Why has the IRBF been established?
The Indian private sector has seen considerable growth in the last 20 years, and it continues to expand. With its growing importance and influence, it is necessary for the private sector to take measurable steps towards ensuring sustainable, responsible and equitable growth.
To enable this, the Ministry of Corporate Affairs consulted with civil society organizations and in 2011, the National Voluntary Guidelines for Social, Environmental and Economic Responsibilities of Business (NVGs) were established. This move was followed by the Securities and Exchange Board of India’s mandate that requires the top 100 listed companies to submit a Business Responsibility Report as a part of their annual report.
However, the country still lacked a credible monitoring mechanism that would analyse the impact and intent of the companies’ activities, and gauge their adherence to the principles of the National Voluntary Guidelines, 2001. To address this need, Oxfam India, Corporate Responsibility Watch, Praxis and Partners in Change developed the IRBF index and have established the IRBF to generate a dialogue about responsibility as an essential part of doing business.
Why should a business care about being responsible?
As the strength and the importance of the private sector have grown, so has awareness about responsible business practices. There is recognition of the frenetic expansion of the private sector and the need for proactive action towards making it sustainable and equitable.
The stakeholders of a business – which include shareholders, employees, consumers as well as those involved in supply chain – are all conscious of the impact that a company has on society. It is vital for a company to be upfront and honest with these stakeholders about the steps it is taking to ensure that the benefits of its growth are distributed in a way that does good to all of them. Stakeholders view responsible companies more favourably, and as good corporate citizens, companies must strive towards gaining the support and respect of these stakeholders.
What does the index measure?
The NVGs cover a diverse range of principles pertaining to responsible business, broadly categorized as follows:
In this first stage of the index, the focus is on social inclusion. For this, the core principle is NVG Principle 8: Businesses should support inclusive growth and equitable development; but as areas of social inclusion underpin other principles of NVGs, the index also partly covers the following four principles:
NVG Principle 2: Product Life Cycle Sustainability
NVG Principle 3: Businesses should promote the wellbeing of all employees
NVG Principle 4: Businesses should respect the interests of, and be responsive towards all stakeholders, especially those who are disadvantaged, vulnerable and marginalized
NVG Principle 5: Businesses should respect and promote human rights
What doesn’t the index measure?
The index is created based on policy-related documents available in the public domain. However, it is possible that the companies may deem some of their policies “confidential,” in which case information about them is not available. The NVGs, through the Business Responsibility Reports, encourage companies to bring all their policies related to different stakeholders into the public domain. The index also does not measure is the actual compliance or performance of the companies vis-à-vis NVG principles. It reflects only publicly stated commitments.
Objective of Index
The long-term goal of the index is to enable systematic measurement of responsible business practice.
Which companies feature on the index?
The index analyses the top 100 companies listed on the Bombay Stock Exchange as per market capitalisation, which in 2012 were mandated by a circular of the Securities and Exchange Board of India (SEBI) to issue annual Business Responsibility Reports (BRRs) as part of their Annual reports. The sample for the index was also restricted to self-disclosed data of these top-100 companies, consistent with the date referred to in the SEBI circular.
How does the IRBF get the information for the index?
Data available in the public domain and self-disclosed (largely sourced through the company’s websites) was used for the purpose of this analysis. Documents available until 20th August 2015 were used. This includes five kinds of documents: