How corporates and not-for-profits can defeat hunger

Malnutrition is one of the many problems arising from uneven distribution of resources that plague the country today. The UN Food and Agriculture Organization (FAO) states that 194.6 million people in the country are undernourished. It is ironic that one of the largest economies in the world is also a home to the largest population of undernourished people in the world. However, on the positive side, several proactive steps are being taken by those in the 'haves' category to help those in the 'have nots' category; the Corporate Social Responsibility (CSR) mandate is one such step.

CSR as a concept is not new for Indian corporates—companies like the Tata Group and Infosys have been actively involved in philanthropy for a while now. But now it is mandatory for corporates above a certain size to undertake CSR activities to contribute towards social development; courtesy, the Companies Act, 2013.

The CSR clause in the Companies Act, 2013 (clause 135) makes it mandatory for companies with net worth of Rs. 500 crore or more, or turnover of Rs. 1000 crore or more, or a net profit of Rs. 5 crore or more during a financial year to spend at least 2 percent of their average net profit on CSR activities. It effectively makes India the first country in the world to mandate a minimum CSR spending, which, in turn, is expected to result in a significant rise in CSR spend.

According to the Indian Institute of Corporate Affairs, 16,352 Indian companies fall into the CSR ambit now that the Companies Act, 2013 has become law. It is estimated that their CSR commitments amount to over 25,000 crores annually. These funds can be channelized towards social welfare. Efficient use of these funds can help us in our pursuit of Sustainable Development Goals (SDGs) such as ending poverty in all forms, ending hunger, achieving food security, ensuring inclusive and equitable quality education, and so on. The availability of these funds puts us in a better position in our pursuit of SDGs.

Despite having the options to undertake CSR activities either on their own or through their non-profit arm, corporates would prefer to partner with not-for-profit organisations with a proven track record. If they are to build the required infrastructure, they have to channelize funds and time towards training employees, hiring people, and getting consultants on board among other things. Instead, they can get into a partnership with a not-for-profit and use the latter's expertise and groundwork. It is a symbiotic relationship between corporates and not-for-profit organisations, with the latter getting a sustainable source of funds.

When corporates look for not-for-profit organisations to work with, they look at specific markers such as … Number of years in operation, Reach, Relevant experience, Infrastructure
Leadership, Necessary registration and documentation and Reputation

Of these markers, the reputation is important because of two things: (i) the number of not-for-profits mushrooming every year and (ii) trust deficit between corporates and not-for-profits.
It is important that not-for-profit organisations establish themselves as credible organisations, or else they may fail to take advantage of the CSR mandate. Transparency and accountability are key to trust and reliability. It is not just important to utilise the grants received in the most efficient manner, but equally important to communicate the same. In the long run, accountability translates into enhanced performance for the organisation. Not-for-profits are accountable to its donors (incl. the corporates with whom they partner), beneficiaries, and the Government.

Corporates will prefer to work with organisations with robust accounting mechanisms. Audit reports, internal and third-party evaluation reports, data from impact studies undertaken by reputed survey firms, stakeholder feedback, case studies, beneficiary stories, key partnerships, etc., help in establishing credibility. Even awards, recognitions, and news coverage have substantial weightage in this context.

All this information should be documented in the form of collaterals and made available in the public domain through websites, newsletters, bulletins, press releases, etc. Considerable efforts have to be invested in devising a comprehensive communications strategy to establish the credibility of the organisation. It can attract other corporates who are looking for a well-known not-for-profit to work with.

It is also advisable to get 80G and 12A registrations for donations from within the country and FCRA registration for overseas donations. While these registrations are primarily used for donations, they also lend credibility to the organisation.

CSR mandate is an opportunity for not-for-profit organisations to mobilise resources to pursue the cause that they have taken up. Similarly, for corporates, it's an opportunity to give back to the society in an organised manner. The idea is to promote inclusive growth and create an equitable environment for all sections of the society. Not-for-profits can take the lead to form a synergetic relationship with corporates to address socially relevant issues, thus making the most of this opportunity.

Chairman, The Akshaya Patra Foundation