Linking businesses and NGOs for CSR

The interaction between Indian corporations and non-governmental organisations (NGOs) increased after the Indian Companies Act of 2013 was passed. In a notice published by the Ministry of Corporate Affairs, companies were directed to work with partners (specifically, NGOs) who have “an established track record of three years in undertaking similar programs or projects.”

The CSR departments of some large companies have, since then, reportedly received a tremendous influx of appeals from NGOs for partnerships. However, companies have to choose partners wisely in order to ensure that their money is well spent.

The process of choosing an NGO partner typically involves a screening process. This can include a credibility test, a field visit, and background checks. It may also involve using the expertise of a CSR consulting firm. Many companies require NGOs to sign a memorandum of understanding (MoU) before entering into a partnership, and they also require monthly or annual impact assessment reports from the NGO. While these activities are essential to ensure that the NGO is reputable, it is also a financial burden for the companies as well as the NGOs. To avoid these additional costs, many companies involved in partnerships prior to the Act are simply strengthening those existing ties.

An important concern for companies is finding an organisation that has the appropriate amount of resources, knowledge, and capacity. As the Act pertains to large corporations, it follows that they are primarily looking to match up with large NGOs that fit this description. Working with reputable NGOs eliminates the worry of malpractice, while also providing a way to channel the majority of their funds and efforts.

What are the implications of this change for NGOs? Companies are demanding high standards from NGOs, especially in project monitoring. This means NGOs may have to devote more time to monitoring their projects rather than carrying them out. A Yes Bank CSR representative points out: “NGOs…don’t have the capacity or the priority to communicate and provide reporting to all the corporates that support them.” Their work is thus either diluted, or NGOs with limited human resources are not able to gain the credibility needed to hold on to partnerships. A CSR representative from Hindustan Petroleum points out that this limits the ability of grassroots organisations to gain momentum since they are not able to scale up or gain the requisite experience.

The choice companies have to make of whether to focus CSR efforts on output or outcome adds tension to the relationship. Output focuses on numbers: it is what companies put in their brochures to advertise the amount of people reached. Outcome is the long-term and lasting change created. Based on our analysis of nearly 200 companies, corporations are trending towards a focus on output rather than outcome.

In order to shift the focus, corporations and NGOs must work more collaboratively. To do so, corporates could increase the quantum of employee engagement in CSR efforts. The GMR Varalakshmi Foundation, for example, added employee’s CSR involvement to their performance reports. So far, however, this has not been a focus for most companies.

Increasing the role employees play in CSR efforts will ingrain the value of social responsibility in the company rather than it being treated as a separate unit. It will also allow for an exchange of skills between corporates and NGOs. Working with each other’s strengths and fostering a sense of shared responsibility can shift the focus to outcome rather than output.

Kelly Scharff is a senior at Lehigh University, Pennsylvania, U.S., with a major in economics and minors in sustainable development and religion studies. She has studied and worked in Kenya, Spain, and India.

This blog was exclusively written for Gateway House: Indian Council on Global Relations. You can read more exclusive content here.

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