As the world’s largest democracy things can move slowly in India. However once change has started it can quickly gain momentum. One instance is the Indian Government’s Companies Bill 2011 which is New Delhi’s first wholesale overhaul of corporate legislation since 1956.
The Indian Government first dipped its toe into corporate responsibility in 2009 with the Ministry of Corporate Affairs’ Corporate Social Responsibility Voluntary Guidelines. The new Companies Bill (among many things) again ups the ante on corporate sustainability. That’s not to say that Indian based multi-nationals, such as Tata and Mahindra Group have been inactive on sustainability. However, it’s the pace of corporate change that vexes Minister for Corporate Affairs, Veerappa Moily. Speaking on 1st February, he highlighted India’s misalignment between being the world’s 9th largest economy while still struggling to achieve the Millennium Development Goals. This he feels is the lightning rod to the current Government’s programme to promote corporate sustainability.
Particularly noteworthy in the Companies Bill is the requirement for companies with a turnover of 50,000,000 IR (640,000 GBP) to establish a Corporate Responsibility Committee to formulate and oversee a Corporate Social Responsibility Policy. Schedule VII of the Bill describes the range of acceptable activities. Initially these committees were to have an annual budget of 2% of average net profit. However this has been downgraded to a recommendation only.
Although the Companies Bill has not yet become statute, it’s clear that despite the wait corporate sustainability is here to stay in India. In part two we’ll examine how new Indian listing regulations complement the Companies Bill and will push the activities of the Corporate Responsibility Committee into the public domain.