Chapter 8. 1 Guidelines and Standards. 1.1 International United Nations Global Compact (UNGC) OECD Guidelines for MNCs

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1 Chapter 8 1 Guidelines and Standards As the corporate social responsibility phenomenon started coming to the forefront of business the various Business and Government organizations felt the requirement of having a uniform operating principal for the users. These organizations also took pains to define the Corporate Social Responsibility to have a common understanding of the CSR. Some important Guidelines and Standards are given below. Most of the standards are voluntary in nature except some standards for which Certification is available. 1.1 International United Nations Global Compact (UNGC) To align the business with the labour, human rights, anti-corruption and environment UNGC provides a set of guidelines consisting of 10 principles which are derived from various United Nations initiatives and conventions. These 10 principles are related to the 4 main core values of Human Rights, Labour, Environment and Anti-Corruption. These are covered in Chapter Error! Reference source not found. Section Error! Reference source not found. Global Compact Self-Assessment Tool OECD Guidelines for MNCs OECD Guidelines (2011) define the standards for Businesses to enable them to be responsible socially and environmentally. It also provides a procedural way for dispute resolution. They are the Government backed, most comprehensive set of

2 recommendations, as on date, related to Responsible Business behaviour of Multinational Companies. The Guidelines were adopted in 1976 and the last update was done in May 2011 with the addition of the new provisions related to Human Rights, Due diligence and Supply Chain Responsibility. OECD guidelines covers the areas like human rights, labour rights, information disclosure, consumer interests, environment, combating bribery, competition, taxation, and intellectual property rights. Certain concepts are the fundamental and foundation of the recommendation of the guidelines which are essential for the implementation. Some of these concepts are as below. A Healthy Business Environment Is The Business Of All: Guideline recognises that all interested parties have a role to play for establishing a healthy business environment. Two Side of the Same Coin: Business Society relationship should be based on two non-exclusive principles. First is that Multinational Enterprises to contribute positively to achieve a sustainable development and second to avoid adverse impacts and address them as and when they occur. Adverse Impact: The businesses should not indulge in activities which cause or contribute to adverse impact on matters covered by the guidelines. Due Diligence: Businesses should do risk based analysis to identify, prevent and alleviate negative impacts of the risk incident. The type of the analysis depends on the environment of a case. Shareholder Engagement: Businesses should engage with all the stakeholders to have a meaningful dialogue for better planning and execution of the related projects and activities affecting the local communities. Fostering Confidence and Trust: Businesses should promote a relationship based on mutual trust and confidence with the societies in which they operate.

3 Human capital formation and capacity-building: Businesses should be instrumental in encouraging human capital formation and local capacity building. Businesses should create opportunity for employment and facilitate training opportunity for employees. Corporate Governance: Business should follow the principles of good corporate governance. Apart from this, businesses need to support and uphold the practices of good corporate governance and good business practices ILO s tripartite declaration (ILO, 2006) The declaration are basically principles related to MNCs and social policy and the guidelines are voluntary in nature, also known as MNE Declaration, meant for the Multi- National Enterprises, Government, Employers and Workers Union in the area of Conditions of work and life, Training, Employment, and industrial relations. In the current era of globalization the Multinational are expanding their reach to have manufacturing units in the developing countries while the developing countries are encouraging Foreign Direct Investment to enhance their growth rate. These guidelines ensure that to promote positive social and labor effects by enlisting a mutually beneficial social and work standards AccountAbility s AA1000 (AccountAbility, 2008) These standards are from Institute of Social and Ethical Accountability. These are in fact are a series of standards which are related to Accountability, Responsibility and Sustainability of an organization. Issue of organizational strategy, business models and Issues affecting governance are being addressed by these standards. They also provide operational guidance on stakeholder engagement and sustainability. These Standards comprises of the following i. AA1000 APS: This standard advances a framework for identifying, prioritising and responding to its sustainability challenges of an organisation.

4 ii. AA1000 AS is meant for assurance practitioners and provides a methodology to evaluate the nature and extent of adherence to the principles of AccountAbility by an organisation. iii. AA1000 SE are meant for an organisation and provide a framework for helping organisation to ensure that processes of stakeholder engagement are based on the purposes; they are also robust and have capability to deliver results ISO 26000: Social responsibility (ISO, 2010) This international standard provides guidelines for a socially responsible behaviour of the organizations by understanding the core issues related to social responsibility, principles of social responsibility and engagement with stakeholders. The standards aim to highlight the results and the improvement in performance of social responsibility. The standards was launched in 1010 after rigorous consultation of various stakeholders across the world. It is outcome of international consensus arrived among the representatives of various governments, Industry, Consumer groups, NGOs and labour organization.

5 As per the standard the social responsibility is defined as depicted in Source: ISO Figure 1.1 Definition of Social Responsibility as per ISO This standard is not for certification purposes. The overview of ISO is depicted in Figure 8.2.

6 Source: ISO Figure 1.2 Schematic overview of ISO The standards deal with Organisational Governance and six related core subjects: Human rights Fair operating practices Labour practices Consumer issues

7 Environment Community involvement and development Figure Core Subjects covered by ISO Social Accountability International (SAI): SA 8000 Standard (SAI, 2008) is an auditable certification standard and spells out the voluntary requirements for employers in the work place (including workers rights). These standards are based on ILO conventions, international human rights norms and national laws.

8 The SA8000 Guidance Document helps in understanding SA8000 and methods for implementing its requirements. It also doubles as a handbook for the auditors and companies willing to get certification under SA8000. By complying with the SA8000 standards, a company will have the capability to develop, maintain and implement the policies and procedures for managing the issues where company can control or influence. Company can also demonstrate that its policies, procedures and practices confirm to standards World Business Council for Sustainable Development World Business council has issued 10 Key principal guidelines for the businesses to run (WBCSD, 2012). These can be described as: 1. Business is to be seen as a part of sustainable development and sustainable development is driver of the long-term strategy for the growth of the business. For the growth of the business and sustainable development should be seen as the foundation of the long term strategy 2. For any business to succeed, it is of utmost importance the society also grow to support the business. In case the society is not having a positive growth, business cannot grow because ultimately the consumer of the product or services is the society. Therefore, it is important for the business and the Government to take care of the basic requirement of the society such as Health, Education, Energy and Infrastructure. 3. If poverty persists, the growth of the business is affected due to the reduced rate of the consumption. Apart from this, poverty leads to political and economic instability, which is in turn, is detrimental for any business. Therefore, it is necessary for the businesses to eradicate poverty and lift the living standard of the society. 4. Unrestricted access to market, transparency in business and global competition are some of the necessary attribute to achieve sustainable development.

9 5. To make sustainable development a reality, one need to have a supportive framework of the rules and regulation. 6. Some of the basic requirements of businesses to be successful and sustainable are Accountability, Transparency, Trust, Ethics, Social and Environmental responsibility. The business should follow the above and perceived by the society as such. 7. While moving towards the goal of sustainable development, some problems ought to come and can find solutions to those problems through the innovations and use of technology. Actually, innovation and application of technology are the backbone of the sustainable development. 8. We need to conserve our resources or inputs and achieve operational excellence for delivering goods and services with have a positive impact on this planet and ultimately will improve the quality of life in long term 9. A business to operate, we need to ensure that the ecosystem i.e. Air, Water, biodiversity etc are not degraded which helps to society in leading a normal life. 10. To track the path of sustainable development successfully, co-operation and contribution from all related parties such as businesses, government, civil societies and international bodies is a prerequisite. Confrontation does not solve any problem while co-operation may lead to an acceptable solution. 1.2 National National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business (MCA, 2011) Ministry of Corporate Affairs after extensive consultation with various stakeholders ere released these guidelines and are applicable for large and small companies alike.

10 These guidelines are based on India centric approach and suitable for businesses operating in India. The document was first released in 2009 and then revised in There are nine basic principles covered by the guidelines and it should be kept in mind that all the principles are important and have equal weight. The Guideline has also suggested a Framework for reporting the CSR activities so that their evaluation and monitoring is possible Guidelines on CSR for PSUs (DPE, 2013) The beginning of the Social obligation of PSUs (Public Sector Units) can be traced back to the year 1994 when circular containing guidelines was published by the Department of Public Enterprises, GOI titled Social Obligations of Central Public Enterprises (DPE, 1994). They were further amended and comprehensive guidelines were issued by Government of India (Ministry of Heavy Industries and Public Enterprises) in the year 2010 (DPE, 2010) and The current guidelines (DPE, 2013) were issued in the year 2013 which integrated the Corporate Social Responsibility with Sustainable Development. As per the guidelines, the CSR and sustainability expenses of a public enterprise will be based on the profit after tax (PAT) of the previous year. The some of the important salient points of the guidelines issues in 2013 are being summarised below. In public sector enterprises, the corporate social responsibility should be taken as channel to conduct business for the benefit of all stakeholders by ethics and sustainable business management practices. Practicing CSR and Sustainability are not 2 different processes but are interlinked and should be viewed as a single process. The CSR and sustainability agenda is equally applicable to the external as well as external stakeholder.

11 The new guidelines drive the CSR and sustainability agenda by promoting capacity building, promotion of green technologies, environment protection, and development of backward regions and economy weaker section of the society. The company is obligated to take development of one district of backward area. The public sector units are expected to be socially responsible and conduct business which is good for the business and the society. The new guidelines are specifically asking top management to get involved with higher passion in social responsible and sustainability activities of the company. The current status evaluation / assessment should be done before taking up any new project including the likely benefits to be gains. This will help in doing the impact analysis. The PSUs need to carry forward the unutilised fund to the next financial year and need to give the reasons for not able to utilised the current year fund. The unutilised fund needs to be utilised within next two years otherwise it will get transferred to a Sustainability Pool. For the annual evaluation of MOU, 2 projects need to be submitted for scrutiny. In case of Maharatna it will be 3 projects instead of 2. One PSU can join another PSU to do collective CSR projects which are large in size.