UNIVERSITY OF RIZAL SYSTEM

Province of Rizal
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Module 10- CSR in not Profit Organization

Learning Objectives

At the end of the of this module, the students should be able to:

1. Examine the role of governmental organizations (NGOs) and activists as

increasingly important stakeholders of the firm and the implications of this role
in the context of CSR.
2. Define civil society and activism and examine the different organizational
forms they include.
3. Explore how activists and NGOs criticize and pressure companies and gain
an understanding of underlying causes for this activity.
4. Identify the various forms of collaboration between business NGOs, and
examine their benefits, disadvantages and challenges.

Introduction

A not-for-profit organization is one whose objective is to support or engage in

activities of public of private interest without any commercial or monetary profit. In
many countries some will be charities but there will also be many which are not.

A non-government organization (NGO)is a legally constituted organization

operates without any participation or representation of any government. In the cases
in which NGOs are funded totally a partially by governments, the NGOs maintains its
non- governmental status insofar as it excludes government representatives from
membership in the organization.

In the nonprofit sector, social responsibility takes many forms. Solid research
is rare because most articles focus on the benefits to corporations; however, there
are many positive outcomes that come from nonprofit CSR such as increased
identification, more favorable perceptions among key publics, increased
volunteerism and positive word of mouth as well as the power to influence political
agendas. The accountability that social responsibility initiatives offer to corporations
can also be applied to nonprofit organizations. Transparency in social impact
reporting, governance, ethics and communication are key to making nonprofit
organizations successful.

A lot of practices are already in use in nonprofit organizations. Recycling and

adopting environmentally friendly practices, such as printing on two-sides of office
paper and reducing power consumption, were cited as practices used by nearly two-
thirds of nonprofits; however, a lot of nonprofits tend to avoid the phrase ‘corporate
social responsibility’ because it is believed to be associated with corporate
terminology and suggests a stigma that is associated with running things like a
business. Most nonprofits will only use the phrase internally or when they are
working on corporate partnerships.
The nonprofit sector also faces many ethical issues. These include areas such
as compensation; conflicts of interest; publications and solicitation; financial integrity;

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investment policies; and accountability and strategic management. This is why social
impact reporting is essential to the operations of nonprofit organizations—it builds
credibility and trust as well as encourages accountability and transparency in
conduct. A recent survey of nonprofits found that only about one third of employees
believed that their workplace had a well-implemented ethics and compliance
program. To address these issues, nonprofit organizations need better institutional
oversight, greater public education, and more transparent and inclusive performance
measures. Program effective and ways to measure the organization’s social impact
should a top priority for the sector.

According to TriplePundit, an online publication on social responsibility, social

entrepreneurship, green jobs, and the triple bottom line is sustainable business.

There are four reasons why NGOs and nonprofits should be reporting
sustainability and impact:

1. NGOs and nonprofit organizations have a footprint and are ethically obligated
to reduce their footprint as much as possible
2. NGOs and nonprofit organizations cannot demand from corporations what
they are not willing to do themselves (e.g. transparency, accountability, full
disclosure on operations)
3. NGOs and nonprofit organizations can benefit from increased cost savings as
a result of reporting metrics from social impact and sustainability efforts
4. NGOs and nonprofit organizations can attract more prestigious talent and
donors to their organization and allow investors to see them as reputable and
credible.

As nonprofits get more engaged with social impact reporting, they will have an
annual, structured process for stepping back and assessing intentions, outcomes,
vision and the practical results of social programs. Organizations who partake will be
able to have a competitive advantage over other nonprofits in the market that do not;
therefore, this is an area of interest that all nonprofit organizations should be paying
attention to, if they are not doing so already.

Creating Corporate Social Responsibility for the Non-Profit Sector

Ethical business practices and industry-wide corporate responsibilities need to

extend beyond the private sector. In a national survey of nonprofit employees, over
50 percent of those polled shared that they observed at least one act of misconduct
in the workplace during the previous year. In the same survey, employees working in
the for-profit and government sectors observed approximately the same degree of
unethical behaviors.[1] Many nonprofit organizations outwardly support missions or
initiatives that promote social good, yet they fail to practice that same goodness
within their internal operations.

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In the private sector, profit maximization has historically been the single most
important figure to measure success, yet in recent years there has been a nascent
but powerful movement in the private sector that also measures environmental and
social implications, or the “triple bottom line.” This approach to business has been
popularized as “corporate social responsibility” (CSR) and is becoming more
structured and legitimized with third party certifiers. Commitments made by
businesses include the B Lab, and global enterprises such as Unilever, Virgin Group,
Salesforce, etc. Although there is already a saturation of labels representing
business practices, the B Lab label or CSR commitments go deeper than addressing
one level within a supply chain. Meanwhile the nonprofit, or plural sector, lacks a
similar framework that allows donors to better understand business ethics. The
sector, especially with its rapid growth and development, should develop a CSR
framework as the private sector, to strengthen transparent and ethical business
practices and bolster the industry.

The 501(c)(3) nonprofit sector, which was valued at $905.9 billion in 2013,
has been growing at an accelerated rate with 1.41 million organizations registered
also in 2013. The work led within the sector varies but the general perception is that
they are mission driven and provide social services–direct or indirect, and that the
money they receive is reinvested into their organization and mission. Even with the
rapid growth and intense competition for in-kind and financial resources, the
nonprofit/plural sector has not developed a CSR framework or set of principles which
could set organizations apart from one another and create a stronger sector. Without
a CSR movement and commitments in the sector, there is more room for fraudulent
cases to take place, such as a nonprofit exposed for executing internal and external
behaviors that are illegal, counterintuitive, or hypocritical to their mission. The Red
Cross’s manipulative response in its handling of relief efforts following the 2010
Haitian earthquake comes to mind.[3] Still, less sensational cases abound that
demonstrate the importance of nonprofits’ developing a CSR framework as well as
committing to it. While ensuring that any surplus funds are reinvested back into the
organization and propelling the mission set out by an organization, consistently
operating at a higher standard and abiding by a framework could create deeper
returns on areas beyond the specific mission, recognizing the importance of the
“triple bottom line.” Many nonprofits do good work that reaches above and beyond
their mission, but they fall short of stimulating a wider and more meaningful
movement, or providing continuity or commitments to CSR. As seen in the for-profit
arena, developing a CSR movement and framework can have a positive ripple effect
across the entire sector.

Investments from Endowments Should be Transparent and with an Ethical

Lens and, if Possible, Tied to Their Mission

Endowments for nonprofits act as long-term securities and safety nets. The
size and annual returns on their endowments are often the primary markers of
success by which organizations are judged. Nonprofits often work to grow their
endowments through diversified standard financial portfolios and are legally able to
invest in any initial public offering. To secure endowment growth, many nonprofits
invest in public companies with high profit yields, and focus on the finances, rather

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than the ethical implications, of their investment choices. For example, “[a]
foundation donated around $50,000 to an immigrant rights organization… [while] its
endowment simultaneously holds nearly $75,000 worth of shares in the parent
company of the detention center against which it’s advocating.” Nonprofits have the
ability to invest in any IPO without any ramifications, which can create hypocritical
practices, as seen in the example above. That being said, there are nonprofits that
have independently committed to investing or divested from investments in certain
areas because of their mission or values.

For example, Stanford University, along with many other diverse nonprofits
have divested stocks from their portfolios in fossil fuel companies, noting that doing
so brought their investment strategy in line with their missions. [5] This is an important
step that aligns with CSR principles though without a proper framework, such trends
can be seen as “one-offs” and fail to put pressure on other organizations to do the
same. If a nonprofit is committed to its mission, an important component of a CSR
framework for the sector must be to invest in businesses that are socially responsible
at a minimum and at best are aligned with the nonprofit’s mission.

Funders/Grantmakers Should Fund Internal and External CSR Practices for

Their Grantees through Grant -Making

Funders and donors provide much of the capital to support nonprofit

operations and projects. This means that the funder, as a partner, can be a driver of
CSR within the nonprofit sector using enhanced grant management practices. To do
this, funders should more deeply work to understand their grantees’ organizational
structures and should include the capital within grants or restricted funds to allow
grantees to fulfill the grants requirements through the triple-bottom-line lens. There
are a few examples of funders that have begun to support components of CSR when
grant managing, though the sector lacks a network or movement that donors can
commit themselves to. The Langeloth Foundation grants through an environmentally
focused model of, “count, reduce, and offset.” The organization has developed many
ways in which other grantors can issue grants in a more environmentally sustainable
way that do not deter from the overall project. Carrying out operations in an
environmentally sustainable manner is just one of the legs or CSR, so to fully work in
this space, funders will need to consider societal returns as well. The true essence of
CSR is to have a set of principles which corporations can adopt to their daily and
programmatic work.
While many grants are provided to address a societal issue and
environmental issues, the key is to think about meeting both within a grant. If, for
example, you are funding conservation work, you might require that the work is done
through a socioeconomic, racial or gender lens or includes focus grouping. In doing
so, the project generates both environmental and societal returns. This will
additionally enhance transparency and partnerships as grantors will be obliged to
more deeply understand the whole context of the grantees’ operations, rather than
just the specific project being funded. In doing so, cutting corners and behaving less
ethically will be diminished and organizations can operate through the lens of
meeting the triple bottom line.

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Funders can include questions and require documentation within their request
for proposals that allow organizations to indicate how they will meet the CSR
principles in their work. In this case, the CSR can be more meaningful if the RFP, for
example, also includes questioning that relates to climate change and carbon-neutral
program implementation. Incorporating a “triple bottom line” focus and line of
questioning into grantmaking might require larger grants to be awarded to support
the three-pronged outcomes and broaden the actions of nonprofits to include CSR
as a fundamental action.
The Board Should have Representation from an Alumna of its Program, and/or
a Content Expert

The board of directors of a nonprofit organization has great power and

authority over the organization’s work plan, investments, and leadership. This board
is usually comprised of an elite group who are expected to donate a significant
amount annually to the organization. A person who was once a recipient of the
organization’s services, or who has extensive knowledge in the subject matter, but
does not have significant financial resources, is seldom a board member.

Organizations that do not have boards with representation from the people or
cause they serve are missing a critical opportunity to strengthen their impact. New
Housing Hope, a nonprofit supporting housing for low-income families, recently
appointed Kristina Jorgenson, a formerly homeless and a resident of the
organization’s housing, to the board. Jorgenson stated in an interview regarding the
new appointment, “Let’s have people who have experienced these things help at the
policy level.” The organization, which has a history of including those that they serve
on their board has been able to more acutely address issues because of the diverse
perspectives represented within the board. Board composition speaks volumes
about an organization. Applying a CSR lens to designing a board would mean that
there would be representation from recipients or experts.
The plural sector is a collection of corporations that are not driven by profit
gains, yet still conduct business and can strive to operate using CSR principles. This
sector also has the opportunity to develop its own set of applicable standards and
certifications for marketing, branding, and internal and external operations and
practices. The “Fair Trade”, “Forest Alliance” and “B-Lab” emblems are socially
responsible stamps of approval for many consumers. The nonprofit sector could
benefit from its own version of these logos as a recognizable CSR merit badge for
discerning donors and other stakeholders.

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