seminar on understanding new csr legislation

New guidelines on CSR in India: Old Wine in New Bottles by Suresh Kr Pramar

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Part One: The National Voluntary Guidelines on Social, Environmental & Economic Responsibilities of Business in India

Mandatory or Voluntary. Whatever. Corporate India will now perforce have to pay greater and a more active attention to its Corporate Social Responsibility Agenda. Despite the frequent changes in its political and bureaucratic leadership the Department of Corporate Affair has come out with a ‘value added’ policy on CSR. The National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business, as the title stipulates, is likely to be voluntary.

Minister of Corporate Affairs Veerappa Moily, however, has in the recent days repeatedly stated that CSR would be made mandatory. Regretting that the concept of voluntary CSR has not picked up in India, Moily said recently that the new Companies Bill would make it mandatory for corporate to earmark part of their profit for corporate social responsibility (CSR) initiatives. India Inc, the Minister said, “needs to develop a culture of voluntary CSR…CSR cannot be considered only as a charity it is more of a social business.”

The Guidelines states “the Guidelines are not prescriptive in nature.”  They are “designed to be used by all businesses irrespective of size, sector or location and therefore touch on the fundamental aspects-spirit-of the enterprise. It hopes that all businesses in India, including multi national companies would consciously work towards following these Guidelines.” The document says the boundaries of business “today extend well beyond the traditional walls of a factory or an operating plant and all the way across the supply chain.” Business is urged to follow these Guidelines not only within the areas of their  immediate control or within their sphere of influence but that they should encourage and support their vendors, distributors, partners and other collaborators across their value chains to follow these Guidelines. It has been stressed that the Guidelines are to be adopted comprehensively.

“All principles are equally important and non divisible. If a business endeavours to function responsibly, it would have to adopt each of the nine principles in their entirety rather than picking and choosing what might suit them.” The Guidelines consist of Nine Principles with the Core Elements to actualize each of these principles. “A reading of the Principles with its attendant Core Elements should provide a very clear picture for putting these Principles in practice.” The Policy also has a section on developing Management systems and processes for Responsible business and indicators to help business to regulate their journey towards becoming sustainable and responsible businesses. The authors of the document claims that “the adoption of these Guidelines will improve the ability of businesses to enhance their competitive strengths, improve their reputations, increase their ability to attract and retain talent and manage their relations with investors and society at large.” The Guidelines have a special section on reporting.

This it says has been done so that business entities  “not only  adopt the Guidelines but also  demonstrate the adoption to their stakeholders through credible reporting and disclosures. The reporting framework is designed on the ‘apply or explain’ principle.” The Nine Principles and the Core Elements   attached to each are not new.

They have been around, with different wordage, for the past several years. They are known to all top managements. By and large the contents of the various Principles are available in the Ten Principles of the UN Global Compact. The First Principle calls upon Business to conduct and govern themselves with Ethics, Transparency and Accountability. It acknowledges that business decisions and actions should be visible to  relevant stakeholders. It lays down that relevant stakeholders should be informed of the operating risks and companies should address and redress the issues raised. Business has been advised to develop governance structures, procedures and practices which ensure ethical conduct at all levels and across its value chain.

It wants businesses to communicate transparently and assure access to relevant stakeholders and to refrain from engaging in abusive, corrupt or anti competition practices. It is expected that businesses will discharge their responsibilities on financial and other mandatory disclosures truthfully. They have also been advised to report on the status of adoption of these guidelines and to avoid complicity with the actions of third parties that violates these principles. The Second Principle deals with “the provision of goods and services that are safe and contribute to sustainability through out their life cycle.” The principle points out that business to function effectively and profitably should work to improve the quality of life of people. “All stages of the product life cycle, right from the design to final disposal of the goods and services after use, have an impact on society and the environment.

Responsible businesses, therefore, should engineer value in their goods and services by keeping in mind these impacts… cover the entire value chain, from sourcing of raw materials or process inputs to distribution and disposal” Businesses should raise consumer awareness through education, product labeling, appropriate and helpful marketing communication. They should promote safe usage and disposal of their products and services. Business will also need to ensure that the manufacturing processes and technologies required are resource efficient and sustainable” They should “promote sustainable consumption, including recycling of resources.” The third principle stresses on the “wellbeing of all employees” The principle relates to the dignity and well being of all employees within the organization and its value chain.

It extends to all categories of employees within and outside its boundaries and covers the work performed by individuals, including sub contracted and home based.Among other things business should respect the right to freedom of association, participation, collective bargaining and access to appropriate grievance redressal. Business will have to provide equal opportunities in recruitment, during the course of employment and in retirement irrespective of caste, sex, religion, disability or sexual motivation. It will have to take into account work life balance of the employees especially women. Business should not use child labour, forced  labour or any form of involuntary labour, paid or unpaid. It will have to provide facilities for the well being of the employees including timely payment of fair living wages.

Systems and practices in the organization should ensure a harassment free work place where in employees feel safe. Employees should have the opportunity for continuous skill and competence upgrading. The company needs to provide access to learning opportunities on an equal and non discriminatory basis. “They should promote employee morale and career development through enlightened human resource development.” The Fourth Principle calls upon Business to “respect the interest of, and be responsive towards all stakeholders, especially those who are disadvantaged, vulnerable and marginalized”.

The principle lays down that business has a responsibility to think beyond the shareholders to include all their stakeholders. The Core Elements under this Principle require business to identify its stakeholders, understand their concerns, define scope of engagement and commit to engage with them. Business should be transparent about the impact of their policies, decisions and services and operations with the stakeholders. They should accord special attention to stakeholders in underdeveloped areas. Differences with stakeholders should be resolved in a just, fair and equitable manner.

The Fifth Principle calls upon “Business to respect and promote Human Rights.” This principle recognizes that Human Rights are the codification and agreement to treat others with dignity and respect. “It imbibes its spirit from the Constitution of India which through the Fundamental Rights and Directive Principles of state policy enshrines the achievement of Human Rights for all its citizens”  The Core Elements of this Principle calls upon business to appreciate that Human Rights are inherent, universal, indivisible and interdependent and are part of the Indian Constitution and the national laws and policy.

It calls on business to integrate Human Rights in management systems. It should respect the Human Rights of all stakeholders and groups including communities, consumers and vulnerable and marginalised groups.  Business should promote awareness and realization about Human Rights across the value chain. They should not be complicit with Human Right abuses by a third party. The Sixth Principle deals with the Environment. The Principle wants business to understand and be responsible for direct and indirect environmental impacts of their operations, products and services. They are expected to make them more environment friendly. It says that “Business should respect, protect and make efforts to restore the environment.”

The Principle emphasizes that “environmental issues are interconnected at the local, regional and global levels which makes it imperative for business to address issues like global warming, biodiversity conversation and climate change.”  Business has been directed to refrain from actions if it is unsure of its adverse impacts. The Core Elements of this Principle says that Business use natural and manmade resources in an optimal and responsible manner. To ensure the sustainability of resources it should reduce its use, recycle, reuse and manage waste. Business is expected to assess environmental damage and bear the cost of pollution in public interest. Business needs to continuously make improvements in their environment performance. This it is expected to do by adopting cleaner production methods, promoting use of energy efficient and environment friendly technologies and the use of renewable energy.

Business will have to create Environment Management Systems (EMS) to help prevent, mitigate and control environmental damage and disasters caused by their operations or by those of a member of its value chain. Business has the responsibility to report on their environmental performance, including an assessment of potential environmental risks associated with their operations to the shareholders. They will have to be proactive in persuading and supporting its value chain to adopt this Principle. The Seventh Principle deals with Corporate Lobbying. The Principle says “ Business, when engaged in influencing public and regulatory policy, should do so in a responsible manner” This Principle acknowledges that Business has “the right to engage with Government for redressal of a grievance or for influencing public policy and public opinion” The Principle  says that policy advocacy must expand public good rather than make it available to select few.

The Core Elements in this Principle state that Business “must ensure that their advocacy position is consistent with the Principles and Core Elements of these Guidelines. “To the extent possible business should utilize trade and industry chambers and associations to undertake policy advocacy.” Principle Eight calls upon business “to support inclusive growth and equitable distribution.” It says business prosperity and inclusive growth and equitable development are interdependent. The Principle while recognising “the value of the energy and enterprise of businesses’ wants them to innovate and contribute to overall development and specially to that of the disadvantaged, vulnerable and marginalized sections of society. It says that business should collaborate with government and civil society in furthering the CSR agenda.

The Core Elements of this Principle says Business needs to understand their impacts on social and economic development and respond to minimize the negative aspects. They need to innovate and invest in products, technologies ad processes to promote the well being of society.  Business should make efforts to complement and support development priority at local and national levels and assure appropriate settlement and rehabilitation of displaced communities. Businesses operating in underdeveloped areas need to be especially sensitive to local concerns.The Ninth Principle states “ Business should engage with and provide value to their customers and consumers in a responsible manner.”

This Principle acknowledges that business cannot exist or survive without its customers. It says customers have the freedom to choice in the selection of goods and services. Business need to “ make available goods and services that are safe competitively priced, easy to use and safe to dispose off.” Business also has the responsibility to mitigate the long term adverse impacts that excessive consumption may have on the overall well being of individuals, society and our planet. The Core Elements of this Principle says that business must take into account the overall wellbeing of the customers and society. It should ensure that it does not restrict the freedom of choice and free competition while designing, promoting and selling their produce.

Business should educate the customers on the safe and responsible usage of their products and services. They should disclose all information about their products and services, truthfully and factually. Business has been told that they should promote and advertise their products in a way that will not mislead or confuse the customers. They are also to “ exercise due care and caution in providing goods and services that result in over exploitation of natural resources or lead to excessive conspicuous consumption. Business will have to provide a grievance handling mechanism to address customer concerns and feedback. As pointed out earlier all these dos and don’t are known and are also a part of the ten principles of the UN Global Compact in some form or the other.

They are principle, which if applied diligently would make Corporate Social Responsibility more meaningful and beneficial for both business and society. To ensure that Business lives upto these Principles CSR will perforce have to be made mandatory. Will the Government take this step or will it allow Business a free run ?

(Suresh Kr Pramar, is Managing Trustee, Global Gandhian Trusteeship & Corporate Responsibility Foundation and the Executive Director, Centre for Training & Research in Responsible Business. A veteran journalist he is presently actively involved in promoting CSR through his publication CRBiz and by conducting workshop on Corporate Social Responsibility. He can be reached at suresh.pramar@gmail.com 09213133042

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Posted by on Aug 5 2011. Filed under Columnists, Latest News. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.

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