We mean business, mostly

‘S ab kuchh dikhta hai (everything is visible)’, the tag line of the now controversial Rotomac pens seems to assume a sinister meaning in light of the recent financial fraud involving owners Vikram and Rahul Kothari.

The recently unearthed Nirav Modi scam, with no LoU [Letter of Understanding] lost, is another case in point. What began as corruption with the involvement of a few bank employees has snowballed into aroughly ₹12,000-crore racket.

In the race toward greater profit, the biggest casualty is transparency, not just in financial matters, but also commitment to inclusive growth. Nowhere is this more critical than in a country like India where crony capitalism is the unwritten rule of law. With the red carpet being rolled out to corporates continuously to improve the Ease of Doing Business ranking, there is a conscious attempt to ‘reform’ at the cost of the community — workers, supply chain, citizens and those affected by business operations, and those pushed out in the name of development.

The recent findings of the third round of the India Responsible Business Index (IRBI), developed through a collaboration between Praxis-Institute for Participatory Practices, Corporate Responsibility Watch, Oxfam India, Change Alliance and Partners in Change, highlight this malaise. The IRBI draws on the spirit of social responsibility outlined in the National Voluntary Guidelines on Social, Economic and Environmental Responsibilities of Business (NVGs), evolved in 2011 by the government of India.

It analyses policy disclosures in the public domain made by the top 100 listed companies and vets these against five elements of social inclusion — non-discrimination, respecting employee dignity and human rights, community development, inclusive supply chain, and community as business stakeholders.

It is pertinent that 15 of the top 100 companies are either banks or related to the finance sector. Four of these are nationalised banks. Over the last few years, nationalised banks have been facing a backlash over increasing non-performing assets (NPA). In fact, three years ago, Arun Tiwary, Union Bank of India chairman and managing director said 58 per cent of the bank’s NPAs were the result of stalled projects. Poor risk assessments of proposed projects by banks notwithstanding, their willingness to engage with responsible business practices of borrowing companies seems a far cry. The sector that could play a progressive role in ensuring responsible practices has ranked poorly across all elements. In this scenario, of the only four banking and finance companies with policies recognising the need for impact assessment of projects, three have disclosed mechanisms for carrying out the assessment.

Only nine companies, across sectors, have disclosed their human rights due diligence. Assuming that most of the top 100 companies would be project-financed by financial institutions, a transparent financial sector in terms of public disclosure will definitely help, especially when regulator-based disclosures are not delivering. Banks also have an instrumental value in ensuring responsible business across the corporate sector, if banks adhere to NVG principles and have related mechanisms in place. But IRBI scores show the contrary as banking and finance average scores fall amongst the lowest quartile in supply chain and community as business stakeholder elements.

The index finds that unless mandated by specific laws, companies prefer to not disclose policies relating to that specific domain. For example, only four of the top 100 companies refrain from disclosing their anti-sexual harassment policy on their websites and all disclose the number of women members in ther workforce and the board. However, when it comes to inclusion in the supply chain, fewer companies are open to disclosure. What the index shows is that companies are satisfied with having policies for employees, and not extending the same to the supply chain.

While 95 companies do not disclose responsibility for providing similar or better living conditions, and services and access to people affected by projects, 96 do not mention free and prior commitment through discussions for land acquisition and displacement.

What companies are quite comfortable with disclosing are, predictably, related to corporate social responsibility (CSR) — with 86 recording policies on identifying marginalised groups for targeted interventions. What is reaffirmed over the three years of conducting research using the IRBI is that the idea of CSR has shifted the debate from responsible business to social responsibility beyond business.

The top 500 companies on the Bombay Stock Exchange are mandated to submit Business Responsibility Reports (BRR) on a framework that has questions relating to the nine principles of the NVGs that broadly relate to social, economic and environmental responsibilities of business. The index draws from the NVGs and the BRR framework, making the basic assumption that if companies are mandated to disclose on these principles, they would have policies in the public domain in these areas.

An index like the IRBI is a quick reference for companies on where they stand on social inclusion. It holds up a mirror to the companies and helps them introspect on how close or far they are from the mantra of Make in India and whether they are doing it responsibly, or steamrolling the larger populace in the race to the top. After all, ‘ sab kuchh dikhta hai ’.

(Views expressed are personal)

Pradeep Narayanan is director, Partner in Change and Dheeraj works with Praxis as senior programme officer. Both authors are part of the principal research team of India Responsible Business Index

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