Is your CSR Partner compliant?

Identification of CSR Partner

While executing CSR Program, selection of a CSR partner is crucial. There are more than 30 Lakh NGOs in India which provides ample choice to the companies. With the growing importance of corporate governance, stricter monitoring and reporting obligation it requires companies to be more disciplined and compliant while implementing CSR program. While company ensures that it is complying with all regulatory and statutory norms required under corporate laws, it may lose track to ensure whether its CSR partner is compliant as required under various laws.

What is Due Diligence (DD)?

Assessing the credibility, reputation, and efficacy of a CSR partner can be challenging task. Any violation of local laws by the CSR partner may have negative impact on the Company and its reputation. Another critical part is whether CSR partner is aligned to a company’s CSR strategy and philosophy. Comprehensive DD of the CSR partner is crucial before the start of any project and shall form part of the CSR Policy. This process has to be sufficiently robust to ensure that the CSR partner has the credibility, competence, and integrity to deliver effective CSR programs.

The DD may broadly cover below areas:

• Past History and Credibility
• Legal and statutory compliance
• Financial sustainability and accountability
• Management and human resource
• Risk management
• Transparency and ethics

Due Diligence and Risk mitigation

DD procedures are designed to assist in decision-making by assessing the potential risk of conducting business with an associate. While companies cannot guarantee that improper conduct will never occur, we can protect and prevent it by implementing adequate controls by use of appropriate due diligence and effective risk management.

For example, the risk of bribery / Conflict of interest can create serious challenges in execution of any project in a compliant way. Another example is CSR partners having political Association / affiliation to public officials. Adequate controls at the time of hiring of third party will mitigate risk to reputation and regulatory violations. Key risks identified in the due diligence process need to be assessed, documented and monitored at regular intervals.

The DD process acts as a risk management tool to assess the ability of the CSR Partner to implement the project in line with the Company’s policy and local legal requirements. A well-structured and consistent approach for the identification and assessment of CSR Partner strengthens and streamlines sustainability of CSR program.