Saturday, July 23, 2011

The Relevance of Corporate Sustainability for Indian Enterprises

Corporate sustainability is a paradigm that has been evolving rapidly and continuously. It never has a fixed definition; rather there is fluidity in its limits, and keeps expanding in all directions just like the universe does. The definition of sustainability, which was earlier defined by the Triple Bottom Line of John Elkington of environment, economics and society has been broadened and translated into other critical areas such as respect for human rights, corporate governance, fair trade ethics and stakeholder engagement, all of which do not in any way take away anything from the original components; instead, they can be considered to be a revised definition of the triple bottom line to match the need of the hour, as subsets of the original three sets laid out by Mr. Elkington about two decades ago. Today, corporate sustainability is an engagement process. It is a dialogue between companies and corporations with their customers, with their shareholders, with their employees, and with the governmental and non-governmental agencies. It is a continuous demonstration of commitment towards the wellbeing of all, be it the natural, ambient or human environment that constitutes ‘our home’, and in this day and age of increasing cynicism of people at large over the actions of companies, corporations and even governments, it is a window for one and all to demonstrate transparency in functions and actions of organizations.
India has had a tradition of its business classes engaging in social causes and philanthropic measures. The Tatas, Birlas and Bajajs of our country can be said to have a glorious past behind them when it comes to not only contributing to India’s development economically, but also socially by setting up schools, colleges, hospitals and many charitable institutions. In this age of the flattening world, it is even more important for companies, especially the medium scale enterprises that are the real chunk of the Indian industrial set up, to be engaged with their stakeholders more than ever, as people, even if appreciative of the rapid growth of the Indian economy, are skeptical about the attitudes of businessmen towards society at large. Indian industrial sectors have been plagued by scandals, which sectors such as textile are all too familiar with. The allegations of child labour have time and again caused considerable losses to this sector along with loss of credibility in the international market.
Corruption scandals hitting headlines has only made the trust deficit wider, and even old-time employees find it difficult to associate with their employers, trying to understand what their company really stands for. This in turn has resulted in a massive churning of employees, with attrition rates in India on the rise. Moreover, industries are unable to tap into the quality productivity potential of Indian employees, which could have immense bearings on the quality of our goods and services, especially those meant for exports as well as increasingly for quality-conscious Indian customers. Even if one were to look at the rise in foreign direct investment in India from Multinational corporations (MNCs) coming in from abroad, lack of transparency results in lack of confidence in Indian industries and corporations, a strong negative that hurts the Indian interests in the long run.
In recent times, Indian corporate sector has also been accused of discrimination on the basis of caste and gender. While the Indian corporate set-up vehemently denies the same, the lack of action to demonstrate otherwise over these allegations has only dented the image further, with people believing that ‘affirmative action are just two more fancy words being bandied about by these industrialists whose only motive is to fill their pockets as much as possible’. The Ministry of Corporate Affairs is bringing in an amendment in the Companies Act 1954 which shall make it mandatory for all companies to spend at least 2% of their book record profits on CSR activities and report on the same as well. Moreover, in this amendment, it is proposed that every company having net worth of ` 5 billion or more (close to US$ 110 million), or turnover of ` 10 billion (close to US$ 220 million) or more, or a net profit of ` 50 million (close to US$ 1 million) or more during a year shall be required to formulate a CSR Policy. Consequently, the Government of India also has its own voluntary reporting guidelines on corporate social responsibility (CSR) measures (it is mandatory to all public sector enterprises and government owned companies and banks) that came out in 2009.
In a world where trust deficit seems to be increasing with each passing day, all of us have to take the step together for increasing confidence amongst each other over our words and our deeds. While the leading big companies, which are in every sense global leaders too, actively engage in this process, and report on it, up and coming medium level enterprises are only just beginning to understand the importance of this composite dialogue. The textiles industry has enough examples from their contemporaries in Sri Lanka and Bangladesh on the multiple advantages that engaging in corporate sustainability brings in, with increasing employee productivity, lower attrition rates and also inviting foreign investment and preferred vendor status from leading apparel chains. Other sectors like banking too can see global examples of such institutions like Standard Chartered, HSBC and ANZ Bank to see the goodwill that they have been generating globally in the financial world for using their resources for sustainable development. All leading companies across the world are also conveying this information through the Global Reporting Initiative’s (GRI) standards of disclosure that rate you according to the level of disclosure that the company engages in and these are globally recognized as well.
Corporate sustainability is an exercise in continuity. It is a dialogue, as I have repeatedly stated, between various parties involved, and it is just another step towards the evolution of a company for tomorrow. If one were to rephrase John F. Kennedy’s famous words, it is time to not ask what this earth can do for us; rather it is time to ask of ourselves what we can do to make this world a better place to live in for each one of us.

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