NGO-Business Partnerships

The foundation for this article was a paper on "Networking with Business" prepared by Frances C. Gretes for the NGO Handbook

A partnership is defined as a relationship between individuals or groups that is characterized by mutual cooperation and responsibility and established for the achievement of a specified goal. Within the international development community, the term “partnership” often comprises the host country counterpart organizations, for-profit entities and program beneficiaries. The UN defines the private (for-profit) sector as having four components: multi-national corporations (MNCs), small and medium enterprises (SMEs), national large-scale enterprises (LSEs) and micro-enterprises. Since 2000, MNCs have increasingly played a more active role as partners providing financial resources, expertise and other forms of support. (Cooley, p. 1)

Models for successful business-NGO partnerships have been slow to develop. As the number of NGOs grows, and NGOs face increasing competition, they are moving towards partnering as a means of differentiation. (Davies, p. 29) Both NGOs and businesses have learned lessons from early partnership experiences and are now developing meaningful relationships that provide mutual benefits. Each side, possessing certain knowledge, skills and infrastructure, is helping the other meet their goals without sacrificing integrity or profit and producing results for the common good.

Jeb Brugmann points out: “As their interests and capabilities converge, these corporations and NGOs are together creating business models that are helping to grow new markets at the bottom of the pyramid and niche segments in mature markets.” (Brugmann, p.2)

Rajat Gupta, former McKinsey managing director, said to the UN General Assembly in 2005, “… there is no hope for development without business, and in the long term, there is no hope for business without development.” (Gupta)

To achieve partnership success, development and business experts agree that the requisites are common ground, effective leadership, and accountability at all levels. They recommend focusing on trust, people and on managing those relationships. Businesses need to have flexibility and work in circles other than those that are customary. NGOs, on the other hand, must understand that businesses work with different start timetables and protocols and that they expect their partners to respect deadlines and commitments. NGOs must also improve accountability to their partners as well as their communities.

Below is a presentation of the key issues and recommendations for building successful long-term partnerships.

Key Issues

Over the past 20 years, countries have liberalized their economies and opened them to foreign goods competition. The NGO sector also increased. As governments play a lesser regulatory role, NGOs sometimes battle with corporations over social responsibility in certain jurisdictions and have emerged as “de facto regulators” to keep the actions of corporations in check. When they do not behave responsibly, NGOs could damage the reputations of businesses by publicly exposing them. For example, NGOs launched attacks on Nike for violating human rights and on Merck and GlaxoSmithKline for enforcing patents on AIDS medicines. (Brugmann)

The most difficult issue that businesses and NGOs deal with is the conflict between ethics and commerce. If a business doesn’t make money, it is not going to be interested in partnering and NGOs may jeopardize their legitimacy by helping businesses make money. This trend, however, is changing from “principles or profits” to “principles AND profits.” The characteristics that businesses and NGOs share make their differences almost indistinguishable.

The International NGO Training and Research Centre’s (INTRAC ) Millennium Paper states: “...we have identified... the dramatic change in the nature and form of NGOs. Even the language used to describe NGOs is changing and identities and boundaries are clearly shifting. We see NGOs with no value base, as against commercial enterprises with very strong ethical values; certain non-profit organisations run counter to the traditional spirit of voluntarism; commercial consultancy firms compete with established NGOs to operate programmes in areas formerly considered “NGO territory”, and NGOs are setting up commercial consultancy wings”. (INTRAC)

Partnering for Success

The World Business Council for Sustainable Development (WBCSD) in their paper on sustainable livelihoods identifies six global trends that are encouraging NGO-business collaboration;

• Many companies see a need to break out of mature market sectors.
• Framework conditions in many developing countries are improving.
• Communications are faster and cheaper, making the world a smaller place.
• Public expectations of corporations are changing.
• New and better partners are available.
• Aid and investment are beginning to reinforce one another.

With a win-win model, businesses would try to:

• blend financial and social values
• create opportunities for the poor
• engage the poor in a business relationship that relates directly to the companies’ core commercial operations
• integrate the poor in the company’s value chain.

By studying the “win-win” case studies discussed by organizations such as the WBCSD, NGOs can learn to understand the business point of view and can negotiate more effectively during the process of selecting and developing a partnership. (WBCSD)

The Global Corporate Citizenship Initiative (GCCI) proposes several examples of ways to engage in partnerships: (Nelson – Partnering for Success)

• Build framework conditions for good governance

1. Spread industry-wide or global standards for accountability, transparency and responsible business practices.
2. Help to strengthen public institutions and administrative capacity.

• Expand economic opportunities

1. Ensure that local communities benefit from major development projects.
2. Support small and micro-enterprise development.
3. Invest in youth entrepreneurship and employment.
4. Engage in integrated approaches to poverty reduction.

• Invest in physical infrastructure – water, energy and transportation

1. Preserve and provide access to clean water
2. Provide access to clean energy
3. Leverage logistics and transportation competencies.

• Improve access to and quality of education

1. Build national business coalitions for education
2. Mobilize private resources and technology for education
3. Prevent child exploitation

• Provide better healthcare and affordable treatments

1. Help to build capacity and infrastructure in public health systems
2. Support global and national alliances for health

• Build partnership skills

1. Invest in training and experiential learning programs.

Potential reasons for forming partnerships

What NGOs want from the private sector (not always the case):

• Financial resources
• Advocacy
• Access to networks and contacts
• Leverage for securing additional funding from other sources
• Technical expertise
• Organizational structures
• Financial and customer management skills
• Raise profile in communities or among donors
• Ensure distribution of goods and services to remote or marginalized communities

What the private sector wants from NGOs:

• Chance to demonstrate corporate philanthropy (Corporate Social Responsibility)
• Enhance reputation (market differentiation)
• Financial benefits (profit)
• Competitive advantage (healthy community thrives economically)
• Clue to societal concerns
• Credibility with the public
• Access to local markets
• Recruitment of talent and insight into different management styles
• Expertise and innovation
• Distribution networks

Types of NGO-business alliances

Independent Sector identifies three major categories of NGO-business alliances:.

Strategic Alliance- This kind of relationship goes beyond a donation, grant, or other contracting arrangement. In a strategic alliance, both partners contribute resources necessary to carry out a set of activities that, when accomplished, will achieve the goal. Resources might include people with a relative set of skills, money, materials, and other pertinent tangible or intangible assets. The goal is one in which both organizations believe is important and relative to its organizational mandate. The partners agree to work together to monitor progress, identify problems and success, and make adjustments.

Issue Specific Engagement. This relationship is similar to the strategic alliance with the exception that it is focused on an issue that is having a negative impact on sustainable development. An NGO must be careful not to accept a grant from a corporation to implement a community-based project if that same corporation’s behavior is harming efforts to achieve sustainable development.

Advocacy and Constructive Dialogue. In this relationship, NGOs do not develop a partnership or accept any form of contribution from the corporation. The relationship is solely based on a constructive dialogue between the NGO and the corporation regarding the issues at hand. An example of advocacy and constructive dialogue could be the diamond industry in conflict zones like Sierra Leone, Angola, and the Democratic Republic of Congo. Diamond companies, such as De Beers, are under pressure from human rights organizations to verify that they do not purchase diamonds from conflict areas where the revenue can be used to fuel the civil war. Interested NGOs could band together to advocate that diamond companies develop a verification and certification system that demonstrates that the revenues from the purchase of its diamonds are not used to continue the fighting.

Related or Other Forms of Partnerships: • Grant-making • Cause-Related Marketing • Sponsorship • Certification • Licensing • Message Promotion • Employee Involvement • Operations/Social Enterprise (Independent Sector) Challenges for Businesses and NGOs

• Meeting stakeholder expectations for both sides • Keeping priorities in order • Accountability

To succeed in solving social and environmental problems through partnerships, there have to be benefits to both parties. The most valuable benefits are newly gained expertise and enhanced reputation. Although NGOs are led by dedicated entrepreneurial types, they often lack training and management experience. They might have the ideas and the motivation, but not the skills for raising money or bringing projects to reality. They must assess what they have to offer and what corporations need and then approach a corporation as a potential participating partner and not just ask for a handout.

Potential Risks/ Weaknesses with Partnering

Business

• Wasting resources • Divulging sensitive information which can be misused • Complex bureaucracies • Fines and litigation costs if something goes awry • Possible damage to reputation • Loss of customers or profits • Negative press NGOs • Compromising principles • Administrative costs could be a drain on resources • Potential loss of credibility among the public or donors • Lack of funding • Poor communication • Lack of management skills

Benefits

Business • Money • Technical knowledge • Management skills

NGOs • Local knowledge and expertise • Ability to enhance a business’ reputation • Moral influence on business by fostering responsible business practices • Established distribution networks and infrastructure • Relief to businesses of certain kinds of administrative tasks

Potential Benefits of Partnership

Business: • Ability to work in a country with less government interference • Enhanced reputation and ‘license to operate’ • Competitiveness and market positioning through lower costs and differentiated products and services • New markets and revenue growth • Improved corporate accountability mechanisms • Emergence of new business models and innovations • Development of responsible business practices • Reduced operating and resource costs • Strengthened supply chains and distribution networks • Improved productivity • Reduced labor costs • Better risk management • Hiring and retention of quality employees • Improved media image • Ethical investing that may contribute to increase of share price • Access to local knowledge and capabilities

NGOs and host communities: • Ability to reach more people • Improved credibility and program visibility • New skills and technologies • Access to more financial resources • Job creation • Establishment of physical and institutional infrastructure • Production of safe and affordable products and services • Income generation and investment • Improved business environment • Inside knowledge of how a company or industry works helps influence change

Recommendations for Establishing a Partnership

Global Corporate Citizenship Initiative: (Nelson - Partnering)

• Build trust and understanding through openness, transparency and good communication. • Establish clear roles, responsibilities and ground rules. • Respect differences in approach, competence, timeframes and objectives of different partners. • Apply the same professional rigor and discipline focused on achieving goals that would be applied to other business alliances. • Focus on achieving mutual benefit in a manner that enables the partners to meet their own objectives as well as common goals. • Understand the needs of local partners and beneficiaries, with a focus on building their own capacity and capability rather than creating dependence.

Aspen Institute’s Nonprofit Sector Strategy Group:

• Identify specific projects for collaboration  Analyze costs and benefits of collaboration  Identify interests and objectives  Determine criteria for selecting partners  Mobilize internal support  Identify champions within organizations  Ensure that managers represent a cross-section of the organizations' functions • Select appropriate partners  Explore values and perspectives  Determine common interests and objectives • Develop procedures for collaboration  Negotiate written memo of agreement between partners  Decide on procedures to settle disputes  Decide on ways to select mediators and technical experts • Define problems and explore feasible solutions  Develop transparent procedures for assessing problems  Create metrics to assess problems and performance  Specify rigorous outcomes and results  Develop mechanisms to share information • Focus on manageable sets of tasks  Assess and select feasible solutions  Test potential solutions in pilot or demonstration projects • Formulate an action plan  Set time horizons for accomplishments  Focus first on actions most likely to succeed • Execute implementation plan  Measure and assess results  Integrate solutions into procedures for operations and administration • Protect confidentiality and issue joint nonprofit-corporate public report  Protect confidential business information  Agree on joint report process and results

Roger Cowe lists these key success factors identified by SustainAbility, a consultancy: • The company must be serious about changing its behavior, and should be able to drive change in its own sector and across the business community generally. • The NGO must be able to maintain clear accountability to its own key stakeholders, and must maintain its independence from the business partner. • Each partner needs to benefit directly and to understand the other’s benefits. • The “rules of engagement” need to be clearly agreed at the outset. • Individual participants must be sufficiently senior to have their organization’s mandate and be able to make difficult decisions without constantly having to refer back. • The people involved must trust each other.

The twelve principles in Robyn Shepherd’s toolkit are: (Shepherd) 1. UNDERSTANDING: Both partners should demonstrate mutual understanding and a shared commitment. If they cannot achieve between themselves a balanced level of enthusiasm and dedication to the partnership, other partners should be sought. 2. REPRESENTATION: Each organization should carefully choose its representatives when forming the partnership. Even if both organizations are generally committed to the partnership, it could fail if the designated representatives are not adequately motivated. 3. POWER: Power in the partnership should be balanced. No one party should dominate discussions or decision-making. Dispute resolution procedures should be established early. 4. OPENNESS: Partners should hold open, candid discussions about power to further transparency and trust. 5. LOYALTY: Partnerships are based on a common purpose and shared responsibility toward the goal and toward each other. To achieve mutual accountability, each partner should demonstrate loyalty and consideration. 6. JOINT ACTION: Partners should work together harmoniously in the partnership, including when evaluating and reporting on partnership activities. 7. OWNERSHIP: The organizations should share ownership of the partnership. Any work done belongs to the collective partnership and not to any single party. Both partners should take credit for all outcomes – achievements and failures. 8. INFORMATION: There should be a balanced flow of information among partners. All reports and documents generated through collaborative work should be shared and open to all partners for review, comment, reference and use. 9. COMMUNICATION: Communications should be fair, open, effective, respectful, and candid. 10. RESPECT: Partners must demonstrate mutual respect and trust in negotiations and decision-making. 11. VALUES: Shared values on development and social action are crucial to the success of the partnership. In order to find common approaches, partners must understand each other’s views of development and the particular work in which they are engaged. 12. VISION: Partners should conduct their partnership using shared priorities and organizational visions. They must agree on how to address not only complex issues such as finances, information sharing, program activities, but also basic issues such as meeting schedules and logistics.

Key Questions to Ask (Asian Development Bank- Proceedings/ adapted)

Choosing the right partner --- Seek mutual trust and respect • What is the mandate of the organization/company? • What is its reputation in the target community? • Is the NGOs reputation likely to be damaged through association with this entity? • If this individual or entity has been critical of the NGO’s operations in the past, will a partnership help alleviate such criticisms or will it exacerbate them? • “If I were working for their organization or in their line of business, would I conduct myself in a similar fashion?” If the answer is yes, then there may be a basis for respect.

Managing the partnership --- Establish shared objectives, clearly defined expectations and systems for communication • Do you agree on the objectives? The issue of misaligned expectations is one of the common causes of failure. Among the issues that should be clarified are: • Roles: Does the private sector partner wish to play an active or passive role in program implementation? Is the NGO an equal partner in all decision-making, or is it playing a supporting role? Roles will vary from case to case and no single approach works in every circumstance. The ADB recommends that NGOs be prepared for a negotiation in which both partners compromise to ensure a win-win situation for all. • Accountabilities: To ensure a necessary transparent decision-making structure, negotiators must be clear from the outset who will be responsible for what. Which partner, for example, will ensure that funds are properly spent and accounted for? What deadlines and milestones have been agreed to, and are there consequences if they are not met? • Policies: Partners should jointly develop operational procedures or policies. It is useful to have clear guidelines on such issues as confidentiality and public relations in advance. • Communication: Establish a mechanism on the frequency and manner of communication. The language of NGOs differs from that of the private sector. A pervasive argument or reasonable excuse in one sector may not be seen as legitimate in another. Recognize these differences and try to talk the same talk. This is just as important during the implementation of a project as it is during the exploration or negotiation phase.

Need for International Standards

The limited use of international codes and standards by both sides causes considerable concern. According to a survey conducted by the UK-based Forster Company, only 18% of NGOs use any form of standards to assist them in their work, despite the fact that these codes and standards are the only objective benchmarks that are available to check the behavior of business. The most frequently used by respondents was the Ethical Trading Initiative Base Code, followed by the use of Global Reporting Initiative criteria for best practice CSR reporting. (Forster, p. 7)

Forster proposes five stages during which international standards might add real value to an NGO: 1. Identifying or confirming the need for collaboration 2. Identifying the shortlist of potential partners 3. Selecting the partner for the collaboration 4. Setting the aims and objectives of an agreed partnership 5. Monitoring and reporting of collaboration against international standards (Forster,p. 7)

Examples of Successful Alliances

BP worked with local groups to develop a fuel-efficient stove for poor consumers in rural India. Coca-Cola transformed libraries into youth learning centers in Indonesia. Chevron built local business and civil society in Angola and worked with Citibank on microfinance in Vietnam. Hewlett Packard has helped to provide microfinance in Uganda. Microsoft has teamed with NGO Pratham to deliver personal computers to Indian villagers. Starbucks maintains alliances with groups impacted by the coffee business.

Examples of multi-member partnerships include the Nordic Partnership, a consortium of leading Scandinavian companies and the World Business Council for Sustainable Development.

Pact, a U.S.-based organization, and the International Business Leaders Forum are among the groups devoted to making partnerships work.

References:

Asian Development Bank. NGO – private sector partnerships: workshop proceedings. February 16, 2005. http://www.adb.org/NGOs/private-sector-workshop.asp (accessed April 7, 2007)

_________. “Forging an effective NGO-private-sector partnership.” NGO private sector partnerships against poverty: lessons learned from Asia. NGO – private sector partnerships: workshop proceedings. February 16, 2005.

http://www.adb.org/NGOs/private-sector/chap3.pdf (accessed April 7, 2007)

Aspen Institute Nonprofit Sector Strategy Group. “Non-profit corporate alliances.” November/ December 2001. http://www.nonprofitresearch.org/usr_doc/01-N%20(SNAPSHOTS).pdf (accessed April 7, 2007)

Brehm, Vicky. “NGOs and partnerships.” NGO Policy Briefing Paper No.4, April 2001. (For the NGO Sector Analysis Programme) http://www.intrac.org/docs/04Partnership.doc (accessed April 7, 2007)

Brittin, Matt and Peter Haden. “Aid agencies team up,” The McKinsey Quarterly, 2003 Special Edition: Organization. (accessed April 7, 2007)

Brugmann, Jeb and C.K. Prahalad. “Cocreating business’s new social compact.” Harvard Business Review, February 1, 2007. (accessed April 7, 2007)

Business Partners for Development (BPD) - Water and Sanitation www.bpd-waterandsanitation.org/web/w/www_31_en.aspx (accessed April 7, 2007)

Cooley, Larry. 2+2=5: A Pragmatic view of partnerships between official donors and multi-national corporations. Brookings Blum Roundtable, August 5, 2005. http://www.brookings.edu/global/200508blum_papers.htm (accessed April 9, 2007)

Cowe, Roger. “Business/NGO partnerships—what’s the payback?” Ethical Corporation, April 2004. http://www.globalpolicy.org/ngos/credib/2004/0404partner.htm (accessed April 9, 2007)

Davies, Robert. A Business guide to development actors. International Business Leaders Forum and World Business Council for Sustainable Development, October 2004. http://www.wbcsd.ch/plugins/DocSearch/details.asp?type=DocDet&ObjectId=MTA4NTk (accessed April 12, 2007) Introduces business community to potential partners in the development community.

Elstrodt, Heinz-Peter and Anamaria Schindler and Andrea C. Waslander. “Helping nonprofits do business,” The McKinsey Quarterly, December 2004. http://wwwmckinseyquarterly.com/article_print.aspx?L2=33@L3+0&ar=1552 . (accessed April 9, 2007)

Forster Company. Collaboration in context; a report on the use of international standards in NGO-business partnerships. June 2005. http://www.twentyfifty.co.uk/docs/TFCPartnershipreportJune.pdf . (accessed April 12, 2007)

Fox, Thomas. “Building partnerships between corporations and NGOs.” Monday Developments, September 24, 2001, Volume 19, number 17. . (accessed April 12, 2007)

Gupta, Rajat. “A Public-private partnership to build a better world.” Speech by Senior Partner Worldwide and former McKinsey & Company Managing Director to the U.N. General Assembly, September 14, 2005. . (accessed April 12, 2007)

Heap, Simon. “Emerging global-business relations.” INTRAC. http://www.prof.msu.ru/[publ/omsk1/4_09.htm. (accessed April 12, 2007)

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INTRAC. “NGOs and companies: principles and profits,” ONTRAC 10, March 2005. http://www.intrac.org/resources_database.php?id=85. (accessed April 12, 2007)

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O’Brien, Dan. “Constructive engagement of the corporate sector: a new approach to corporate philanthropy and social activism.” Independent Sector. 2004. http://www.independentsector.org/mission_market/O'Brien_briefing.htm . (accessed April 12, 2007)

Reese, William S. What works in public/private partnering: building alliances for youth development. International Youth Foundation. Highlighted are examples of IYF partnerships with global companies such as Cisco Systems, Gap Inc., Kellogg Company, Microsoft, Nike, Nokia, and Shell International. http://www.iyfnet.org/section.cfm/6/29 . (accessed April 12, 2007)

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Shepherd, Robyn. “Monitoring for success: new evaluation tool to help ensure successful partnerships.” Monday Developments, vol. 24, no. 10, June 26, 2006. http://www.interaction.org/files.cgi/5220_WEB_6.26.pdf. (accessed April 12, 2007)

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Websites:

Ethical Corporation. http://www.ethicalcorp.com/ An online newsletter with many articles about business/NGO partnerships.

Global Accountability Index. http://www.oneworldtrust.org/?display=index_2006 The 2006 Global Accountability Index assesses thirty transnational organizations in the four dimensions of accountability as defined by the Global Accountability Framework: transparency, participation, evaluation, and complaint and response mechanisms.

INTRAC http://www.intrac.org/

One World Trust. http://www.oneworldtrust.org/?display=project&pid=32 The NGO Accountability Forum, as part of the One World Trust, is an informal group of local, national and international NGOs based in the UK committed to working together for more accountable NGOs. The Trust is also undertaking a study to look at ways through which feedback methods such as complaint and response mechanisms can enable NGOs to increase their accountability to beneficiaries.

World Bank. Business, Competitiveness & Development. Business, NGOs and Development. http://web.worldbank.org/WBSITE/EXTERNAL/WBI/WBIPROGRAMS/CGCSRLP/0,,contentMDK:20872363~pagePK:64156158~piPK:64152884~theSitePK:460861,00.html (accessed April 9, 2007)

World Economic Forum. http://www.weforum.org

Ensuring Successful Partnerships: A Toolkit, InterAction’s guide describes a fast and easy method for undertaking an assessment of your partnership using a three-step process and set of practical tools. http://www.interaction.org

Corporate Social Responsibility Newswire Service. Link to directory of sources on public/private partnerships. www.csrwire.com/directory/