The uneasy relationship between corporates and NGOs4 min read . Updated: 14 Jul 2016, 11:54 PM IST
Two years after CSR rules came into force, firms and non-profits are still finding it hard to fulfil each other's expectations
Mumbai: The corporate social responsibility (CSR) mandate was supposed to bring the disparate worlds of non-profits and companies closer. The expectation was that corporate wealth, combined with the expertise of non-profits, would bring about social change.
The CSR rules, under the Companies Act 2013, require companies with a net worth of ₹ 500 crore or revenue of ₹ 1,000 crore to spend 2% of their average profit of the past three years on social development.
In spite of the rules being in place for two years now, companies and non-profits continue to share an uneasy relationship with both having expectations of each other that remain largely unfulfilled.
While both agree that partnership is the way forward, the balance has been hard to find.
Companies’ primary demand is for non-profits to be more process driven, as CSR is not just about doing good but also about compliance and accountability. The Companies Act has penal provisions for auditors and board members (CSR committee members) ranging from fines to imprisonment of up to 10 years for concealment of facts or taking undue advantage of the Rules.
“For companies this is an onerous responsibility, and having a system and process to show how the money is spent is crucial not just from a compliance standpoint but also as a good practice. So it is natural that companies insist on it," said Richa Bajpai, co-founder of NextGen, a CSR management firm.
In fact, for Tata Motors Ltd, this reporting ability of non-profits is a crucial point when striking a partnership, said Vinod Kulkarni, CSR head at Tata Motors.
“We want NGOs (non-governmental organizations) to have a system to capture continuous progress and we want to know the progress in a prearranged schedule, and that’s important to us because it gives visibility of how things are progressing," said Kulkarni.
However, this constant harangue to be process-driven and professional has become the biggest pain point for non-profits.
They hit back by saying that the demand is not backed by adequate financial support.
For instance, CRY, an organization which works for child rights, received only 15% of the ₹ 69 crore it got in fiscal 2015 as CSR funds. And, these CSR funds came from about 50 companies that partner with it. Anita Bala Sharad, director of resources at CRY, said the expectations from non-profits had increased to the point of becoming overwhelming.
“One the one hand, there is this expectation that NGOs should live a hand-to-mouth existence and should be frugal. On the other hand, companies expect the same organization to be very professional," Bala pointed out.
“Professionalism comes with investment. If companies want top class reports and videos, it costs a lot of money. If no one finances that how can we bring it about?" asked Bala.
Sharmila Kher has a similar complaint. Kher is manager, communications and fund raising at non-profit SNEHA, which works in the area of maternal health and preventing infant mortality. “It is a chicken-and-egg situation really. They want us to be professional, but will not give us the necessary financial resources to bring about that professionalism," Kher said, adding that it would cost ₹ 2-5 lakh for a professional project report, which corporates expected from NGOs.
With companies not contributing towards capacity-building, non-profits say they are unable to hire better people to run their organizations and introduce new processes.
Additionally, many companies insist that non-profits should not have high overheads or administrative expenses.
Kulkarni of Tata Motors said that they look to partner with non-profits that do not have overheads above 10% of the total project cost. “Overheads over 10% show that they are not spending their resources efficiently," he said.
Another issue that non-profits face is that many companies look at CSR as an annual project, rather than a long-term engagement.
“We need a commitment from a corporate to work on a project for at least 3-5 years. Else it is not viable at all," said Sharad, of CRY.
Agrees Biren Bhuta, CSR chief at Tata Steel Ltd. “For sustainable change, long-term projects are key, else we are going to have numerous projects on pilot mode," he said. Tata Steel recently entered into a six-year partnership with a non-profit called Aspire to improve learning outcomes in a thousand schools.
Besides the need for professionalism, the geographical spread of a non-profit is also a factor that firms look at before taking on an NGO as a partner.
Anirban Ghosh, vice president, sustainability, Mahindra & Mahindra, said that for a company like his, with plants in five locations across the country, this is an important criteria. “We look for this capability or the desire to expand when we look to partner with NGOs on large projects. Finding these types of NGOs is challenging as there are very few of them," Ghosh said.
But for non-profits, this expectation of companies borders on the impractical. “The first question companies ask us is: ‘How many cities are you present in?’ Geographical diversity is almost a testimony for the success of an NGO," Kher said. SNEHA is present only in Mumbai. This, she explained, is because understanding the complexities of one city is a challenging task in itself and takes years.