Ensuring business responsibility is a challenge for governments at the best of times. More so, when the government attempts to set the rules of the game. When M Veerappa Moily took over as corporate affairs minister recently, he said his topmost priority is to address the concerns (see box below) of the corporate sector on the amended Companies Bill, which amongst other things proposes to make it mandatory for companies to spend 2% of their annual net profits on corporate social responsibility (CSR), before introducing it in the monsoon session of Parliament. Central public sector enterprises are already required to spend up to 5% of their net profits on CSR.
Moilys statement came soon after the corporate affairs ministry released a revised version of the (2009) National Voluntary Guidelines on Social, Environmental & Economic Responsibilities of Business. Enlarging the scope of CSR, the new guidelines cover not only social, but also environmental and economic responsibilities of businesses. Specifying the parameters for businesses to conduct themselves responsibly, the new guidelines emphasise on promotion of inclusive growth.
The guidelines have been enunciated in the form of nine principles. Saying that the nine principles cover all the four core issuesanti-corruption, labour rights, human rights, and environmentof UN Global Compact (without acknowledging so), Uddesh Kohli, senior adviser, UN Global Compact, adds, The guidelines have gone further to cover sustainability, responsiveness to the marginalised and the disadvantaged, inclusiveness and equitable development, responsible policy influence and offering value to customers.
Agreeing with him, Abha Negi, senior general manager, CSR, Jindal SAW, says that these guidelines also emphasise that businesses have to endeavour to become responsible actors in society so that their actions lead to sustainable growth and economic development, Accordingly, the guidelines use the term responsible business instead of corporate social responsibility to avoid limiting the scope and understanding of the term CSR.
Though the guidelines are by and large homegrown, they combine the best from Indian practices and experiences and the latest global trends. Vikas Goswami, director CSR, Microsoft Corporation (India), says that it is a good idea for India to come up with indigenous guidelines that can be a stepping stone to come up with size and sector specific ones. She adds, The guidelines have also made an attempt to place all the laws in sync with various principles, which is a good starting point for even small companies.
Underlining the need to follow a triple bottomline approach so that the financial performance is in tune with the societal expectation in an environmentally correct way, the guidelines promise followers competitive advantage, enhanced reputation, lower staff attrition, and better bonding with investors and society.
CSR professionals are crossing their fingers, though. Yashashree Gurjar, group head CSR, Avantha Group, says, It will be interesting to see how CSR performance ratings develop in future and whether it will bring any genuine advantage to good CSR companies in the capital market and with consumers in India. CSR should be looked at as something that creates value for a business through creating value for its stakeholders. Ultimately it is this perceived value of all stakeholders combined that will ensure the sustainability of a business, she adds.
Meant for businesses of all sizes and sectors, domestic as well as multinationals, the guidelines lay down only the floor level and expect businesses to scale up in such a way that the exercise is sustainable. The guidelines also apply to Indian MNCs active abroad. They are meant not only for principals, but also their supply chains.
Anuradha Bhavnani, regional director, Shell Foundation, says, The guidelines are essential to mainstreaming sustainability in sourcing, redefining productivity in the value chain, innovating in products and services, and hence creating greater value. It has to be a win-win to ensure that companies take a long term view.
Going forward, the guidelines seek to assist businesses in implementation by developing management systems and processes and indicators. The idea is that businesses should internalise the principles and core elements in their strategies and operations. A separate section has been added on how micro, small and medium enterprises can follow guidelines to enable them to cash in on the emerging business opportunities.
A reporting mechanism provides for businesses to communicate their progress on CSR to their stakeholders. Since the guidelines are voluntary, they hinge on the principle of Apply or Explain. The reporting framework factors in the fact that some businesses are already following recognised frameworks, while others lack the ability to embark on comprehensive reporting.
Aditi Haldar, director, GRI Focal Point India, elaborates, that the objective of the reporting framework is to assist businesses communicate with their stakeholders on their performance across social, environmental and economic responsibilities. She adds, The framework is simple and gives the choice to businesses that are preparing their sustainability reports following any national/international framework to furnish the same report. It should be particularly helpful to many Indian companies that follow the Global Reporting Framework (GRI).
Emphasising that the Indian government has gone beyond many current national guidelines in scope and content, Mark Hodge, director, Global Business Initiative on Human Rights, adds, Of course, guidelines are guidelines and the onus is now on business leaders and politicians to move to implementationor else, these are empty promises that the marginalised Indian citizen can do without.
CSR expert Viraf Mehta cautions that implementation would not happen overnight. It calls for creation of a whole enabling ecosystem. He says, First, guidance has to lead to standards verifiable by a third party. Verifiable standards are likely to be accompanied by non-fiscal incentives, which would have the potential to trigger a transformational change. Its a long way to go, but the just made good beginning should be helpful.
Source: The Financial Express
Published on 17 July 2011