CSR funding of NGOs

GS paper 2

Syllabus: Development process and the development industry-NGOs, SHGs and various other groups and associations, donors, charities etc

Directions: This is an editorial piece and is important for Governance, can be used as an example of CSR funding’s impact on NGOs

Source: The Hindu

Context:

• • • In any social effort, programme expenses attract the big cheques, especially from corporate social responsibility (CSR) initiatives in India.

How do NGOs spend:

• • • Working on particular outcomes: For example, NGOs working on education receive funding for books, other online resources, teacher training, curriculum design, etc.
    • Administrative and support expenses: For instance, rent, electricity, technology and human resource costs.

Issues with the CSR:

• • • Small, unlisted companies: The CSR amendment law, 2021 provides Substantial financial penalties for non-compliance.
      • Roughly 90% of the CSR funders are relatively small, unlisted companies.
    • CSR committee: Companies that spend less than ₹50 lakh annually on CSR are not required by law to have a CSR committee.
      • Leaving decision-making and action plans to company boards, having little to no experience in social impact.
    • CSR responsibility to the HR: Several larger companies have added CSR to the responsibilities of their HR or administration or communications head, rather than hiring professional leads, experienced in the social sector.
    • Awareness about CSR rules: Not every company is aware of all the facets of the CSR rules they are complying with.
      • For instance, the 5% cap on administrative overhead costs is applicable only to a business’ internal CSR operation cost, not to the grantee’s administrative costs.
    • Many CSRs make errors on safety: It leaves an NGO with unpaid bills or worse still, drawing on its scarce core funding from other donors to pay for these essential costs.

How can CSR funding of NGOs be made better?

• • • Resource pooling by companies with other mission-aligned CSR or social sector stakeholders: This will increase their collective impact potential, and also hire or tap into professionals with experience working with NGOs
    • CSR funders should learn from peers: who view organizational development and indirect costs differently.
      • For example, ASK Foundation(CSR arm of ASK Group) is working to enable better livelihoods for rural communities.
    • Covering indirect costs and organizational development: they can help to relieve financial pressure and make organizations more resilient.

Corporate Social Responsibility(CSR):

• • • It is a corporate initiative to assess and take responsibility for the company’s effects on the environment and impact on social welfare.
    • CSR is governed by clause 135 of the Companies Act, 2013.
    • India is the first country in the world to mandate CSR spending along with a framework to identify potential CSR activities.
    • Provisions within the Act: Applicable to companies with an annual turnover of 1,000 crores and more, or a net worth of Rs. 500 crores and more, or a net profit of Rs. 5 crores and more.

Insta Links:

Corporate Social Responsibility

Mains Link:

Q. How can the role of NGOs be strengthened in India for development works relating to the protection of the environment? Discuss throwing light on the major constraints. (UPSC 2015)