Why NGO Due diligence is Critical – Key Reasons
Updated: Apr 19
Due diligence is an important step in ensuring that an NGO is legitimate and operates in a responsible manner before committing resources to support its work. The following article lists down reasons that signify the importance of Due diligence
– Compliance with legal and regulatory requirements: The Companies Act, 2013, which governs CSR in India, requires businesses to spend a specific proportion of their profits on socially responsible activities. With the use of due diligence, companies can ensure that the NGOs they collaborate with, adhere to all applicable regulations and requirements.
– Delivery of social targets – Due diligence enable corporates to assess whether the NGO has delivered the required outcome/KPIs in the past and has the necessary workforce and infrastructure to deliver pre-agreed outcome and impact.
– Reputation management: Businesses are being held more and more responsible for the societal impact of their operations, including the impact of their CSR initiatives. Companies can protect their reputation by using due diligence to avoid collaborating with NGOs that may have a bad reputation or engage in unethical/unlawful behaviour.
– Accountability and systems: Companies can use due diligence to make sure that the NGOs they associate with follow due processes and have the necessary systems in place in relation to aspects such as data management, partnerships, vendors etc. This aids businesses in determining whether the NGO’s operational procedures are aligned with their operational methodologies.
– Due Diligence of an NGO should answer some fundamental questions around its governance, adherence to regulations, operation modalities and its efficiency. Also, whether the NGO has sound financial systems and the necessary skill set to execute the project and deliver optimal performance.
A CSR consulting firm has the necessary skills to conduct such Due diligence and can offer relevant advice/recommendations to select the right implementing partner. Therefore, hiring a CSR consulting services firm can be a wise move to ensure that a suitable NGO is selected which is able to deliver in line with the CSR vision of the corporate.