Corporate Sustainability

Voluntary Codes for Sustainability

Term III
(Session 14)

Dr. Madhurima Basu

[email protected]
What are voluntary codes of
sustainability?
• Self-regulated guidelines that help businesses improve ESG
performance and sustainability.
 Why Do Businesses Adopt Voluntary
Codes?
• Competitive Advantage: Enhances brand reputation.
• Risk Management: Reduces ESG-related risks.
• Market Access: Helps businesses meet investor & global trade requirements.
• Regulatory Readiness: Prepares companies for future sustainability laws.
Types of Voluntary Codes in
Corporate Sustainability
1. Global Sustainability Frameworks
Eg: UN Global Compact (UNGC), SDGs, ISO 26000 etc.
2. Environmental & Climate-Related Codes
Eg: ISO 14001, Carbon Disclosure Project, Equator Principles etc.
3. Ethical Supply Chain & Human Rights Standards
Eg: Fair Trade Certification, Ethical Trading Initiative etc.
4. Sustainable Finance & Investment Codes
Eg: Ethical Trading Initiative, Green Bond Principles etc.
 The Ten Principles of the UN
Global Compact
Human Rights Labour Environment Anti-Corruption

• Principle 1: • Principle 3: • Principle 7: • Principle 10:

Businesses should Businesses should Businesses should Businesses should
support and respect uphold the freedom support a work against
the protection of of association and precautionary corruption in all its
internationally the effective approach to forms, including
proclaimed human recognition of the environmental extortion and
rights right to collective challenges. bribery.
bargaining. • Principle 8:
• Principle 4: the undertake
• Principle 2:
elimination of all initiatives to
make sure that forms of forced and promote greater
they are not compulsory labour. environmental
complicit in • Principle 5: the responsibility.
human rights effective abolition • Principle 9:
of child labour. encourage the
abuses. • Principle 6: the development and
elimination of diffusion of
discrimination in environmentally
respect of friendly
employment and technologies.
occupation.
 Benefits of Joining the UN
Global Compact
• Global Recognition – Align with UN Sustainability Goals.
• Networking & Partnerships – Connect with corporate leaders & sustainability experts.
• Learning & Training – Access resources, workshops, and guidance on ESG practices.
• Competitive Advantage – Enhance investor confidence & brand reputation.

https://unglobalcompact.org/interactive
ISO 26000: Social Responsibility
Standard
• ISO 26000 is an international standard developed by the
International Organization for Standardization (ISO) to provide
guidance on social responsibility (SR) for organizations.
• Unlike other ISO standards, ISO 26000 is not a certification but a
voluntary guideline that helps organizations operate in a socially
responsible manner.
 Key Features of ISO 26000
1. Non-Certifiable – Provides guidance rather than requirements
2. Applies to All Organizations – Businesses, NGOs, and government bodies.
3. Focuses on Sustainable Development – Aligns with UN SDGs.
4. Stakeholder-Oriented – Encourages dialogue with employees, communities, and consumers.
Core Principles of ISO 26000
1. Accountability – Organizations are responsible for their decisions and actions.
2. Transparency – Operations and impacts should be openly communicated.
3. Ethical Behaviour – Conducting business with integrity and fairness.
4. Respect for Stakeholder Interests – Addressing the concerns of employees,
consumers, and society.
5. Respect for Rule of Law – Complying with local and international laws.
6. Respect for Human Rights – Upholding universal human rights in all business
operations.
7. Respect for International Norms of Behavior – Adopting global best practices
beyond legal compliance.
The Indian Context….
 From NVG to NGRBC
The Ministry of In order to align The new

NGRBC
NVG

Revision of NVG
Corporate Affairs the NVGs with the principles are
(MCA), Sustainable called the
Government of Development National
India, released a Goals (SDGs) and Guidelines on
set of guidelines the ‘Respect’ Responsible
in 2011 called the pillar of the Business
National United Nations Conduct
Voluntary Guiding Principles (NGRBC). As with
Guidelines on the (UNGP), the the NVGs, the
Social, process of NGRBC has been
Environmental revising the NVGs designed to assist
and Economic began. businesses to
Responsibilities of perform above
Why Responsible Business Conduct
Matters?
• Economic Impact: Enhances market competitiveness and investor trust.
• Social Impact: Builds stakeholder and community trust.
• Environmental Impact: Reduces carbon footprint and waste.
The 9 Principles of NGRBC
Principle 1 – Ethical Principle 2 – Principle 3 –
& Transparent Sustainable Goods Employee Well-
Governance & Services being & Diversity

Principle 6 – Principle 5 – Principle 4 –

Environmental Respect & Promote Stakeholder
Responsibility Human Rights Engagement

Principle 9 –
Principle 7 – Principle 8 –
Responsible
Transparent Public Inclusive Growth &
Consumer
Policy Advocacy Social Development
Engagement
Principle 1 – Ethical & Transparent
Governance
• Businesses should be transparent, ethical, and accountable.
• Disclose policies, procedures, and financial performance.
• Promote responsible decision-making and governance structures.
Principle 2 – Sustainable Goods &
Services
• Design eco-friendly and safe products.
• Transition towards a circular economy (reduce, reuse, recycle).
• Encourage sustainable consumption through responsible marketing.
Principle 3 – Employee Well-being &
Diversity
• Ensure safe working conditions and fair wages.
• Prohibit child labor, forced labor, and workplace discrimination.
• Promote work-life balance and skill development.
Principle 4 – Stakeholder
Engagement
• Consult stakeholders on business decisions and social impact.
• Ensure transparency in assessments and grievance mechanisms.
• Focus on marginalized and vulnerable groups.
Principle 5 – Respect & Promote Human
Rights
• Align with Indian Constitution & International Human Rights
Standards.
• Conduct human rights due diligence in supply chains.
• Provide access to grievance redressal mechanisms.
Principle 6 – Environmental
Responsibility
• Reduce emissions, pollution, and resource depletion.
• Support climate change mitigation & adaptation efforts.
• Implement sustainable waste management practices.
Principle 7 – Transparent Public
Policy Advocacy
• Engage in ethical lobbying and corporate advocacy.
• Avoid misleading influence over regulatory frameworks.
• Promote policies for social and environmental good.
Principle 8 – Inclusive Growth &
Social Development
• Support local communities, small businesses, and rural economies.
• Align CSR initiatives with national development goals.
• Ensure fair compensation in land acquisition cases.
Principle 9 – Responsible Consumer
Engagement
• Provide safe, high-quality, and fairly priced products.
• Disclose product risks and environmental impact.
• Establish consumer grievance redressal mechanisms.
Reporting Framework & Compliance
• Annual Business Responsibility Reporting (ABRR) mandatory for top
500 companies.
• Encourages adoption of ESG performance indicators.
• Aligns with SEBI’s business responsibility compliance requirements.
• These reporting mandate enabled business to demonstrate the adoption
of the NGRBC principles.
Challenges with Voluntary Codes in
Sustainability
• Lack of Enforcement - No legal requirement for adoption.
• Greenwashing Risks - Some companies use certifications without real
impact.
• High Compliance Costs - Implementing sustainability initiatives can be
expensive.
• Complexity & Overlap – Many different codes create confusion for
businesses.
Why Companies Should Adopt
Voluntary Codes?
• Builds long-term brand trust and stakeholder confidence.
• Reduces regulatory risks by aligning with emerging laws.
• Improves access to sustainable finance & impact investments.
• Enhances corporate social responsibility (CSR) initiatives.
Case Study: Greenwashing Risks
• Volkswagen Emissions Scandal (2015)
• Falsely claimed to meet environmental standards.
• Damaged brand reputation and cost billions in fines.