NGOs: Role, Advantages, and CSR Engagement

Introduction to NGOs and Their Organizational Form

Non-governmental organizations (NGOs) have become an integral part of the present-day organizational landscape. Jammulamadaka (2009) discusses how NGOs have become the method of choice in places like India for implementing various social welfare programs. As the term suggests, these are organizations that operate outside of government and are privately managed. The way an NGO is structured differs from the traditional forms seen in public bureaucracies and for-profit businesses (FPBs), based on the two defining criteria of being non-governmental and non-profit.

NGOs are reported to offer certain advantages, including the ability to attract altruistic resources, provide for unmet demand for public goods, and protect against contract failure. In addition, they have been recognized as sites that facilitate socialization in democratic participation, social innovation, and responsiveness. Yet, because of the preferences of institutionalized funders and the non-profit characteristics central to their identity, these features continue to define NGOs even when they may not confer a competitive advantage over public bureaucracies or FPBs.

NGOs are increasingly becoming mass producers of welfare goods. The focus on clearly planned project proposals, well-specified procedures, and defined budgets has reduced the flexibility available to NGOs to innovate. This loss of relevance is primarily because the organic features of the organizational form — which originally bestowed key advantages on NGOs — are now being traded off in favor of a more standardized and formalized structure (Jammulamadaka, 2009, p. 9).

NGO Engagement with Business and CSR

Arenas, Lozano, and Albareda (2009) confirm in their research that new forms of business-NGO engagement have emerged based on a combination of confrontation and collaboration strategies. Without abandoning advocacy and campaigning, today's NGOs also engage corporations and business associations to identify and disseminate corporate best practices. They form partnerships to promote social and environmental actions, provide technical assistance to corporations, develop commonly agreed certification schemes, and promote and design corporate social responsibility (CSR) standards as well as management and reporting processes. They also participate in CSR monitoring and auditing.

These new forms of collaboration between business and NGOs reflect broader changes in the overall governance environment, while contributing to the reconstitution of the global public domain within which firms carry out their activities. NGOs are usually recognized by other stakeholders as one of the main actors — perhaps the leading actor — in the introduction and development of CSR, both in Spain and internationally. They are perceived as spearheading CSR or standing at its forefront. Some stakeholders recognize that pressure from NGOs has led to measurable improvements in business behavior, and companies increasingly regard NGOs as among their primary stakeholders. For many professionals in corporate CSR departments, NGOs are their main audience: they are the parties who read and evaluate communications, websites, sustainability reports, and other materials produced by corporations (Arenas, Lozano, & Albareda, 2009, p. 182).

Advantages of the Non-Profit Model

A primary advantage of NGOs is their ability to meet demand for public goods. NGOs emerge partly because their non-profit status enables them to address unmet demand — particularly in the areas of development and social welfare goods. Researchers explain that government is constrained in providing the full range of public goods by factors such as the free-rider problem and the criteria of universality and equality (Jammulamadaka, 2009). This constraint necessitates the existence of non-profit NGOs that supply goods and services not adequately provided by the government. Because of their non-profit constraint, NGOs can address the free-rider problem. Furthermore, being private organizations, they are not bound by universality or equality criteria and can therefore offer greater variety in services. Their non-profit nature guards against contract failure and creates public trust, which distinguishes them favorably from FPBs.

Jammulamadaka (2009) further explains that non-profit status provides scope for consumer control of the organization that is not available with FPBs. Public bureaucracies allow for public control, but the electoral process may not be as immediate or effective as the accountability provided by non-profit governance. It has also been suggested that non-profit status enables NGOs to better capitalize on the altruistic tendencies of people and mobilize volunteer resources more effectively, making them more cost-efficient in providing development goods. Because these organizations are perceived as engaging in their activities for charitable rather than profit-driven reasons, they can mobilize volunteer labor and receive donations of cash and in-kind contributions from the general public. These volunteer resources reduce the cost of service provision, making NGOs more efficient than public or market alternatives. Because they are privately managed and are believed to operate on altruistic values, they are also expected to follow democratic processes that enable people to participate and become empowered, thereby influencing broader political behavior in society (Jammulamadaka, 2009, p. 12).

Conclusion: The Enduring Significance of NGOs

Regardless of one's perspective, it is easy to recognize the significance of NGOs and the maturation that has taken place over the past decades. Playing an important role in how business is conducted, as well as in shaping the perceptions of companies and their stakeholders, NGOs have proven — and continue to reaffirm — that they are a permanent fixture. They have carved out a distinct niche and made it virtually impossible to imagine the world of business, and the politics surrounding it, without acknowledging the influence of NGOs and the way they have been woven into the fabric of day-to-day commerce. The research discussed here makes evident that the positive contributions of NGOs outweigh their shortcomings. They provide a vehicle for those with lesser voices to be heard, a means of exercising choice, and a sense that someone is advocating for the average individual.

However, no system is without flaws. As Arenas, Lozano, and Albareda (2009) observe, a significant factor undermining the legitimacy of NGOs is the perception among businesses and other stakeholders that NGO criticism often stems from a lack of understanding. Rather than recognizing the benefits that organizations like NGOs can offer, some stakeholders remain wary of the power these organizations appear to wield. NGOs represent a resource that should be utilized as the effective instrument they truly are, rather than feared for the influence they have accumulated.

References

Arenas, D., Lozano, J., & Albareda, L. (2009). The role of NGOs in CSR: Mutual perceptions among stakeholders. Journal of Business Ethics, 88(1), 175–197. doi:10.1007/s10551-009-0109-x

Jammulamadaka, N. (2009). Do NGOs differ? How, with what consequences? In Vikalpa: The Journal for Decision Makers (pp. 9–24). Vikalpa, Indian Institute of Management, Ahmedabad (IIMA). Retrieved from EBSCOhost.