The CSR clause in the Companies Act, 2013, mandates companies above a certain size to spend 2% of their net profits for every fiscal year on philanthropic activities in the field of education, environment, healthcare, etc. It serves as an incentive for companies to take up the role of changemakers to address issues, such as hunger, poverty, unemployment, etc. A good CSR programme is usually a time-bound activity which has measurable outcomes and impacts. So companies set aside budgets and have specialized teams that strategize goals and formulate policies for such programmes.
The CSR mandate came into effect with the Companies Act of 2013 from April 1, 2014. As per the data compiled by the Corporate Affairs Ministry, between April 1, 2014, and November 30, 2017, eligible companies spent a total of INR 28,111.63 Cr on CSR activities. In 2016-17, a third of the companies spent more than the recommended CSR spend. In 2017, the 92 companies surveyed by Goodera, a CSR and sustainability management platform, recorded a spend of INR 6,810 Cr.
Over the years, NGOs—despite their best efforts—had found it challenging to raise enough funds to mobilize resources and make a strong impact through their programme. The availability of CSR spends as made evident by the aforementioned statistics, should bring about the much-needed change by making it relatively easier for NGOs to raise funds.
Several companies prefer collaboration with NGOs over the option of undertaking CSR activities on their own. A 2017 study titled Inter-Organizational Collaboration for CSR: An Exploratory Study, found that most of the companies prefer to collaborate with NGOs to execute their CSR activities as “they provide better access in the community they operate.” In 2016, Honourable Minister of Corporate Affairs, Arun the parliament that 776 companies engaged NGOs for their CSR interventions, according to The Economic Times. Herein lies the opportunity for NGOs: they can establish themselves as worthy partners and collaborate with companies for socio-economic good, thus serving as a link between the industry and community.
When shortlisting NGOs for their CSR interventions, there are certain parameters that companies consider; ground experience being one of them. As suggested in the 2017 study quoted above, companies choose NGOs that can help them better understand the local needs as the latter is directly related to the efficiency of project implementation. The number of years the NGO has been in operation also helps establish its credibility and reputation.
Companies see if effective monitoring and evaluation mechanisms are in place and whether the NGO abides by transparency and accountability in its functioning—both financial and ethical. Therefore, while it is important for NGOs to utilize the grants received in the most efficient manner, it is equally important for them to communicate the same. They thus need to formulate and implement a comprehensive communications strategy. In the long run, accountability translates into an enhanced reputation for the organisation, which, in turn, boosts its ability to raise funds.
In addition, there are other factors that come into play. At times, for instance, the NGOs that work in the sphere that is relevant to the company’s CSR goals, strike a bond or an inclination with the company. An NGO with a good reputation will always be preferred by companies and philanthropists; the markers for this being inspiring leadership, positive media coverage, awards, membership of agencies such as the CII, Chamber of Commerce, etc.
While NGOs seek a reliable source of funding and strategic resources, companies, in turn, seek NGOs with ground expertise and proper infrastructure for CSR interventions. With the backing and partnership of the corporate world, the NGO sector can be in a better position to address various social issues. However, if NGOs are to harness this opportunity, it is imperative that they are prepared to make the most of it by ensuring that all the parameters are in place.
Ajay is a seasoned professional with eighteen years of rich experience in strategic change management, resource mobilisation and communications, technology innovation and research and development. Under his leadership, Akshaya Patra has won numerous national and international awards in the fields of communications, public service, leadership and financial transparency. He has won the prestigious Chevening Fellowship for Leadership and Excellence from the British government and is an alumnus of King’s College, London.
Views of the author are personal and do not necessarily represent the website’s views.
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The CSR Journal Team