The legislation around sustainable responsible practices by businesses in India is limited to guidance like the National Voluntary Guidelines, which the Securities and Exchange Board of India (SEBI) had asked the top 100 firms to adopt a few years back.
SEBI as per its circular dated August 13, 2012 mandated the inclusion of a “Business Responsibility Report” (BRR) as part of company’s Annual Report for top 100 listed entities based on market capitalisation at the BSE Limited (BSE) and the National Stock Exchange of India Limited (NSE) as on March 31, 2012. The reporting framework is based on the ‘National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business (NVGs)’ released by the Ministry of Corporate Affairs, Government of India, in July 2011 which contains 9 Principles and Core Elements for each of the 9 Principles.
The Key Principles and their core elements are enumerated as follows:
- Principle 1- Ethics, Transparency & Accountability. Businesses should conduct and govern themselves with Ethics, Transparency & Accountability.
- Businesses should develop governance structures, procedures and practices that ensure ethical conduct at all levels; and promote the adoption of this principle across its value chain.
- Businesses should communicate transparently and assure access to information about their decisions that impact relevant stakeholders.
- Businesses should not engage in practices that are abusive, corrupt, or anti-competition.
- Businesses should truthfully discharge their responsibility on financial and other mandatory disclosures.
- Businesses should report on the status of their adoption of these Guidelines as suggested in the reporting framework in this document.
- Businesses should avoid complicity with the actions of any third party that violates any of the principles contained in these Guidelines.
- Principle 2- Product Life Cycle Sustainability. Businesses should provide goods and services that are safe and contribute to sustainability throughout their life cycle.
- Businesses should assure safety and optimal resource use over the life-cycle of the product – from design to disposal – and ensure that everyone connected with it- designers, producers, value chain members, customers and recyclers are aware of their responsibilities.
- Businesses should raise the consumer’s awareness of their rights through education, product labelling, appropriate and helpful marketing communication, full details of contents and composition and promotion of safe usage and disposal of their products and services.
- In designing the product, businesses should ensure that the manufacturing processes and technologies required to produce it are resource efficient and sustainable.
- Businesses should regularly review and improve upon the process of new technology development, deployment and commercialization, incorporating social, ethical, and environmental considerations.
- Businesses should recognize and respect the rights of people who may be owners of traditional knowledge, and other forms of intellectual property.
- Businesses should recognize that over-consumption results in unsustainable exploitation of our planet’s resources, and should therefore promote sustainable consumption, including recycling of resources.
- Principle 3- Employee Well Being. Businesses should promote the well being of all employees.
- Businesses should respect the right to freedom of association, participation, collective bargaining, and provide access to appropriate grievance Redressal mechanisms.
- Businesses should provide and maintain equal opportunities at the time of recruitment as well as during the course of employment irrespective of caste, creed, gender, race, religion, disability or sexual orientation.
- Businesses should not use child labour, forced labour or any form of involuntary labour, paid or unpaid.
- Businesses should take cognizance of the work-life balance of its employees, especially that of women.
- Businesses should provide facilities for the well-being of its employees including those with special needs. They should ensure timely payment of fair living wages to meet basic needs and economic security of the employees. Businesses should provide a workplace environment that is safe, hygienic humane, and which upholds the dignity of the employees. Business should communicate this provision to their employees and train them on a regular basis.
- Businesses should ensure continuous skill and competence upgrading of all employees by providing access to necessary learning opportunities, on an equal and non-discriminatory basis. They should promote employee morale and career development through enlightened human resource interventions.
- Businesses should create systems and practices to ensure a harassment free workplace where employees feel safe and secure in discharging their responsibilities.
- Principle 4- Stakeholder Engagement. Businesses should respect the interests of, and be responsive towards all stakeholders, especially those who are disadvantaged, vulnerable and marginalized.
- Businesses should systematically identify their stakeholders, understand their concerns, define purpose and scope of engagement, and commit to engaging with them.
- Businesses should acknowledge, assume responsibility and be transparent about the impact of their policies, decisions, product & services and associated operations on the stakeholders.
- Businesses should give special attention to stakeholders in areas that are underdeveloped.
- Businesses should resolve differences with stakeholders in a just, fair and equitable manner
- Principle 5- Human Rights. Business should respect and promote human rights.
- Businesses should understand the human rights content of the Constitution of India, national laws and policies and the content of International Bill of Human Rights. Businesses should appreciate that human rights are inherent, universal, indivisible and interdependent in nature.
- Businesses should integrate respect for human rights in management systems, in particular through assessing and managing human rights impacts of operations, and ensuring all individuals impacted by the business have access to grievance mechanisms.
- Businesses should recognize and respect the human rights of all relevant stakeholders and groups within and beyond the workplace, including that of communities, consumers and vulnerable and marginalized groups.
- Businesses should, within their sphere of influence, promote the awareness and realization of human rights across their value chain.
- Businesses should not be complicit with human rights abuses by a third party.
- Principle 6- Environment Protection. Businesses should respect, protect, and make efforts to restore the environment.
- Businesses should utilize natural and man-made resources in an optimal and responsible manner and ensure the sustainability of resources by reducing, reusing, recycling and managing waste.
- Businesses should take measures to check and prevent pollution. They should assess the environmental damage and bear the cost of pollution abatement with due regard to public interest.
- Businesses should ensure that benefits arising out of access and commercialization of biological and other natural resources and associated traditional knowledge are shared equitably.
- Businesses should continuously seek to improve their environmental performance by adopting cleaner production methods, promoting use of energy efficient and environment friendly technologies and use of renewable energy.
- Businesses should develop Environment Management Systems (EMS) and contingency plans and processes that help them in preventing, mitigating and controlling environmental damages and disasters, which may be caused due to their operations or that of a member of its value chain.
- Businesses should report their environmental performance, including the assessment of potential environmental risks associated with their operations, to the stakeholders in a fair and transparent manner.
- Businesses should proactively persuade and support its value chain to adopt this principle.
- Principle 7- Policy Advocacy. Businesses, when engaged in influencing public and regulatory policy, should do so in a responsible manner.
- Businesses, while pursuing policy advocacy, must ensure that their advocacy positions are consistent with the Principles and Core Elements contained in these Guidelines.
- To the extent possible, businesses should utilize the trade and industry chambers and associations and other such collective platforms to undertake such policy advocacy.
- Principle 8- Inclusive Growth and Equitable Development. Businesses should support inclusive growth and equitable development.
- Businesses should understand their impact on social and economic development, and respond through appropriate action to minimize the negative impacts.
- Businesses should innovate and invest in products, technologies and processes that promote the well-being of society.
- Businesses should make efforts to complement and support the development priorities at local and national levels, and assure appropriate resettlement and rehabilitation of communities who have been displaced owing to their business operations.
- Businesses operating in regions that are underdeveloped should be especially sensitive to local concerns.
- Principle 9 – Customer Value. Businesses should engage with and provide value to their customers and consumers in a responsible manner.
- Businesses, while serving the needs of their customers, should take into account the overall well-being of the customers and that of society.
- Businesses should ensure that they do not restrict the freedom of choice and free competition in any manner while designing, promoting and selling their products.
- Businesses should disclose all information truthfully and factually, through labelling and other means, including the risks to the individual, to society and to the planet from the use of the products, so that the customers can exercise their freedom to consume in a responsible manner. Where required, businesses should also educate their customers on the safe and responsible usage of their products and services.
- Businesses should promote and advertise their products in ways that do not mislead or confuse the consumers or violate any of the principles in these Guidelines.
- Businesses should exercise due care and caution while providing goods and services that result in over exploitation of natural resources or lead to excessive conspicuous consumption.
- Businesses should provide adequate grievance handling mechanisms to address customer concerns and feedback.
These guidelines are a refinement of the CSR Voluntary Guidelines, 2009 and also provide for a structured format for the Business Responsibility Reports requiring certain specific disclosures, demonstrating the steps taken by companies to implement the said principles. Listed companies beyond the top 100 have also been encouraged by SEBI to voluntarily disclose information on their ESG performance in the BRR format. Infact, as a part of its corporate governance efforts, SEBI is now looking at expanding from the top 100 to top 500 listed companies the BRR requirement.
APPLICABILITY OF BRR
The applicability of the Business Responsibility Report to different categories of companies so far is as under:
Business entities already preparing responsibility and sustainability reports based on internationally accepted reporting frameworks.
|These entities may not prepare a separate report for the purpose of these guidelines but furnish the same to their stakeholders along with the details of the framework under which their BR report has been prepared and a mapping of the nine principles contained in these guidelines to the disclosures made in their BR reports.|
|Business entities that have chosen to adopt these guidelines completely or in part, but are not yet fully capacitated to prepare a comprehensive BR report.||These entities may furnish a simple communication to their stakeholders indicating their commitment to adoption on these guidelines in full or in part, and basic details of the activities undertaken in pursuance to these guidelines. The communication may be in a free format and should be signed by the owner/Managing Director of the CEO of the entity.|
Business entities that would like to prepare comprehensive reports after adopting these guidelines.
Disclosures in the BR report have been suggested based on certain parameters to facilitate these entities to demonstrate their adoption of these guidelines in letter and spirit.
SUGGESTED FRAMEWORK FOR BRR
A framework for Business Responsibility Reporting in the form of standard disclosure template has been put out by SEBI (click here) based on which companies which effectively contribute to the economic and social betterment of communities and the environment also report their performance in these areas. Apart from this, the CSR Report to be submitted by Indian companies satisfying certain criteria as a part of their annual report under Section 135 of Companies Act, 2013 and the CSR Rules, 2014 will also form a key input into the company’s Business Responsibility Report and Sustainability Report.
- SEBI, Business Responsibility Reports, Circular CIR/CFD/DIL/8/2012 at http://www.nseindia.com/content/equities/SEBI_Circ_13082012_3.pdf
- Ministry of Corporate Affairs, Government of India, National Voluntary Guidelines on Social, Environmental & Economic Responsibilities of Business at http://www.mca.gov.in/Ministry/latestnews/National_Voluntary_Guidelines_2011_12jul2011.pdf
- PTI, SEBI may soon make biz responsibility reports must for top 500 firms at http://www.firstpost.com/business/sebi-may-soon-make-biz-responsibility-reports-must-for-top-500-firms-2486100.html