By Rayan Bhattacharya
The National Guidelines on the Economic, Social and Environmental Responsibilities of Business are the result of processes that had been initiated by the Ministry of Corporate Affairs in September 2015. These new guidelines are a systematic upgradation on the National Voluntary Guidelines on the Social, Environmental and Economic Responsibilities of Business (NVGs), which was originally released in 2011. The due process of upgrading and amending the guidelines was done by the Ministry of Corporate Affairs in coordination with the Indian Institute of Corporate Affairs.
The primary rationale of the new guidelines was to incorporate the various changes and new trends that had been developing in the corporate responsibility sector since the 2011 guidelines. The drafters also felt that the old guidelines could be improved upon by making them more comprehensive to assist business owners and leaders to implement with greater ease in their respective organisations. These guidelines are meant to be implemented across all types of businesses, irrespective of sector, ownership or size. Even foreign multi-national firms and companies were expected to adopt these guidelines and make efforts to achieving the set goals.
With respect to the responsibilities regarding the adoption of the guidelines, there have been many changes added to the new guidelines. Whilst the 2011 NVGs highlighted on several occasions the Governance Structure and Companies’ leadership in proper implantation and adoption of the Guidelines, the updated version has taken this requirement a step further by pointing out certain specific aspects of each Principle as part of the responsibility of the management of the business to adopt and implement in their respective companies.
Having developed an understanding of the rationale, purpose, scope and nature of the new Guidelines, it is necessary to understand the content of the same. This includes developing an understanding of the requirements and obligations the Guidelines imposes on various companies on behalf of the government. Just like the 2011 version, the new Guidelines retain the five-chapter structure with an expanded set of annexures. In terms of the Principles themselves, there currently exist nine upgraded principles along with instructions to ensure their successful implantation.
There also is a dedicated chapter with commentaries and guidelines specifically for Micro, Small and Medium Enterprises (MSMEs). This is done to uphold the unique socio-economic eco-system in which these enterprises operate. There is also a dedicated chapter on transparency, which talks about disclosure and reporting by businesses of their functions and to ensure no unethical means are utilized by corporations in their daily operations.
The nine thematic pillars of corporate responsibility or the Principles, have been structured as given below –
- Businesses should conduct and govern themselves with integrity in a manner that is Ethical, Transparent and Accountable
This Principle highlights the role of ethicality and integrity as a defining factor to be considered by businesses while achieving their profit-making goals. It recognizes the integral role of business and companies in society and hence inducts the obligation of being responsible for their actions and not carrying out any functions that may be unethical in nature. The Principle, on that note, encourages full disclosure and transparency of the business towards society.
- Businesses should provide goods and services in a manner that is safe and sustainable
This Principle deals with the interrelated-ness of sustainable consumption and production as a step towards improving the quality of life. It calls upon businesses to create value and profit out of their goods and services while ensuring there is no adverse impact on the environment during the process.
- Businesses should respect and promote the well-being of all employee, including those in the value chain
Simply put, this Principle calls for the dignified treatment of all individuals a business employs, both within the business and those in the value chain, without any discrimination. The well-being of these employees is to be taken care of by the business.
- Businesses should respect the interests of and be responsive to all its stakeholders
This Principle deals with the importance of the network of stakeholders whether it be shareholders, investors or others and the necessity of the business to act in their best interests. It calls for the business to acknowledge its obligation of making stakeholders money and minimizing their risk. It also calls for giving special attention to the needs of any marginalized, differently-abled or vulnerable stakeholders the company might have.
- Businesses should respect and promote human rights.
This self-explanatory Principle recognizes the evolution of human rights under historic socio-political circumstances and value it has in present day society. It further imbibes the spirit of the ideals upheld in the Indian Constitution and the UN Guiding Principles on Business and Human Rights.
6. Businesses should respect and make efforts to protect and restore the environment
As the title itself suggests, companies are obligated to fulfil their responsibilities towards environmental preservation in terms of internal management policies, taking preventive measures against potential threats and actively helping in protecting the environment via drives and awareness programs. Companies are also to acknowledge the penalties involved if any action of theirs causes damage to the environment.
- Businesses, when engaging in influencing public and regulatory policy, should do so in a manner that is responsible and transparent
This Principle deals with the compliance of businesses with national and international regulatory legislation. It also implies the protection of a company’s rights under these laws itself and how they can even seek a remedy if their rights are infringed. Overall it calls upon companies and firms to respect and abide by commercial laws and general public policy.
- Businesses should promote inclusive growth and equitable development
This Principle recognizes the inequalities that are present in society and the existence of minority groups. Hence it calls upon businesses to contribute to the social development in the country by giving some specific focus to minority or vulnerable groups and providing them with employment or help them via other non-profit means.
- Businesses should engage with and provide value to their consumers in a responsible manner.
This Principle is based on the fact that the primary aim of a business entity is to provide goods and services to its consumers in a manner makes the firm profit and gives the customer satisfaction. The Principle highlights that no business entity can exist or survive if there are no consumers to buy their goods. Hence it aims to make businesses aware of their obligation to provide quality goods and services and always give customers a free choice while choosing among their products. It should also be appropriately priced, safe to use and servicing available in the case of goods.
Having understood the content of the nine Principles, it is necessary now to address the final steps which is adopting, implementing and reviewing. Since the Principles are constructed in a way businesses themselves can comply by and uphold them, it is expected that they are incorporated into the core business strategy of the company.
The question that arises at this stage is that – how does a company’s management ensure that the Principles have been successfully implemented? Given below are some essential indicators –
- It should have in place, policies and guidance that are approved at the highest level and cover all the Principles
- The key performance indicators of the business should incorporate all the Principles of these Guidelines and those Core Elements that significantly impact or are impacted by the business.
- The operating procedures of the business should also cover those Core Elements that significantly impact or are impacted by the business.
As a reader aiming to understand the new Guidelines, it can be concluded with a fair deal of certainty that after going through the premises, history, nature, content and utility of the Guidelines and its constituent Principles, you have gained a working knowledge of the same whether it is for the purpose of making your business more compliant or checking the compliance of another business. These Guidelines will continue to evolve in the coming years, depending on when the Ministry of Corporate Affairs and other relevant authorities deem it suitable for upgradation.
- National Guidelines on the Economic, Social and Environmental Responsibilities of Business 2018 – mca.gov.in
- Nine Principles as per the Draft National Guidelines 2018 Document – mca.gov.in