Business Plus NGOs: Agents For Social Change

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By Suresh Kr Pramar

Changing expectations about the role of business in society has pushed the concept of good corporate citizenship into the forefront of business decision making. Research studies have revealed that good corporate activities have a positive impact on business performance. Most major companies now recognize that they have an extended family of stakeholders which include investors, employees, non government organizations and the community in which the operate.

Corporates now realize that for long term survival they need to look beyond just making money for their shareholders and owners and pay heed to the needs of the community. This change in attitude is what Corporate Social Responsibility is all about..

The World Business Council for Sustainable Development defines CSR as “the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the work force and their families as well as the local community and society at large.”

According to another definition CSR involves the “ operations of a business in a manner that meets or exceeds the ethical, legal, commercial and public expectations that society has of business. It is viewed as a comprehensive set of policies, practices and programmes that are integrated through business operations and decision making processes that are supported by top management.”

These definitions reveal that Corporate Social Responsibility is not merely giving funds for community development and religious purposes. It involves a wide range of activities and extends to a wide range of stakeholders of the business. For a company to qualify as a good

Corporate Citizen it is essential not only for the top management to be pro CSR but also for a entire workforce of the company to be involved in some way or the other in the Company’s Corporate Social Responsibility activities.

Mark Goyder, an expert on CSR,  in “Redefining CSR” sees a key distinction between what he describes as ‘compliance CSR’ or a more fundamental process that he calls ‘conviction or values-led CSR’.

Compliance CSR sees a company undertaking the community programmes, the ethics statements, the environmental management systems purely to keep up with external demands.

One might think that such a company was a long way forward. But the case of Enron – a company that had a good profile for its compliance programmes – illustrates the point of how action without the guiding light of real values and substance can unravel in the harsh spotlight  of public accountability.  For Goyder, the correct interpretation of CSR is the expression of a company’s purpose and values in all its relationships.

Western writers would have us believe that Corporate Social Responsibility is a gift of the Western world. This I strongly believe is not the complete truth. Over  seventy-five years ago Mahatma Gandhi propounded the concept of Trusteeship as a mid path between pure capitalism and pure communism. Gandhi emphasized on the fact that the rich were the Custodians or Trustees of the wealth they earn and that this was to be used for the welfare of their less fortunate beings.

Pointing out that the war against poverty would be a long drawn one Gandhi had said that the Government, in addition to fiscal and monetary measures, would have to take other measures to reduce income ceilings. He said “ it would be desirable to assist wealthy landlords and industrialists in parting with portions of their wealth, property and earnings as public contributions towards specific local schemes and plans”

For Gandhi, it would seem, a Trustee is one who self-consciously assumes responsibility for upholding, protecting and putting to good use whatever he possesses, acquires or earns. This is the essence of Corporate Social Responsibility as propound by western writers.

As in the west so also in Asia and India the desire to “give back to society/community” is growing among  fledging and established industrial houses/Corporations. Business houses today have the capacity to contribute substantially to the well being of the society.

Business has the potential, the capital and the efficiency to impact various stakeholders in a positive way. To be sure most businesses would like to take to CSR but are not attuned to the needs or means to achieve the desired levels of Corporate Responsibility

Most companies who wish to be more responsible do not necessarily have the knowledge, training or the dedication to carry out development programmes. Non Government Organisations (NGOs) on the other hand have acquired the expertise to become instrumental in development work. They, however,  lack the required means and financial resources to carry out their projects efficiently in a sustainable manner.

Why have business and NGOs become major actors in the promotion of social and economic development? One reason is a decline in the role of the nation-state in the context of an increasingly “globalized” international economy. Transnational corporations (TNCs) or multinational corporations (MNCs) and major domestic industries have gained increasing economic and political power of the last decades.

In an article “Global Strategic Partnerships Between MNEs and NGOs” Stephen Chen, Chong Ju Choi, and Carla Miller refer to this phenomenon as the “rise of global corporatism.” They say  that this has taken place throughout the world and has shifted power from governmental institutions to the private sector. “In the developed industrial nations, state and national governments are often seen as doing the bidding of their major corporations, while in the less developed world,  MNCs may often be seen to have more economic power than governments.”

According to Simon Heap, a former researcher for International NGO Training and Research Center (INTRAC) who has focused much of his research on corporate-NGO relations, as business has become more multinational and electronic means of communication have advanced, there has been a “perceived reduction in the powers of the nation-state to affect development and a rise in the powers of the business community” .

TNCs are responsible for about 25  percent of the Earth’s gross national products, as such they have unprecedented resources at their disposal. Because of their ability to have far reaching activities, there is an increasing sense that business has a responsible role in promoting development: “the welfare state is giving way to the business welfare.”

Business, especially large multinationals, are  perceived as ruthless and exploitative in many ways, caring only about the bottom line. They tend to do what is necessary to stay within the bounds of laws and regulations, but have little incentive to promote practices that go beyond what is required.

Yet Business today have a considerable influence on national governments and international institutions. Increasing international corporate power and reach have made the private sector much harder to regulate at the national level, and no supra-national organization seems prepared to take on this task.

Stuart L. Hart, author of Capitalism at Crossroads, concedes that the power of governments has eroded in the wake of globalization. He also notes that this is due the growth of transnational corporations whose supply chains span several continents. But he argues that “NGOs and civil society groups have stepped into the breach, assuming the role of monitor and, in some cases, enforcer of social and environmental standards.”

NGOs are seeking new ways to achieve their goals. John Elkington and Shelly Fennell, in “Partners for Sustainability” argue that NGOs have become frustrated in their efforts to improve environmental practices through legislation. Therefore some are attempting to work directly with business to achieve their goals. “Quite simply, NGOs realized that business participation was essential to the development of any long lasting solutions.”

In 2001, the Canadian Council for International Cooperation (CCIC) produced a guide for NGOs called “Bridges or Walls? Making Our Choices on Private Sector Engagement” which outlines ways of engaging with the private sector.

It explains that cutbacks in international development aid by governments have put pressure on the nonprofit sector to find alternative funding. Some NGOs have turned to the private sector for funding, but they do not want to be in a position of dependency vis a vis corporations.  Partnerships are emerging as a way of engaging the private sector in projects in which it has an interest,rather than simply receiving funding from a corporation that could withdraw its support at any time.

The push for more responsible business practices has caused some corporations to seek out NGOs as partners to help them implement solutions to development problems. Because NGOs are usually more trusted by the public, which sees them as more reliable than businesses on issues concerning the environment and social responsibility, a company associated with an NGO can have a more positive public image.

A study of corporate-NGO partnerships in Asia Pacific says  “NGOs have begun to transform themselves from traditional organizations that provide charitable contributions and services to the poor into organizations that directly involve themselves in addressing issues in developing countries, such as rural development, poverty alleviation, nutrition and health, reproductive biology, and education, and global issues such as environmental preservation, human rights, refugees, and the population crisis.”

According to Tadashi Yamamoto globalization has also created new sets of concerns about CSR and has required domestic adjustment on the part of all actors in Asia. Corporations have experienced economic gains which enabled them to expand their activities and role as engines of economic growth in the region, thus strengthening their impact on society. They took on a more active and direct role in solving social problems that went beyond charitable giving, and began to see NGOs as useful partners in their activities involving stakeholders.

“A new generation of  managers and owners played a role in transforming the way that corporations interact with the broader society [as] younger executives hold different views from their predecessors on the roles and responsibility of their companies.” They have come to recognize that the long-term success of their business is closely related to the health and stability of the societies in which they operate.

What Yamamoto says about Japan is equally true in the Indian context. Most major corporates in the country are steadily moving into the realm of Corporate Social Responsibility. Rajashree Birla, Chairperson of the Aditya Birla Centre for Community Initiatives and Rural Development, has said “ for us in the Corporate world to expect that the government alone should address welfare issues is both unfair and unrealistic. Unlike European countries, which are relatively affluent, India’s needs are huge and the resources available with the state are limited.”

Ruling party politicians in the country crow about the country’s economic strides. While economic progress has been achieved and millionaires and billionaires are growing in number the plight of the common man has not improved. According to present estimates almost 75 % of the population is still under the poverty line The decline in the share of agriculture in the GDP has resulted in the fact that nearly 60 percent of the country’s population shares barely 22 percent of output.

According to Rajshree Birla, “In India more than 70 percent of the one billion people are housed in rural areas. Over 400 million do not have access to piped drinking  water, adequate sanitation facilities, electricity and quality health care. The goal of universal primary education remains elusive. Some 69 million children in the age group 6 to 14 are out of the school system.”

It has become evident over the years that the government does not have the capacity to fulfill the basic needs of the population. The only hope lies with the corporate sector and the non government organizations. The world over the welfare state is giving way to business welfare. NGO-Private Sector relations are like a game of chess: while there are only a few pieces to move, there are an almost infinite variety of ways to play the game.

“Partnerships between business and NGOs is a solution to pressing present-day problems.” Traditionally the two sectors have been conflicting rather than cooperating with one and other. Business and NGOs used to interact only through confrontation or through charitable donations given by the private sector to fund NGO activities.  NGOs and business are often considered to be on “opposite ends of the continuum of concern on issues of poverty and development.”

While business is perceived as caring only about the financial bottom line, the non-profit sector is typically seen as being concerned with poverty reduction, and more social or environmental goals. This has led to stereotyping on both sides translating into mutual suspicion and resistance to change. NGOs see themselves as the losing party in attempts at collaboration because they have weaker bargaining power. They therefore believe that most of the benefits of partnerships are enjoyed by corporations.

On the other hand, companies view NGOs as being too idealistic and not having enough discipline to function in the market. The most prevalent stereotypes are rooted in the fact  that “NGOs view companies as unreliable, dominated by economic self-interest, while they in turn see NGOs as marginal ‘do-gooders’ who cannot manage their finances.”

But these traditional perceptions  are now changing. NGOs are finding themselves increasingly involved in areas of commercial activity. They have taken on an active role in providing credit, supporting micro-enterprises, and have formed links with producers of various products such as handicrafts and primary goods. These new areas of activity have led NGOs to “seek the kind of expertise and knowledge found in the private sector” and benefit from “its practices for improvement in efficiency and economic sustainability.”

Accordingly, the differences between businesses and NGOs are becoming increasingly blurred. The main perceived difference – that “NGOs have monopoly over principles while companies focus on profit” – is still generally accurate today. But the frontier between these sectors is breaking down as we see more and more links developing between them.

Heap says  that both sectors have begun to adopt each other’s vocabulary and methods: “both now talk about branding, niche marketing and customer satisfaction.”30 According to him, the main NGO aid agencies may be charities, but they are managed similarly to companies with huge turnovers, marketing strategies and revenue targets.

Heap points out that there is a move on the part of NGOs to focus more on the goal of “humanizing capitalism” rather than simply fighting it or turning to profit-making entities for funding.

On the other hand businesses are increasingly concerned with explaining and publicizing their social and environmental policies. Most large corporations post mission statements, CSR reports, or ethical codes of conduct on their company websites, and have restructured their communications efforts to address consumer and NGO expectations.

Trust is becoming a fundamental driver for partnerships between  NGOs and the Private Sector, but there are serious implications for NGOs if a corporate relationship turns sour. Thus NGOs should not be endorsing companies, but engaging with them critically.

That a company exists merely to maximise shareholders’ profits is no longer a valid proposition. A company’s impact on its stakeholders is an emerging benchmark of corporate performance since stakeholders are beginning to ask what companies can do for society, not what society can do for companies. Business investors are increasingly interested in the risk factors associated with reputation.

An enhanced public image through association with an NGO can increase corporate brand reputation. Yet the reputation of  NGOs as effective, tenacious campaigners can also cause business to fear what they might do to their image and sales. So the initial instincts of businesses to fight back against campaigning NGOs are tending to give way to more consultation and collaboration.

Trust is becoming a fundamental driver for partnerships between NGOs and the Private Sector, but there are serious implications for NGOs if a corporate relationship turns sour. Thus NGOs should not be endorsing companies, but engaging with them critically.

There is adequate scope for partnership between the private sector and NGOs provided they are able to indulge in give and take. Each needs to soften its stand against the other and be willing to accept each other’s point of view and to  respect these views.

In developing partnerships, both sides have to persuade internal constituencies that dialogue is the way forward. NGOs are terrified of being seen to “sell out,” of losing credibility among their peers and stakeholders, of losing more than they gain.   “From an NGO perspective, there is a change of culture needed. We have to understand internal lobbying. It requires a lot of persuasion.” That  job has been made harder by a number of partnership failures, where NGOs have seen companies funding initiatives simply as a way of heading off criticism, or where one part of a company has changed its ways, only for another part

There are both opportunities and risks for both    It is a complicated task – for every benefit there may be an accompanying risk. Making the job more difficult, it may be impossible to be certain of the real risks and benefits until months, even years, into a project.

Often, the risks and benefits as perceived at the beginning seemed quite different once the NGO and business had worked together over time. Both sides are only now beginning to develop ways of measuring the effectiveness of partnerships; a number of respondents said more research was needed in this area.

[The article  first printed in CRBiz (India’s first print publication on CSR) February 2007.]

(Suresh Kr Pramar, Speaker, Trainer, Writer,  CSR Consultant and the Executive Director, Centre for Training & Research in Responsible Business is a veteran journalist presently actively involved in promoting CSR through He is Managing Trustee, Global Gandhian Trusteeship & Corporate Responsibility Foundation . He is regular contributor at INDIACSR. He can be reached at suresh.pramar@gmail.com ).

Photo: INDIACSR

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