ESG

Ministry of Corporate Affairs (MCA) National Guidelines on Responsible Business Conduct (NGRBC)

In today’s world, responsible business conduct has become a critical aspect of corporate governance. Companies are expected to go beyond profit-making and contribute positively to society and the environment. To facilitate this shift, the Ministry of Corporate Affairs (MCA) in India has introduced the National Guidelines on Responsible Business Conduct (NGRBC). These guidelines serve as a framework for businesses to adopt ethical and sustainable practices, aligning their operations with the principles of social responsibility and sustainability.

MCA National Guidelines on Responsible Business Conduct (NGRBC)

The MCA NGRBC is a comprehensive set of guidelines that emphasize responsible business practices, including environmental, social, and governance (ESG) considerations. The guidelines are applicable to all companies registered in India that meet specific financial thresholds. The key aspects covered by the guidelines include:

1. Ethical Conduct: The guidelines encourage companies to conduct their business in an ethical manner, with integrity, transparency, and fairness. This includes promoting responsible supply chain practices, respecting human rights, and preventing corruption and bribery.
2. Environmental Sustainability: The guidelines emphasize the need for companies to minimize their negative impact on the environment and promote sustainability. This includes adopting measures to reduce greenhouse gas emissions, conserving resources, managing waste responsibly, and addressing climate change risks.
3. Social Responsibility: The guidelines highlight the importance of companies contributing positively to society by addressing social issues such as poverty, inequality, and discrimination. This includes promoting diversity and inclusivity, supporting local communities, and respecting the rights of marginalized groups.
4. Governance: The guidelines emphasize the need for transparent and accountable corporate governance practices. This includes maintaining a diverse and independent board of directors, ensuring robust risk management practices, and enhancing stakeholder engagement.

Importance of the MCA NGRBC for Businesses

The MCA NGRBC is a significant development in the landscape of responsible business conduct in India. It highlights the growing importance of ethical and sustainable practices for businesses. Here are some key reasons why companies should prioritize adopting the MCA NGRBC:

1. Legal Compliance: The MCA NGRBC is not just a voluntary guideline, but it also has legal implications. The Companies Act, 2013 mandates companies to disclose their CSR (Corporate Social Responsibility) activities and initiatives in their annual reports, and the MCA NGRBC provides a comprehensive framework to guide companies in fulfilling their CSR obligations.
2. Stakeholder Expectations: Stakeholders, including customers, investors, employees, and civil society organizations, are increasingly demanding responsible business practices. Adhering to the MCA NGRBC can help companies meet these expectations, build trust, and enhance their reputation in the market.
3. Risk Management: Companies face various risks associated with environmental, social, and governance issues, such as regulatory fines, reputational damage, and operational disruptions. By adopting the MCA NGRBC, companies can mitigate these risks by proactively addressing ESG considerations and implementing robust risk management practices.
4. Business Opportunities: Responsible business practices can create new business opportunities for companies. For instance, companies that adopt sustainable practices can tap into growing markets for eco-friendly products and services, attract socially-conscious investors, and gain a competitive edge by meeting customer preferences for socially responsible brands.
5. Long-term Sustainability: Businesses need to adopt a long-term perspective to ensure their sustainability and resilience in a rapidly changing world. The MCA NGRBC provides a roadmap for companies to integrate sustainability into their business strategies, operations, and decision-making processes, which can contribute to their long-term success.

Steps to Implement the MCA NGRBC

To implement the MCA NGRBC, companies can follow these steps:

1. Assess Current Practices: Companies should conduct a thorough assessment of their existing business practices to identify gaps and areas for improvement in terms of ethical, environmental, social, and governance considerations.
2. Develop a Policy: Based on the assessment, companies should develop a comprehensive policy that outlines their commitment to responsible business conduct. The policy should align with the principles of the MCA NGRBC and be approved by the board of directors.
3. Implement Action Plans: Companies should develop action plans to implement the policy across their operations. This may involve setting specific targets, defining responsibilities, and allocating resources to address identified gaps.
4. Monitor and Report Progress: Companies should regularly monitor and report their progress towards implementing the MCA NGRBC. This includes tracking key performance indicators (KPIs), conducting audits, and preparing sustainability reports to communicate their efforts to stakeholders.
5. Engage with Stakeholders: Companies should actively engage with their stakeholders, including employees, customers, investors, suppliers, local communities, and civil society organizations, to understand their concerns and incorporate their feedback into their responsible business practices.
6. Build Capacity: Companies should invest in building the capacity of their employees and other stakeholders to understand and implement responsible business practices. This may include training programs, workshops, and awareness campaigns to promote a culture of responsible business conduct.
7. Collaborate and Innovate: Companies should collaborate with other stakeholders, including industry peers, government agencies, and civil society organizations, to drive collective action towards responsible business conduct. This may involve sharing best practices, participating in industry initiatives, and fostering innovation to develop sustainable solutions.

The Rationale for Revision of NVGs and Introduction of NGRBC

The Ministry of Corporate Affairs (MCA) released the National Voluntary Guidelines on the Social, Environmental and Economic Responsibilities of Business (NVGs) in 2011 to provide guidance to businesses on responsible conduct. In 2015, the revision process began to align the NVGs with the Sustainable Development Goals (SDGs) and the UN Guiding Principles. The updated version, called the National Guidelines on Responsible Business Conduct (NGRBC), aims to assist businesses in performing beyond regulatory compliance.

Updated Rationale for the NGRBC

The National Guidelines on Responsible Business Conduct (NGRBC) have been updated to reflect key national and international developments in sustainable development and business responsibility since their release in 2011. The primary rationale for the update is to capture the following key drivers:

1. UN Guiding Principles for Business and Human Rights (UNGPs): The UNGPs were endorsed by the UN Human Rights Council in 2011 and have become the authoritative global standard for Business and Human Rights. They recognize the State’s obligations to respect, protect and fulfill human rights and fundamental freedoms, the requirement of business enterprises to respect human rights, and the need for access to effective remedy for those who are affected by adverse business-related human rights impacts or abuse. In support of the UNGPs, the UN Working Group (UNWG) was established to facilitate their global dissemination and implementation, and has strongly encouraged all States to develop a National Action Plan (NAP).
2. UN Sustainable Development Goals (SDGs): The 2030 Agenda for Sustainable Development was adopted by the UN General Assembly in 2015 and established seventeen SDGs, comprising targets and indicators, as well as follow-up and review mechanisms. The SDGs recognize the role of business as a major driver for economic growth and infrastructure, whilst explicitly calling for businesses to act in accordance with the UNGPs. The SDGs are mapped against the NGRBC in Annexure 4.
3. Paris Agreement on Climate Change (2015): This is an agreement under the United Nations Framework for Climate Change (UNFCC) reached in December 2015, in which countries have committed to take steps to combat climate change and adapt to its effects. India ratified the agreement on 2nd October 2016, and its commitments are called the National Determined Contributions (NDCs). The Paris Agreement also constitutes SDG 13.
4. Core Conventions 138 and 182 on Child Labour by the International Labour Organization (ILO): India ratified ILO Core Conventions 138 (minimum age of employment of children) and ILO Core Convention 182 (worst forms of child labour) in June 2017^[1].
5. Annual Business Responsibility Reports (ABRRs): The Securities Exchange Board of India (SEBI) amended the Listing Agreement for companies listed in the stock exchanges in India in 2012, mandating the submission of an ABBRs by the top 100 listed companies. The ABRR is based on the Business Reporting Framework of the NVGs, and SEBI has since extended this requirement to the top 500 listed companies.
6. Companies’ Act 2013: Section 135 of the Companies Act 2013 requires companies to undertake Corporate Social Responsibility (CSR) initiatives in communities, and has since provided additional rules and guidance on the areas and target groups of such interventions in consistency with national socio-economic priorities.`

Conclusion

The Ministry of Corporate Affairs (MCA) National Guidelines on Responsible Business Conduct (NGRBC) are an important framework for promoting ethical and sustainable practices among companies in India. By integrating responsible business conduct into their operations, companies can create long-term value, meet stakeholder expectations, and contribute to societal well-being. Adhering to the MCA NGRBC and other relevant guidelines, and reporting on CSR initiatives and sustainability practices, can help companies demonstrate their commitment to responsible business conduct and contribute to building a more sustainable and inclusive business environment.