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Business With A Human Touch

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This is a carrot that companies, after  consistently opposing every move by the government to impose mandatory corporate social responsibility (CSR) on them, may well bite into. The corporate affairs ministry will soon allow firms to show part of their sustainability initiative expenses as CSR spend. Under the mandatory CSR reporting initiative, now under consideration, registered firms are expected to spend at least 2 per cent of their net profit on CSR.

Such disclosures will become mandatory once the ministry formalises an Annual Business Responsibility Reporting (ABRR) framework.

Globally, CSR is part of sustainability, and not vice-versa. Amsterdam-based Global Reporting Initiative (GRI) terms CSR as one of the four essentials for business entities. GRI guidelines consider sensitivity towards ecological footprint, environmental social governance and a triple bottom line approach (equal importance to people, planet and profits) as equally important virtues needed for global business community. India has begun to think on GRI lines now.


 



































9 PRINCIPLES OF ABRR
1. Businesses should conduct and govern with ethics, transparency and accountability
2. Should provide goods and services that are safe and contribute to sustainability
3. Should promote the wellbeing of all employees
4. Should respect the interests of all stakeholders, especially those who are disadvantaged, vulnerable and marginalised
5. Should respect and promote human rights
6. Should respect, protect, and make efforts to restore the environment
7. Businesses, when influencing public and regulatory policy, should do so in a responsible manner
8. Should support inclusive growth
9. Businesses should engage with and provide value to their customers and consumers in a responsible manner


The Companies Bill 2011 had proposed a legislative framework for companies to earmark 2 per cent of their net profits for CSR activities. The proposal, which is being considered by a parliamentary panel at the moment, is to make reporting of CSR activities mandatory. The government will now expand the scope of CSR by making it part of the ABRR framework.

Sustainability reporting is already a voluntary practice among a number of Indian and foreign corporates, though very few account for it under a separate head. That may change now. Public sector majors like ONGC and Gail and corporate groups like Tatas and Reliance bring out sustainability reports on a regular basis. The GRI itself has 17 Indian entities among its organisational stakeholders, including RIL and CII.

Corporate affairs minister Veerappa Moily says the framework will be finalised and implemented in consultation with stock exchange regulator Sebi and other stakeholders soon.

The draft sustainability guideline reporting framework was prepared by a committee headed by Bharat Wakhlu two months ago. The electronic format suggested by Wakhlu seeks disclosures at multiple levels of the firm's operations. This includes a section that seeks information on the nine principles enshrined in the National Voluntary Guidelines on the "Social, Environmental and Economic Responsibilities of the Business" brought out by the ministry last year.

Prime Minister Manmohan Singh is expected to declare India's commitment towards sustainable development at the UN Conference on Sustainable Development in Rio next week.

(This story was published in Businessworld Issue Dated 25-06-2012)