Mainstreaming Responsible Business Actions: First Baby Steps

IICA convened the 1st National CSR Conclave to make ‘Responsible Business’ a board room conversation and promote the recently launched guidelines. The direction from the top needs to be focused if the initiative has to penetrate the board room.

CSR or Responsible Business?

While the title of the conference (held on Jan 18th in New Delhi) had the word ‘CSR’ in it, the intention seemed to have been to focus on more holistic ‘responsible business’ actions expected out of businesses; and to propagate the recently launched NVG-SEE guidelines.

It would have been useful for IICA to have clarified the stance on CSR vs Responsible Business upfront; because while the former is at best peripheral to business, the latter is of real relevance to many business leaders and corporate boards.

CSR as widely interpreted by Indian business has to do with charity and social actions that are not necessarily core to business operations. This ‘old business model’ was decried by the business chambers and business leaders present at the Conclave, the most vociferous voice being that of Bharat Wakhlu, Resident Director of the Tata Group. Many of the business representatives spoke of a new model for ‘responsible business’ which recognizes the need for a balanced approach on the environmental and resource issues as an intrinsic requirement for long term sustainable growth. Speaking on behalf of ASSOCHAM, Akhil Bansal, COO of KPMG, stressed on ‘responsibility’ in the CSR acronym as being an ‘ongoing state’ and not manifested through ‘one-time action’.

Interestingly, though not surprisingly, in the same session, Minister of Corporate Affairs, Veerappa Moily, outlined the need for business to take greater responsibility in helping promote the government agenda around education, and healthcare, amongst other areas (as government alone cannot address all these challenges). He went on to describe how PSUs should spend a chunk of their cumulative Rs 1400 Cr annual CSR budget in this area. This was clearly the ‘old business model’ CSR. The Minister also described the forward looking aspects of the new guidelines for businesses (more below) while highlighting the need for businesses to be responsible in their operations.

While the exchanges were interesting, it would have been refreshing to get a clear direction from the top: that ‘Responsible Business’ is the way to go and the old model of cheque-book CSR that is carried out once a year, does not have a place.

National Voluntary Guidelines for Social, Environmental and Economic Responsibilities of Business (NVG-SEE)

The name is a mouthful, but captures the gist of the recent guidelines that were announced by the Ministry of Corporate Affairs. The guidelines encompass 9 principles ranging from product life-cycle sustainability, to employee well being, to customer value, to stakeholder engagement. The IICA site has the official booklet that defines the principles .

While similar to some leading global frameworks, the NVG-SEE have been developed specifically for the Indian business context. One such customization is the principle on “Inclusive Growth” which states that “Businesses should support inclusive growth and equitable development”.

This inclusive aspect of the NVG-SEE is commendable. But that should not be the sole focus as the dialog evolves: after all it is one along with eight other principles. And to the extent that it (inclusivity) is focused upon, it should be those actions the help enhance business performance. Because at the end of the day if the business is not economically sustainable, what is the point?

Apply or Explain

These guidelines although voluntary in nature are expected to have mandatory disclosure requirements. Under the ‘Apply or Explain’ approach, businesses will have an option to: (a) disclose their responsible business actions as per the NVG-SEE framework, or (b) disclose as per another internationally accepted framework, or (c) management can indicate its commitment and provide a brief summary of actions, or (d) management can decide not to take action on this front and provide a statement to that effect.

In the near future some form of disclosure as per the NVG-SEE will appear in the filings as part of the MCA-21 e-filing system and every business will be expected to respond.

This mandatory disclosure (not to be in any way confused with mandatory adherence to the NVG-SEE) aspect is wonderful, because that will allow the market to decide what is expected from the businesses and they (businesses) can respond appropriately to the stakeholders (customers, employees, community, shareholders, or any other stakeholder).

Businesses have to take the long-view: MCA needs to set the direction

The current operating environment for industry in India is such that traditional areas of responsibility are receiving attention: consumers are becoming more demanding, governance is coming under the lens, investors are becoming more active, and laws covering production and labour are getting enforced. Industry leaders are also looking beyond the near-term as natural resources required for production are getting scarcer, and disparities in the communities they are operating in are increasing.

As policy makers aim to sustain 7-9% annual GDP growth they are dependent on India Inc to enable the country’s growth targets. To achieve the requisite growth ambition, businesses will have no option but to become more sustainable in every sense of the word: for the long-term.

The fact that IICA, supported by the Ministry of Corporate Affairs, convened this national forum focused on responsibility and sustainability, is heartening. Policy makers are stepping out to engage private businesses; and onus is now on the business leaders to hear this voice and start the conversation in the board room.

There is still a long way to go, and the team at MCA and IICA could help steer these conversations in the right direction by clarifying that their message and outlook is towards ‘Responsible Business’ and not old-school CSR. Lets hope the next national conclave doesn’t have the word CSR in it!
 

The opinions above are of Pawan Mehra, Managing Director, cKinetics, a full services sustainability advisory firm.

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