govt's business responsibility norms improve
Business Standard, June 13, 2012
The guidelines can ensure sustainable
corporate commitment to society but insisting on compulsory
compliance is tricky
“The guidelines urge firms to integrate
responsible business conduct within its core business model,
rather than treating the issue peripherally, as a mere PR
Satyam scandal, the number of cases of corporate misdemeanours
hitting the headlines in recent times has seen an exponential
increase. There are manifold reasons for this. Greed coupled with
unethical behaviour is one, for which there is no solution other
than strong disincentives. Political demands is the other,
particularly as we see currently in our growing economy, which
leads to higher demands for rents and crony capitalism. Vigorous
competition is another major driver for such behaviour.
Corporations do everything but follow good business behaviour.
However, there are still many business houses in India that are
widely respected for their value systems, standards and products.
This testifies that conducting business in a responsible manner is
possible. Alas, there are many bad fish in the pond.
healthy competition, business ethics, transparency and
accountability are beginning to find more space in the public
policy discourse in India. Growing public pressure by a burgeoning
middle class, improved access to information, splendid court
actions, sensational audit exposes and enforcement is leading to
greater accountability of market players and the administration.
It is quite unlikely that cases involving delinquent firms would
escape attention anymore.
The government has
also provided a significant fillip to the issue by developing an
umbrella instrument: the National Voluntary Guidelines on Social,
Environmental and Economic Responsibilities of Business, popularly
referred to as the NVGs. The NVGs provide a framework comprising
nine principles for defining responsible corporate conduct.
According to the NVGs, the level of responsibility of a firm is
gauged by assessing effectiveness of its business model (and
practice) in minimising adverse impacts on related social,
environmental and economic aspects. It lays considerable emphasis
on compliance with applicable rules and regulations. It urges
firms to integrate responsible business conduct within its core
business model, rather than treating the issue peripherally, as a
mere public relations function.
The unholy alliances
of health care providers and pharma companies were recently
highlighted by the popular TV programme Satyameva Jayate. It got
brickbats from doctors and bouquets from consumers, although
pharma companies kept mum. At CUTS, we have been working in this
area for long and are currently testing the NVGs in these two
critical sectors in India – pharmaceutical and private health care
– through empirical research in four states. Our findings would
contribute towards greater uptake of the NVGs.
business responsibilities and are more than corporate social
responsibility (CSR), seeking a long-term and sustainable
commitment to society. The issue of CSR has received unprecedented
attention since late 2010. The Parliamentary Standing Committee on
Finance recommended that private sector companies should
mandatorily allocate two per cent of their average net profits for
previous three years towards CSR programmes. However, there was an
uproar and the recommendation is unlikely to fly. Notably, public
sector companies are already mandated to allocate two per cent of
their net profit to CSR activities.
The three terms:
philanthropy, corporate social responsibility and business
responsibility have been used inter-changeably in recent
discussions and related analyses on the subject. These are three
different delivery systems used by business to meet its societal
expectations. At one end, there is philanthropy that stems from
the idea of altruistic “giving” to society. Business
responsibility is at the other end and involves alignments of
a firm’s methods of doing business by committing to abide by all
applicable rules and regulations at the workplace and marketplace,
and for the community and the environment. It comes with a
commitment from the top management. Thus, NVGs need to be
incorporated in business strategies of firms, and the government
should ensure that the concepts are well understood and applied.
Only then can business responsibility norms lead to better
corporate governance, and corporate citizenship in our country.
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