Interaction between Indian corporations and non-governmental organizations increased widely with the passing of the Indian Companies Act of 2013. In a notice published by the Ministry of Corporate Affairs, companies are directed to work with partners who have “an established track record of three years in undertaking similar programs or projects,” and have been encouraged by the government to partner specifically with NGOs.
According to CSR departments in multiple large companies, there has been a tremendous influx of appeals from NGOs appealing for partnerships. However, companies are intent on choosing partners wisely to ensure their money is being well spent.
The process of choosing an NGO partner typically involves a screening process. This can include a credibility test, field visits, 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 also require monthly or annual impact assessment reports from the NGO. While these activities are essential in ensuring the NGO is reputable, it also causes a financial strain for companies and NGOs. To avoid these additional costs, many companies involved in partnerships prior to the Act are simply strengthening those existing ties.
A main concern for companies includes finding an organization 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 who fit this description. For example, K.C. Mahindra Education Trust's main partner is Naandi Foundation, an educationally focused NGO that had already scaled up their CSR efforts and thus provided a solid partnership. Working with reputable NGOs eliminates the worry of malpractice, while also providing one place to channel the majority of their funds and efforts.
What exactly are the implications of this change for NGOs? Companies are demanding high standards from NGOs especially in the realm of project monitoring. This means NGOs have to devote more time into 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.” Thus, their work is 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 possibility for grassroots organizations to gain momentum since they are not able to scale up or say they have three years of experience.
The choice 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 the analysis of nearly 200 companies, it seems that corporations are trending towards a focus on output rather than outcome.
To shift the focus to a more outcome-centered approach, corporations and NGOs must work more collaboratively. To do so, corporates could increase the amount of employee engagement in CSR efforts. Unusually, GMR Varalakshmi Foundation added in employee’s CSR involvement to their performance reports. So far, however, this has not been a focus for the majority of corporations.
Increasing the role employees play in CSR efforts will ingrain the value of social responsibility in the company rather than treating it as a separate unit. Furthermore, this will allow for an exchange of skills between corporates and NGOs. Playing off of each other’s strengths and fostering a sense of shared responsibility can increase the focus to outcome rather than output.