CSR: Will corporates look at CRISIL ratings now?

CSR: Will corporates look at CRISIL ratings now?
Ranjan Kaplish August 12, 2014

One of the leading agencies known for its diverse rating systems has now developed a rating system for non-government organizations (NGOs) and will be grading them on the scale of 1–5, with VO-1A being the highest and VO-5A being the lowest grade.

With the new Companies Act mandating corporate social responsibility (CSR) spends for large corporate groups, the demand for credible NGOs with sound performance records has soared. This new rating system by CRISIL is likely to help businesses in making their first short lists while seeking CSR implementation partners.

CRISIL in a news report claims that NGOs will be evaluated on various parameters including the people driving the NGO, the processes that are in place for attaining its objectives – such as training of field staff or a grievance mechanism for beneficiaries, and impact analysis of flagship programmes which includes site visits. The agency will then conduct financial analysis to determine the ability of the NGO to raise funds and also its utilization.

One of the first NGOs to be rated under the system is HelpAge India, which has been assigned a VO-1A grade, denoting ‘very strong’ delivery capability and high financial proficiency. SOS Children's Village (SOSCV) was given a VO-2A grade, which denotes ‘strong’ delivery capability and high financial proficiency, as per the rating agency.

It is to be noted that there are more than 20 lakh NGOs registered in the country, but there is no consolidated system to track their works or to measure the impact that they could be making. Recently, the Central Bureau of Investigation (CBI) had been entrusted with collating data on NGOs. Failing in its attempt, CBI informed the Supreme Court that the task is difficult given the mind-boggling number of NGOs as many do not file audit reports with the authorities. Hence, such a system by CRISIL may be a welcome move for many organizations.

Yet, it may also be noted that thousands of NGOs are based out of small towns and villages and do meaningful work on shoestring budgets. How CRISIL will reach them in the first place and then evaluate them on financial proficiency is a matter of wait and watch.

Also, if CRISIL has developed a revenue model for itself, then its focus may remain on the large foundations that are funded by corporate groups or foreign charities, and there is a fear of limiting the grading to posh organizations that can afford public relations agencies