Beyond CSR

Draft guidelines take a holistic view of business responsibility


Sweta Ranjan | May 12, 2011

The corporate sector around the world is debating whether corporate social responsibility (CSR) as a concept needs a replacement. The draft National voluntary Guidelines on Social, Environmental and Economical (NVGs) Responsibilities of Business, under consideration with the ministry of corporate affairs (MCA) provide a comprehensive answer.  These guidelines, which seek to replace the 2009 National Voluntary Guidelines on CSR released by the ministry, have been prepared by the think tank Indian Institute of Corporate Affairs (IICA).

Speaking at a stakeholder consultation session on the draft guidelines, one of the drafter authors commented, “CSR is an old term. It needs to be replaced by a more holistic concept of the social, economic and environmental responsibilities of business. Business responsibility is not discharged by charitable donations or philanthropic activities alone. That is why the draft guidelines emphasize that businesses have to endevour to become responsible actors in society, so that their actions leads to sustainable growth and economic development. Accordingly, the guidelines use the terms ‘business responsibility’ instead of ‘corporate social responsibility”.

Opinions may vary but the proposed replacement of CSR with the expanded perspective on business responsibility in the draft NVGs will definitely lead to some serious introspection among businesses as to how they should develop models that provide a more holistic engagement with the stakeholders covering not only the social responsibility but also their environmental and economic responsibilities towards society.

But, while doing so, it is necessary to keep in perspective the typical social and economic context in which Indian businesses operate. Simply importing the concept of CSR from the west, where the focus is on labour rights, human rights and environmental responsibilities, would not be fair. What is required is an Indian concept of business responsibility (BR) that takes into account the unique social and economic challenges facing our country and the role of business in meeting these challenges.

The NVGs come as a refined form of CSR. Unlike CSR, NVGs are clear guidelines talking about environmental and economical responsibilities as well. The NVGs take into account the learning from various international and national good practices, norms and frameworks, and provide a distinctively ‘Indian’ approach, which will enable businesses to balance and work through the many unique requirements of our land. The guidelines, if implemented, may also take cognizance of the fact that all agencies need to collaborate together, to ensure that businesses flourish, even as they contribute to the wholesome and inclusive development of the country. Responsible business alone will be able to help India meet its ambitious goal of inclusive and sustainable all round development.

The draft says, “There is growing awareness that in an increasingly complex world, businesses also have significant and long lasting impacts on people, our planet and our ability to sustain the levels of holistic development that we all aspire to.”

To lead India to the path of a developed nation, it is utmost necessary for the corporate sector to compliment government actions and join hands in its efforts to bring in prosperity and growth uniformly to all regions and all community, thereby bridging the gap between the government and those governed.

While the government undertakes developmental activities, the business sector also needs to discharge their responsibility of exhibiting socially responsible business practices that ensures fair distribution of wealth and well-being of the communities in which the business operates. With extending its operation across the globe, the corporate India must play its role in nation’s socio-economic development.

The NVGs list out nine basic principles that a business needs to adopt in discharge of its responsibilities:
1.    Business should conduct and govern themselves with ethics, transparency and accountability
2.    Businesses should provide goods and services that are safe and contribute to sustainability throughout their life cycle
3.    Businesses should promote the wellbeing of all employees
4.    Businesses should respect the interest of, and be responsive towards all stakeholders, especially those who are disadvantaged, vulnerable and marginalized.
5.    Businesses should respect and promote human rights
6.    Businesses should respect, protect, and make efforts to restore the environment
7.    Businesses, when engaged in influencing public and regulatory policy, should do so in a responsible manner
8.    Businesses should support inclusive growth and equitable development
9.    Businesses should engage with and provide value to their customers and consumers in a responsible manner

The only debatable point in the draft NVGs is about the inclusion of micro, small and medium enterprises. The guidelines are applicable to large and small businesses alike, but an argument can be made that MSMEs do not have the capacity or resources to implement the changes. The authors of NVGs say that this argument has been juxtaposed with the idea that without a conscious effort to adopt the guidelines, MSMEs would lose out on future business opportunities and their ability to remain viable and socially relevant.

Another interesting aspect of the NVGs is the disclosure framework which is based on the notion that businesses should not only be responsible but should also be seen to be so.  Corporate governance which basically relates to the governance of company in a manner that the interest of the shareholders be protected through transparency of information and involvement of independent directors for effective functioning of the company, NVGs promises to be a much wider term which extends beyond the interest of investors and brings within its ambit the interest of society and the nation as a whole. To address the issue of disclosure a separate chapter on reporting has been included so that the business entities are not only able to adopt the guidelines but also to demonstrate the adoption of their stakeholders through credible reporting and disclosure.

The ministry is expected to take a call on the release of the NVGs shortly. The IICA is already taking steps to improve their uptake by businesses through outreach and capacity building. It will be interesting to watch this space and see how India Inc takes a leadership position in this area which the government is exhorting it to do so.



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