India Business Responsibility Guidelines 2011 Announced

17 Aug 2011Shankar Venkateswaran

In early July, after nearly a year of drafting and several rounds of consultations with business and civil society, the Ministry of Corporate Affairs, Government of India announced the adoption of the National Voluntary Guidelines for Social, Environmental and Economic Responsibilities of Business (PDF).

These guidelines replaced the earlier guidelines of 2009, entitled Corporate Social Responsibility Voluntary Guidelines 2009 (PDF), and represent a significant step in the emerging understand of the role of business in society in India. SustainAbility played a significant part in drafting these guidelines. The drafting committee was convened by SustainAbility’s Council member and Resident Director, Tata Services, Bharat Wakhlu, and included myself as SustainAbility’s India Director. The guidelines also used outputs of SustainAbility’s research work, specifically Developing Value and Market Movers.

These new guidelines represent a significant step in the understanding of what constitutes Responsible Business, not just in India but across the world. For one, Corporate Social Responsibility or CSR continues to be seen as shorthand for corporate philanthropy, and while this must remain an important component of business’s role, especially in a country like India, it is certainly only a part. Also, the choice of the term “business” instead of “corporate” was a deliberate one because an overwhelmingly large number of businesses, especially in the micro, small and medium category, are actually not registered as companies but as sole proprietorships or partnerships. Including these was critical for the sustainable development agenda to prevail.

There was considerable debate on whether the guidelines should be voluntary or mandatory and it was decided to keep them voluntary because many of the recommended actions were indeed voluntary, though it was clear that businesses that do not take steps to follow these guidelines will have to face the consequences from their stakeholders. A second reason was that for this to be a game-changer, forcing companies to work on multiple fronts without them building an understanding for the need to do so may have resulted in resistance and non-compliance. Thirdly, the drafting committee noted that most global standards and guidelines – be they the OECD Guidelines for MNCs, the Global Compact or ISO 26000 – were all voluntary. And finally, mandating these actions would require a significant compliance infrastructure which simply does not exist in India.

The guidelines themselves consist of nine principles relating to various aspects of business. One of the most debated of these was Principle 7, which states, “Businesses, when engaged in influencing public and regulatory policy, should do so in a responsible manner.” This principle recognises the democratic right for businesses to influence policy and goes on to explain what “responsible” means. What made this principle both controversial and relevant was the fact that India has faced multiple financial scandals in the recent past, with the improper award of second generation mobile telephony spectrum to certain companies (referred to as the 2G Scam) being one of the biggest in independent India. While it is unlikely that the adoption of this principle could have prevented this scam, it clearly suggests that how a business influences public policy separates the responsible ones from the others (see also my colleague Jeff Erikson’s recent post on responsible lobbying).

The Ministry of Corporate Affairs sees these guidelines only as a starting point and is already looking at ways to encourage and motivate businesses to adopt them. Mandating reporting and giving preference in government procurement to businesses that conform to these guidelines are but two suggestions that have been advanced by people working on the issue.

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