Today, not for profit sector (NFP) sector is growing in importance all over the world; and it is bigger than people generally realize. It is estimated that the sector comprises around 40% of Europe’s GDP.
In the world, there is an unknown number of such organizations. For example, estimates suggest that there are 1 million to 2 million NFPs in India alone. They may be government institutions, large charities (like WWF) or very small organizations.
One of the distinguishing features of NFPs is that there is normally a disconnection between the acquisition of resources and their use. This means that the money to provide the services does not come from the recipient of those services.
NFPs can be classified into different types, each with a different purpose:
• Public bodies : Have the function of providing services to members of society and receive their funding and powers directly from the national government
• Quasi-public body : Serve a public or a civic purpose without having a direct relationship with the government
• Educational Institution : Includes organizations such as schools, colleges and universities that serve an educational function
• Charity : Fulfils a function which involves providing a service
To understand the implications of CSR in NFPs, it is necessary to understand the motivation for the existence of NFPs. Contrary to popular opinion, it is not always true that if an organization exists for a public or charitable purpose, then it must be a socially responsible organization.
CSR is about how an organization conducts its operations and deals with its stakeholders. Dealing with the different stakeholders is an important function for NFPs. Doing more with fewer resources is always an objective for NFPs. Thus, sustainability is a major concern for NFPs but its implications are quite different in terms of both decision making and motivation.
Without shareholders or customers, who are NFPs accountable for? In order to be able to carry on its operation, NFPs need to be accountable to its donors, beneficiaries and a wide range of other stakeholders. In NFPs, disclosure is necessary to seek additional funds and to satisfy the diverse but powerful stakeholder groupings.
To summarize, CSR in NFPs is about satisfying stakeholders and running the organization with sustainability, accountability, transparency and with proper disclosure.
Company specific examples from Business:
It is a fact that in today’s socially aware times, it is close to impossible to find a multinational company that doesn’t express a commitment to Corporate Social Responsibility. Few years back, CSR was an ambition of corporate do-gooders. Today, it has become omnipresent. If a firm has a good CSR policy, it means that both through its day-to-day business activities and extra-curricular activities (donations, etc.), a company thinks of the needs of its surrounding ecosystem and the environment.
But yes, there are both good and bad examples.
Salesforce.com’s commitment to CSR is difficult to question. The software services company’s CSR policy is to give 1% of its profit, 1% of its equity and 1% of its employees’ time to charities and other non-profit organizations.
The company has helped to rebuild tsunami-damaged schools in Sri Lanka, fund-raise for arthritis charities and support projects that help deprived children start up their own companies.
While salesforce.com’s commitment to social responsibility can be straight-forward, it becomes much more blurred when a company’s product itself is controversial. Take the case of tobacco companies. All cigarette firms have CSR policies and follow them religiously. For example, Gallaher (world’s fifth largest cigarette maker) has a CSR policy that states that it will not buy tobacco from any developing world producers that use child labor and has firm policies on the prevention of sales to minors.
Now to see the other side of the story, take the case of Enron, the Texan energy giant. Enron was forever winning national awards for its CSR work and it gave millions of dollars to local charities.
The world knows what happened in 2001. Enron collapsed with a debt of $31.8 billion. The boss, Jeffrey Skilling who orchestrated the fraud was jailed for 24 years for the crime. Enron is a classic example to prove that CSR is irrelevant if the essential business practice of the firm is dishonest.