The Role of Business to Achieve SDG Goals

EVER SINCE THE INTRODUCTION OF THE NEW INDUSTRIAL POLICY IN 1991, BUSINESSES IN INDIA HAVE BEEN CONTRIBUTING TO INDIA’S GROWTH BY CREATING EMPLOYMENT OPPORTUNITIES, DRIVING TECHNOLOGICAL ADVANCEMENT AND INFRASTRUCTURE DEVELOPMENT, AND TODAY, FORM A VITAL PART OF INDIA’S SUSTAINABLE DEVELOPMENT JOURNEY.

·      Increasingly, business sector has played an important role in diversifying, expanding and strengthening the country’s economic position.

·      In the year 2017-18, the private sector’s gross capital formation accounted for about 22.4 per cent of India’s GDP.

·      Proportionately, the sector’s responsibility to help create a just and secure world for the future generations has increased.

·      In India, the private sector includes MNCs with local operations, companies serving the domestic market at various tiers, exporters, micro, small and medium enterprises and startups, of which many companies have overlapping presence.

·      Further, the size of enterprises varies significantly under each category.

·      The scope of engagement with SDGs is modulated by the size, annual turnover and geographical spread of these enterprises.

·      India is one of the fastest-growing economies, with real GDP growth moderated at a rate of 6.1 per cent between FY 2017-18 and FY 2018-19 and is poised to become the third-largest consumer market in the world by 2030.

·      Inclusive and low-footprint growth - the key characteristics of sustainable development, will ensure that the purchasing power of Indian consumers grows steadily, creating a positive feedback loop, which ultimately leads to general economic prosperity.

·      Therefore, by investing in pursuing the SDGs the Indian private sector will ensure its own long-term prosperity.

·      External stimulus has also been crucial in determining the strategic direction of the businesses. In recent years, governments and consumers have taken cognizance of the importance of sustainable production and consumption.

·      It is expected of businesses, especially brands and corporates, to play a greater role in ensuring sustainability both with in and outside their value chains.

·      The government is already committed to sustainable development, as evident from its initiatives in the field of renewable and clean energy.

·      Above all, India has set ambitious targets to reduce greenhouse gas emissions.

·      Wholehearted participation from the private sector to complement the efforts made by the government will go a long way in the future, in ensuring that India stays on track to achieve its targets under the SDGs.

·      There is sufficient evidence to suggest that businesses are increasingly looking at stretching their mandate of value creation beyond customers or shareholders to cover a wider and more diverse set of stakeholders along their value chain.

·      The private sector through innovative business models for developmental challenges, replication of good practices, influencing supply chains and participation in multi-stakeholder initiatives will be a strong ally in the achievement of the SDGs in India

 

India is one of the fastest-growing economies, with real GDP growth moderated at a rate of 6.1 percent between FY 2017-18 and FY 2018-19 and is poised to become the third-largest consumer market in the world by 2030.

Institutionalized Business Responsibility Frameworks in India

·      Business responsibility frameworks play a key role in providing an enabling environment for improved integration of the society as stakeholders, corporate transparency and strengthened risk management.

·      Several initiatives have been taken by the government to mainstream sustainability and responsibility to this effect, even before the adoption of the SDGs in 2015.

·      Efforts for developing a comprehensive national framework with respect to businesses began in 2011 with the development of the National Voluntary Guidelines (NVGs) on Social, Economic and Environmental Responsibilities of Business.

·      This was followed by the inclusion of a provision on Corporate Social Responsibility (Section 135) in the Companies Act, 2013 and the subsequent enactment of the CSR Rules 2014.

·      The adoption of the SDGs provided consider[1]able fillip to further strengthen the commitments embedded in these frameworks.

·      Consequently, to align the NVGs with the SDGs and the UN Guiding Principles on Business and Human Rights (UNGPs), the process of revising NVGs commenced in 2015, which led to the development of the National Guidelines on Responsible Business Conduct (NGRBC) in 2018.Simultaneously, Business Responsibility Reports (BRR) was made mandatory for top 1,000 listed companies by the Securities & Exchanges Board of India(SEBI) in November 2019.

·      The characteristics of such disclosures entail that companies report their actions towards adoption of responsible business practices, drawing from the principles of NGRBC.

·       Further, the Government of India initiated the process of developing the National Action Plan (NAP) on Business and Human Rights in 2018.

·      There is considerable alignment between the NAP and the SDGs.

·      A Zero Draft of the NAP was developed in February 2019 and the development of India’s National Action Plan is presently underway, being led by the Ministry of Corporate Affairs (MCA).

·      An important guiding framework for the private sector with respect to sustainable development is also provided by Section 135of the Companies Act, 2013, which directs organisations with either a net worth exceeding INR 5 billion (USD 67 million), turnover of more than INR 10 billion(USD 133.33 million) or a net profit of INR 50 million (USD 667 thousand) or more, to spend two per cent of their average net profits in the preceding three years on Corporate Social Responsibility (CSR).

·      The Act lists the activities which can be carried out as part of the company's CSR strategy.

·      These activities include poverty reduction, gender empowerment, rural development and environ[1]mental sustainability among others. Of the INR 119.61 billion (USD 1.6 billion) that was spent on CSR activities by National Stock Exchange (NSE) listed companies in 2018-19, around 65 per cent was towards poverty alleviation, nutrition, healthcare, education and skilling.

·      Institutionalized voluntary sustainability and responsibility frameworks will play a vital role in the next decade in terms of informing both producer and consumer behaviour.

·      The Bombay Stock Exchange’s (BSE) Environmental, Social and Governance (ESG) guidelines for voluntary reporting is a step in this direction.

·      Similarly, adoption of Voluntary Sustainability Standard (VSS) will promulgate the commitment of businesses towards SDGs in terms of their operations, sourcing, production and trade.

·       The success of voluntary guidelines, principles and standards will in turn be influenced by the impact of these disclosures on consumer choice.

Businesses in the Decade of Action

·      Apart from business responsibility and employment opportunities, Indian businesses have been an active partner in government led interventions in critical cross-cutting areas.

·      Financial inclusion has been one such area where businesses have facilitated in scaling-up the interventions in conjunction with responding to government signaling in digital finance.

·      Businesses have undertaken or are exploring several initiatives under frameworks such as resource efficiency, circular economy, climate change mitigation and clean technology and therefore will play an instrumental role in achieving the larger goal of 175 GW clean energy by2022 and the long term target of 450 GW by 2030.

·      Education, skilling and training as a domain has seen significant investments by businesses.

·      Numerous vocational education and skilling programmes at the national and state level have business entities as active partners.

·       Decent work conditions, gender empowerment, water, sanitation and hygiene (WASH),health and telemedicine and adoption of emerging technology for public infrastructure projects are the other notable areas where collaborative efforts among the state, markets and society can be seen.

·      While the frameworks and initiatives discussed above have been successful in mainstreaming sustainability, business responsibility and the overall SDG agenda among businesses in India, the next decade will require further escalation of efforts including improvement in quality of businesses engagement.

·      CSR initiatives, while being impactful, have concentrated around industrial regions of the country, which incidentally also are the places where the firms are registered.

·      Diversification and inclusion of other areas of investment in the CSR ecosystem would ensure that attention is given to regions and groups which are relatively worse off.

·      This has been successfully experimented in the relatively backward 112 Aspirational Districts across the country, where in critical gaps in social impact projects have been plugged through partnership with businesses and their CSR activities.

·      In terms of disclosure, reforms in BRR formats and other disclosures will not only augment the quality but also the level of engagement for enterprises.

·      Mainstreaming the SDG agenda among smaller business entities remains a challenge and therefore supply chain interventions in the sector is pivotal.

·      These would involve cross-connected workflows in various industrial domains and address multiple goals of the 2030 Agenda and consequentially, encourage participation of businesses of all sizes.

The blog on The Role of Business to Achieve SDG Goals pertains to UPSC paper GS 3 changes in industrial policy and and their effects on industrial growth. Don’t forget to subscribe so that you never miss out on such important and interesting topics. Check out our previous blogs on various topics here.

Blog Post written by:
Anurag Trivedi
UPSC Mentor