Trust me, I’m an NGO: The role of accountability and transparency in the bonds between NGOs and the private sector

Trust me, I’m an NGO: The role of accountability and transparency in the bonds between NGOs and the private sector

Trust is a tricky subject in all relationships - whether in friendships between individuals or collaboration among corporations and sectors. Trust takes time and effort to build, and very little to destroy. When non-governmental organizations and the private sector work together, accountability and transparency are vital to their mutual trust.

NGOs need to know what corporations are capable of giving them, while businesses must trust NGOs to do their jobs competently. Proper partnerships between the sectors can facilitate NGOs’ abilities to be both accountable and transparent, increasing efficiency and propelling their purpose.

NGOs, or non-governmental organizations, are defined as private, not-for-profit organizations that serve society by advancing social, political and economic goals in terms of equity, education, health, environment and human rights. Often NGOs step in to work where governments do not or cannot function and many of them have contributed to major changes in global economic policy, law and regulation. A growing global, non-profit “third” sector has gained strength since the 1970s, filling the gap between the private and public sectors as a response to fiscal crises, ideological shifts, and privatization that has led to a decline in the scope and capacity of the state.
There are many different types, characteristics, and purposes that differentiate NGOs. Campaigning and advocacy NGOs work to promote causes and lend a voice to the disadvantaged. On the other hand welfare-providing operational NGOs offer goods and services to those in need. Of course some NGOs can be both, and yet others are considered capacity-building NGOs. According to a report by the UN and SustainAbility, the global nonprofit sector has more than $1 trillion in turnover.

 

Interaction with the Private Sector

 A wide variety of interactions between NGOs and the private sector include advocacy, dialogue and cooperation. More specifically, organizations cooperate on support for fair trade and other forms of socially responsible enterprises, development of for-profit entities within the voluntary sector, dialogue with corporations, fundraising, sponsorship, and cooperation or strategic alliance. Some consider this cooperation to be neutral interaction for a common purpose, while others believe it entails the change of corporate framework. Regardless, the relationship between various types of NGOs and the equally variable private sector - which ranges from large corporations to small micro-enterprises, and the self-employed - should be a two-way street, and often results in changes on both sides. This variability among and within the sectors means relationships are different. Some businesses have a genuine concern for social values and have integrated them into their business principles. The economic activity of companies has a direct impact on local communities and in the economy at large.  Transnational corporations are of greatest concern to the third sector because of their direct impact on economies, with power to influence the rules of global trade and investment.

 

Power & Responsibility

 Due to the international economic downturn, NGOs have received less government support and have become vulnerable. This has lead to increasing pressure to find alternative sources of funding. Many organizations have diversified their revenue base by increasing corporate fundraising and developing their own for-profit divisions that allow them to become more self-sustaining.

 As the role of the third sector has become more significant globally, questions regarding effectiveness, reliability and legitimacy have risen. Unfortunately NGOs are often perceived as being less accountable for their actions than the private and public sectors and are consequently criticized. For this reason NGOs have developed mechanisms, tools and processes to ensure transparency and accountability to multiple stakeholders in order to assure donors, staff and the general public of their operations. Regardless of their humanitarian nature, the power NGOs have acquired with their multi-million dollar operations is undeniably significant. As a result it is rather natural that such NGOs (and by association, others in the sector) are expected to shoulder more responsibility for their increasingly important roles in the void between the private and public sectors. An NGO’s interaction with the corporate sector is a double edged sword as it can support or detract from efforts to endorse the greater good. It is urgent for NGOs to be transparent and they must consider not only their individual internal relationships with companies but also their impact on the third sector as a whole, the community, and stakeholders.

 

Defining Accountability

 Defining NGO accountability is complex because NGOs are so multifaceted and hard to define. What constitutes accountability and how it is best carried out often depends on the relationship between organizations and the society and stakeholders they serve. Most NGOs have multiple accountabilities: downward and upward. Downward accountability is directed at partners, beneficiaries, staff and supporters.  On the other hand upward accountability serves to reassure trustees, donor and host governments, which are more likely to force accountability requirements on NGOs. Consequently, NGOs, (particularly international one’s) are more interested in meeting upward requirements imposed on them. From this perspective, accountability can include budgeting, program implementation, reporting, oversight, and audit practices. Recently, there has been increased attention on the role of boards, interlocking board directorates, and overlapping board memberships between corporations and NGOs, thanks in part to several international corporate governance scandals. Initiatives like the NGO Watch, launched by the American Enterprise Institute and the Federalist Society for Law and Public Policy Studies, aim to highlight issues of transparency and accountability in NGOs as well as international organizations.

There is no one size fits all relationship between the sectors, various organizations, and even the same organization over time. Instead, groups must look at their specific goals and values, and assess the impact of their choices in the current context in order to create strategic and positive partnerships across the sectors. These alliances should be approached in a transparent way, with an awareness of shared goals.

 

SourceResponsible Business Magazine

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All, 2012

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