With CSR Funds Going to COVID-19, NGOs Are Looking at Steep Reduction in Corporate Support

Long standing commitments to fund crucial projects will suffer in the coming year.

COVID-19 has blindsided most of us.

And while the middle and upper classes complain, in general they are able to manage. It is the low income households, the marginalised in the cities, and groups like senior citizens who are really suffering.

And it is for such groups in need, that non-governmental organisations (NGOs) in different parts of the country  have responded swiftly, helping in every way they can – from distributing rations to families in slums to providing cooked meals to migrants to ensuring that senior citizens have medicines.

An article in India Today highlighted that NGOs provided meals to 3 million people in the first few weeks of the lockdown. Even the government has recognised the value NGOs provide and the CEO of Niti Aayog, Amitabh Kant, has appealed to them to help in providing services to vulnerable populations and in monitoring for COVID-19 outbreaks.

But it is not only during crises that NGOs support our society. They engage populations that the government has difficulty reaching (e.g. street children), help address issues that are difficult to tackle (e.g. domestic violence), highlight areas of improvement for the government, and even foster innovation. The NGO sector plays a critical role in helping the marginalised in our society today.

Also read: Where Have the Children on the Streets Gone?

But just when they need more support and funding, they could be facing headwinds that could affect their work in the coming months and years.

A significant amount of support comes from corporates, who have a long history of supporting the NGO sector. This support increased significantly after 2014, when the government made it mandatory for large corporates to spend 2% of their profits on social development. These CSR (Corporate Social Responsibility) funds, were estimated to be around Rs 13,000 crores in 2017-18. In the context of the current COVID-19 crisis, will corporates continue to provide this support, given that a lot of the money is moving towards tackling the crisis?

To understand this, we interviewed 18 CSR leaders and corporate CEOs. Every corporate we spoke to has already gone out of their way to help on the COVID-19 front – from directly supporting COVID-19 relief to donating to PM CARES Fund and chief ministers’ relief funds. A large part of this funding has come from the CSR funds that would have normally gone to NGOs. This will naturally impact NGOs.

While the decision is more straightforward for a CEO, many CSR leaders and teams are conflicted. They recognise the need to address COVID-19 related needs, but they also see other large problems that need to be addressed. One donor said that drug resistant TB and malaria are among the largest killers in the country and how could they stop supporting the programs that were working in the geographies most affected by these two diseases? But they know that their funds are reduced and they will have to support some COVID-19 related initiatives.

So what will be the financial impact on NGOs? Our calculations suggest that funding for traditional CSR activities – which are not linked with COVID-19 – in this fiscal year will reduce by 30 % to 60%. That is a significant portion of what NGOs would have got.

A number of these CSR funders have signed agreements with their NGO partners for the current fiscal year (April 20 to March 21), but many of the corporations said they will not be able to fulfil these commitments. For partners where the commitments were informal or expected to be finalised later in the year, the extent of support is going to be even less (if any).

Also read: When Government Committee Said ‘No CSR’ for PM Relief Funds, Why the Sop for PM CARES?

In addition to cuts in total funding, even the funding that is available for the NGOs is being prioritised towards activities related to COVID-19 (for example, partners focusing on skilling for migrants who have returned home may get money over those focusing on improving primary education).

There are numerous important causes that CSR funders have supported over the years which may not seem to relate to immediate COVID-19 needs and recovery (e.g., services for waste pickers or people with disabilities). Deprioritising these may have devastating long-term implications for NGO partners who have developed capabilities in these sectors, and consequently for the sectors as well. This is a time when these NGO partners need their CSR funders more than ever. 

So what should CSR funders do?

Their funds are limited, but they do have some funds (even though there is pressure to spend these funds on activities related to COVID).

The CSR funders know their partners well, and so they should work with them to find ways in which their capabilities can be used in the COVID-19 context (for example, supporting maternal and child health, mental health, or initiatives against domestic violence are all invaluable in the COVID-19 context); second, they could also provide targeted financial support to the NGO partners to help them maintain their core capabilities during these challenging times so that they can ramp-up their work again when the funding situation improves.

What should NGOs do? It is important for them to start thinking about what steps they need to take to make it through this fiscal year and beyond. Their strategy could include aligning their work to the COVID-19 context so that their CSR funders can fund them through this window, and conserving funds or even cutting costs to maintain core capabilities.

Many citizens who give funds to NGOs will also feel the crunch. In these times of economic uncertainty, contributions to NGOs can feel like an expense we can reduce. However, the work that NGOs do continues to be critical. Society will likely continue to need these NGOs to help in areas where government’s can’t. They still need and deserve funding support through these difficult times.

Ashish Karamchandani and Sujata Rathi work with FSG, a social action non-profit. The authors would also like to thank Johan Thurad, Vishnu Rajeev and Valmik Ahuja for their contribution to the research.