Understanding The National Guidelines For Responsible Business Conduct (NGRBCs)
The world today is facing colossal Climate change and other Environmental challenges; the continuity of life on earth is at stake if we do not take immediate actions. Fortunately, the hard-work of activists has paid off and there is recognition in all quarters be it government, business houses or public at large of the enormous actions that are required to undo the damage done to the environment.
Once we recognized the environmental damage, simultaneously we had to recognize the flawed value system that has led to the environmental damage. One of the mitigating measures for the massive work required was drawn up in the shape of ‘Sustainable Development Goals (SDGs)’ by the UN. Achieving these and the other goals would require ‘All Hands On Deck’ approach. Various countries have committed to follow these principles and have put in place suitable measures in place to ensure the goals avowed internationally are met.
In India, The Ministry of Corporate Affairs (MCA), had released a set of guidelines in 2011 called the National Voluntary Guidelines on the Social, Environmental and Economic Responsibilities of Business (NVGs). This was expected to provide guidance to businesses on what constitutes responsible business conduct.
NVGs were revised in 2015 to ‘National Guidelines on Responsible Business Conduct (NGRBC)’.
NGRBC are formed to give effect to the following Global commitments by India and also encompasses relevant existing Indian Statutory Requirements:
1) The UN Guiding Principles for Business and Human Rights (UNGPs): In 2011 the United Nations released ‘Guiding Principles on Business and Human Rights: Implementing the United Nations ‘Protect, Respect and Remedy’ Framework. The UNGPs require that the states as well as its business enterprises honor, respect and protect human rights and fundamental freedom. And that effective remedies are in place for those affected by adverse business-related human rights impacts or abuse.
2) Paris Agreement on Climate Change (2015) {Allied to SDG 13}: Under this agreement, countries have committed to take steps to combat climate change and adapt to its effects. India ratified the agreement in October 2016 and its commitments are called the National Determined Contributions (NDCs). It is international scientific consensus that, in order to prevent the worst climate damages, global net human-caused emissions of carbon dioxide (CO2) need to fall by about 45 percent from 2010 levels by 2030, reaching net zero around 2050.
3) UN Sustainable Development Goals (SDGs): In September 2015, the UN General Assembly adopted the 2030 Agenda for Sustainable Development which established seventeen Sustainable Development Goals (SDGs), comprising targets and indicators, as well as follow-up and review mechanisms. Significantly, the SDGs recognize the role of business as a major driver for economic growth and infrastructure, whilst explicitly calling for businesses to act in accordance with the UNGPs. The SDGs are mapped against the NGRBC in Annexure 4.
4) Core Conventions 138 and 182 on Child Labour by the International Labour Organization (ILO): India, in June 2017, ratified ILO Core Conventions 138 (minimum age of employment of children) and ILO Core Convention 182 (worst forms of child labour).
5) Annual Business Responsibility Reports (ABRRs): In 2012, the Securities Exchange Board of India (SEBI) amended the Listing Agreement for companies listed in the stock exchanges in India, and mandated the submission of an ABBRs by the top 100 listed companies. The ABRR is based on the Business Reporting Framework of the NVGs, and SEBI has since extended this requirement to the top 500 listed companies.
6) Companies’ Act 2013: Notified in the Gazette of India on 30 August 2013, Section 135 of the Companies Act 2013 requires companies to undertake Corporate Social Responsibility (CSR) initiatives in communities, and has since, provided additional rules and guidance on the areas and target groups of such interventions in consistency with national socio-economic priorities.
Now let us examine the ‘National Guidelines on Responsible Business Conduct’.
On Whom Does NGRBC Apply?
The NGRBC are Guidelines designed to be used by all businesses, irrespective of their ownership, size, sector, structure or location. It is expected that all businesses investing or operating in India, including foreign multinational corporations (MNCs) will follow these guidelines.
Correspondingly, the NGRBC also provide a useful framework for guiding Indian MNCs in their overseas operations, in addition to aligning with applicable local national standards and norms governing responsible business conduct.
Furthermore, the NGRBC reiterate the need to encourage businesses to ensure that not only do they follow these guidelines in business contexts directly within their control or influence, but that they also encourage and support their suppliers, vendors, distributors, partners and other collaborators to follow them.
Responsibility for Adoption of NGRBC
The NGRBC identifies specific aspects of each Principle, which make up the guidelines, as part of the duty and responsibility of the highest governance structure of the business to oversee the implementation and adherence to these guidelines in their business.
In the case of companies and corporations it is the Board, the responsibility for adoption of the NGRBC in proprietorships, partnerships, and other types of business is assumed in the present context to rest with the owner/s, partner/s, and/or, any other structure responsible for the highest level of decision-making and governance functions in the business.
Themes or Principles of NGRBC
There are Nine Themes called Principles of NGRBC. Each Principle is introduced as a statement and followed by a narration of the essential aspects of the principle, referred to as the brief description. This will provide a clear idea of the essential spirit and intent of the Principle.
It is worthwhile to emphasize that all Principles of the NGRBC are equally important, inter-related, inter-dependent and non-divisible, and business should adopt them to demonstrate their commitment to being a responsible business, and accrue the full benefits of sustainable business strategies.
Core Elements to Each Principles
Each Principle is accompanied by a set of requirements and actions that are essential to the operationalization of the Principle, referred to as the Core Elements.
Business Responsibility Reporting Framework (BRRF)
The information sought in Annexure 3 of the Guidelines (Business Responsibility Reporting Framework) is derived from the Core Elements.
The principal purpose of this reporting framework is to serve as an internal tool for businesses wishing to align themselves with the NGRBC. It should not be seen as a mandatory reporting format as that is the domain of a regulator or law.
While this reporting framework is not meant to be a mandatory reporting format, a design principle that was used in its development was that it can be adapted into one by any legitimate authority or regulator. For eg. This was adopted by SEBI. Amended Regulation 34(2)(f) of SEBI Listing Regulation 2015 (LODR Regulations) replaces the previous BRR (Business Responsibility Report), making it mandatory for the top 1000 listed companies to annually report ESG related information from the financial year 2022-2023.
Aggregate Reporting (AR) methodology for MSMEs: Further, through BBRF MSMEs can now imbibe a method of preparing an aggregate report, i.e. the result of applying the Aggregate Reporting (AR) methodology to combine data from individual units that belong in the same cluster (i.e. region/location) in order to create one collective sustainability report. The methodology is outlined in the learning document for the project, “Scaling Up Sustainable Development of MSME”. A link to this learning document and examples of Aggregate Reports are in Annexure 2 of NBGRBC.
The Nine Principles of NGRBC And Their Main Action Points
Principle 1
“Businesses should conduct and govern themselves with integrity, and in a manner that is ethical, transparent, and accountable.”
{Principle Allied to: SDG 12- Responsible Consumption and Production}
Principle 2
“Businesses should provide goods and services in a manner that is sustainable and safe.”
Design and Produce Goods and Services that are Resource Efficient and Low Carbon Footprint
Among other things:
# Review if sourcing is sustainable.
# Hazardous waste or other waster disposal mechanisms in place.
# Review end of life – recycle, reuse, repurposing by reclaiming products and packaging materials.
Principle 3
“Businesses should respect and promote the well-being of all employees, including those in their value chains.“
Design infrastructure to respect and
promote well-being of employees, in your organization as well as in your value chain.
Among other things:
# Health and Accidental Insurance, Maternity, Paternity and Retirement benefits for
Employees.
# Taking Care of Special Needs of Employees.
# Training and Development of Staff.
#Performance Reviews.
# Health and Safety management Infrastructure.
Principle 4
“Businesses should respect the interests of and be responsive to all its Stakeholders.”
Businesses should identify key stakeholders including vulnerable and marginalized groups; Identify any issues that would affect them and communicate clearly and frequently with Stakeholders.
Principle 5
“Businesses should respect and promote human rights.”
Businesses should train employees on human rights; comply with laws on minimum wages, using child labor, Sexual harassment, forced labor and any other form of harassment; put in a mechanism to report violation as well as protection of complainants from being discriminated.
Principle 6
“Businesses should respect and make efforts to protect and restore the environment.”
Businesses should make efforts to restore and protect the environment.
Among other things:
# Calculate Consumption of Energy and Water, Emissions of GHG as well as other sorts of emissions and Waste generated.
# Consider options to reduce energy and water consumption, reduce GHG and other emissions and curb waste generation, through alternate energy sources, recycling and repurposing. Report on the measures taken.
# If functioning in ecologically sensitive zones, ensure all environmental clearances are in place.
Principle 7
“Businesses, when engaging in influencing public and regulatory policy, should do so in a manner that is responsible and transparent.”
Businesses when working on influencing public policy should do in a transparent and responsible manner.
Among other things:
# Publish names of affiliations with Chambers of Commerce, Trade Associations and other Unions.
# Report action taken on any anti-competitive conduct by the entity.
# Disclose Public Policy advocated by the entity.
Principle 8
“Businesses should promote inclusive growth and equitable development.”
Businesses should promote inclusive growth and equitable development.
Among other things by:
# Conducting Social Impact Assessments (SIA) of projects undertaken by the entity based on applicable laws.
# Provide information on project(s) for which ongoing Rehabilitation and Resettlement (R&R) is being done.
# Describe the mechanisms to receive and redress grievances of the community.
# Report Percentage of input material sourced from small/ MSME suppliers or from within and neighboring district.
# Information on CSR projects undertaken by your entity, any other consideration given by entity to marginalized population.
Principle 9
“Businesses should engage with and provide value to their consumers in a responsible manner.”
Businesses should have and report mechanisms of dealing with consumer complaints.
Among other things:
# Report Number of consumer complaints in respect of specified issues.
# Report Details of instances of product recalls on account of safety issues.
# Have a framework/ policy on cyber security and risks related to data privacy in place.
# Provide details of any corrective actions taken or underway on issues relating to advertising, and delivery of essential services; cyber security and data privacy of customers; re-occurrence of instances of product recalls; penalty / action taken by regulatory authorities on safety of products / services.
– CA Molly Chatterjee Sinha