, equally, businesses must become more socially responsible.

Over the coming months and years some charities, including a few of the most successful, will go to the wall. But instead of sentimentally mourning their passing, businesspeople should capitalise by looking at how to turn their own organisations' skills and talents to a social, as well as business, purpose.

The demarcations between business and charity are blurring, as the growth in social enterprises-profit-making companies set up specifically to tackle a particular social or environmental need-testifies, and the more all parties recognise that trend, the more they will all benefit.

People want to give—research shows that giving is a key contributor to individual happiness (and, by extension, employee engagement). But the easier and more enjoyable it is to do, the more likely we are to do it and the more we are likely to give. As for me, I'm off to put my walking boots on.