A collaboration between businesses and NGOs is mutually beneficial for both; businesses benefit from the domain expertise and groundwork of NGOs, while NGOs get access to a sustainable source of funds and strategic resources in turn. The CSR mandate serves as a social contract between businesses and NGOs, providing them an opportunity to leverage each other’s strengths to further socio-economic development. It has helped in forging a resourceful partnership by bringing the two sides together.
Though the CSR mandate gives businesses the option to set up their own philanthropic arm, not all of them are equipped for it. Many businesses do not have the bandwidth to undertake welfare initiatives on their own, for this means they have to build the necessary infrastructure, channelize funds and time towards training employees, hiring people, and getting consultants on board, etc. Instead, they prefer to partner with NGOs. Thus, there is immense potential for NGOs to acquire funds and strategic resources to help maximize the impact of their services.
In directing businesses to spend at least 2 percent of their average net profit for the preceding three years on CSR activities, the Companies Act 2013 earmarks thousands of crores for social initiatives which can be utilized to further social good. The mandate is in its fourth year and there has been a steady rise in CSR spends. According to CII analysis, in FY17, businesses spent Rs. 8,897 Cr on CSR activities, which is 9 percent more than the amount spent in FY16 (Rs. 8,185 cr). The rise in CSR spends over the last four years shows that the concept is slowly gaining traction with businesses starting to integrate social welfare into their core operations.
In spending Rs. 8,897 cr on CSR expenditure in FY17, the 1,522 BSE-listed companies achieved 92 percent of their targeted expenditure as per the mandate. In a survey conducted by the global consulting leader Mercer, 58 percent of the respondents revealed that they have an annual centralised budget for sustainability activities.
On their part, NGOs should establish themselves as credible organisations. They should abide by high standards of financial transparency and accountability if they are to make the maximum use of this opportunity. The most effective way to do this is to adopt robust accounting mechanisms and make all the information about them readily available in the public domain. Financial transparency is one of the several metrics that businesses take into consideration before partnering with an NGO. Other points that are usually considered include the number of years the NGO has been in operation, its reach, necessary registrations, reputation, etc. With the number of NGOs increasing rapidly, these metrics—the reputation in particular—become indispensable.
Besides benefiting the community and society at large, the services enhanced as a result of CSR-fuelled innovation can also add to the businesses’ brand value. So any good work by a company on the social welfare front is most likely to translate into good business for it. The CSR mandate gives businesses the opportunity to go beyond the culture of signing cheques and be an active part of the whole process from the beginning, making informed decisions all along.
The world is challenged by several social issues such as hunger, malnutrition, poverty, lack of education, etc., and multi-stakeholder partnerships can go a long way in addressing these issues. In facilitating collaborations between businesses and NGOs, the CSR mandate is laying the foundation for such partnerships to thrive for serving those in need. The CSR mandate bridges the gap between NGOs and businesses and, in doing so, it contributes towards the sustainability of various initiatives by helping both sides make the most of their respective strengths.
-The author is the director of PR & Advocacy at The Akshaya Patra Foundation
The thoughts and opinions shared here are of the author.
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