II. Evolution of Business and Human Rights in India

This section outlines India’s long history with the UN and human rights. It then explores how this history has enabled the integration of the business and human rights agenda into the responsible business policy formulation process. India was a founding member of the UN and played an active role in drafting the Universal Declaration of Human Rights (UDHR). She was one of the original signatories to the International Covenant on Civil and Political Rights and a signatory to the International Covenant on Economic, Social, and Cultural Rights. As the UDHR consultation process coincided with India’s independence movement, the influence of the UDHR is evident in the Indian constitution drafted in 1950 with its emphasis on the dignity of the individual.Footnote ³ The Indian constitution provides a unique combination of justiciable and non-justiciable rights. The first generation of human rights, consisting of civil and political rights such as the right to life, religion, expression, press, association and mobility, are included in the enforceable fundamental rights of the Indian constitution. The second generation of human rights, namely social, economic and cultural rights including education, employment, livelihood, just and fair work conditions, food, housing, health, welfare and social security measures for women, children, indigenous tribes and minorities, were placed in the non-justiciable part of the constitution. The third generation of human rights like development, environment, refugees, displaced persons and vulnerable sections of society has been enunciated in international human rights instruments and UN resolutions. Predating the UNGPs, the Indian judiciary has striven to bridge the gap and meaningfully integrate the enforceable fundamental rights and the aspirational set of directive principles of state policy. Since the Bhopal gas tragedy of 1984 and other environmental disasters, the Supreme Court of India has re-interpreted the universal tortious principle of ‘strict liability and developed a non-negotiable obligation of absolute liability’.Footnote ⁴ The Supreme Court has also incorporated reference to international treaties, the ‘precautionary’ and ‘polluter pays’ principles, and widened the scope of the traditional public trust doctrine to include even non-state actors and corporations. The rights of women, children, minorities, including migrant workers, marginalized groups like scheduled castes, scheduled tribes, and people displaced by infrastructure projects, have been recognized as vulnerable groups and offered protection through the constitution and institutions like the National Human Rights Commission of India (NHRI). Against this backdrop, the idea of human rights per se is not new to India; however, the discourse on business and human rights within the UNGPs is relatively new.

The UN Global Compact (UNGC) played a crucial role in seeding the idea of business and human rights. The Global Compact Network India (GCNI) was one of the first national chapters to be established in 2001. In the initial stages, public sector organizations, especially oil and natural gas companies, took a lead role in the GCNI. The oil companies were going global, and their businesses posed environmental and social risks. The UNGC, as a multi-stakeholder initiative, provided them with an opportunity to align with international principles. Partners in Change (PIC), a civil society organization working on corporate responsibility, became the secretariat of the UNGC network. PIC got a ringside view of the global discourse and the discussions at the UNGC on principles 1 and 2, which covered the human rights agenda.

In 2007, the Prime Minister of India, at a meeting of the confederation of Indian industry (CII), urged businesses to demonstrate ethical, social and environmental responsibilities. Immediately afterwards, in 2008, a four-year project on responsible business was initiated by the Indian Institute of Corporate Affairs (IICA), an arm of the MCA, with support from the German international cooperation enterprise for sustainable development (GIZ). The project’s objective was to provide a multi-stakeholder platform to dialogue, determine the Indian concept of business responsibility, and develop a set of guidelines for companies to disclose their social, environmental and economic responsibilities voluntarily. IICA constituted the Guidelines Drafting Committee (GDC) to craft the policies. As the implementation partner to the project, PIC brought their experience with the UNGC and held consultations with business and civil society actors. In 2009, the corporate social responsibility (CSR) voluntary guidelines were released, which contained the intent of the MCA to the responsible business agenda and the guidelines explicitly mentioned human rights.

In 2009, PIC organized the first regional consultation by the UN Special Representative of the Secretary-General on human rights and transnational corporations and other business enterprises (SRSG) on the ‘Protect–Respect–Remedy’ framework in New Delhi with stakeholders from the Asia Pacific region representing labour unions, corporations, government, academia, industry associations and civil society.Footnote ⁵ The SRSG also visited the NHRI. During his visit, GDC members had deliberations with the SRSG and decided to integrate the ‘Protect–Respect–Remedy’ framework into the guidelines.

In 2011, the NVGs (replacing the CSR voluntary guidelines) launch marked a watershed moment as they were the first official national framework on responsible business. The NVGs explicitly mentioned the ‘Protect–Respect–Remedy’ framework and they were applicable irrespective of size, sector or location. The NVGs also defined the BRR framework, which is a format for disclosures. In 2012, the Securities and Exchange Board of India (SEBI) mandated the top 100 listed companies based on market capitalization to report on the BRR. SEBI extended BRR disclosures to the top 500 companies in 2015. While the SEBI took the lead in implementing the BRR, MCA, the architect of the NVGs, was engaged in releasing the new and updated companies act in 2013. The act explicitly articulated the fiduciary responsibility of the directors towards stakeholders, thereby strengthening the NVGs. The act also introduced a mandatory CSR clause that required companies to spend two per cent of their profits on social development activities and disclose such expenditures in their financial statements and publish a separate CSR report. However, the business and human rights agenda took a backseat. There was no progress on the business and human rights agenda from 2013 to 2018, other than the NVG disclosures mandated by SEBI. In 2015, the model Bilateral Investment Treaty included a provision that asked investors to voluntarily incorporate internationally recognized CSR standards in their practices and internal policies.

In 2018, the MCA reviewed the NVGs after consultations with stakeholders and released the updated National Guidelines on Responsible Business Conduct (NGRBC). In his opening message in the report, the Honorable Prime Minister of India statedFootnote ⁶: ‘The NGRBC is dovetailed with the United Nations Guiding Principles on Business & Human Rights (UNGPs). The NGRBC intends to make companies more responsible and accountable and create a whole ecosystem to “Protect, Respect & Remedy” as envisaged in the UNGPs. I sincerely hope that the NGRBC would usher a new philosophy of responsible and sustainable business’.

In 2019, MCA released the revised disclosure format Business Responsibility and Sustainability Reporting framework (BRSR) for mid-sized and large companies aligned with the new NGRBC. SEBI mandated the top 1000 companies based on market capitalization to disclose in line with the reporting framework. In 2019, the World Business Council for Sustainable Development (WBCSD), in collaboration with CII, released a primer for companies on business and human rights.

In 2019, the NHRI set up a working groupFootnote ⁷ on business and human rights to examine the commission’s specific role in advancing the business and human rights agenda. It also commissioned research projects to understand the state of business and human rights. Also, the zero draft of the national action plan on business and human rights (NAP) was released in 2019. In February 2020, the second phase of consultations and deliberations on the NAP began, and the working group submitted its report in May 2020.

In sum, since 2018, MCA has taken several actions to revive the responsible business and human rights agenda. These actions are likely to bear fruition only in the next decade. In the next section, we take stock of the progress of the NVGs and the human rights agenda.

III. Taking Stock

While the decade began with a promise and inclusion of the ‘Protect–Respect–Remedy’ framework in the responsible business framework, the reality at the end of the decade is disheartening. Corporate Responsibility Watch (CRW), a voluntary network of civil society actors, tracked the top 100 listed companies’ disclosures based on the BRR framework. Their analysis revealed that while companies reported that they have policies in place on business and human rights, the supporting evidence was not provided.Footnote ⁸ Other studies support the findings that the disclosures on human rights were weak, and very few organizations mentioned human rights due diligence in their disclosures.Footnote ⁹ While the NVGs went beyond the UNGPs in spirit, asking businesses to promote human rights, the CSR regulation distracted policymakers’ and corporate attention. However, the CRW 2018 report also sums up the positive impact of NVGs:Footnote ¹⁰

An essential contribution of the NVGs has been assigning a responsibility to promote human rights to businesses, rather than merely one to respect them. It is here that the NVGs go beyond the UNGPs. The guidelines drafting committee deliberated on the inclusion of the responsibility of promotion. The committee’s view was that in countries like India, large businesses and the formal sector are responsible for creating awareness for human rights impacts along their supply chains. The formal sector consists of state-owned enterprises, subsidiaries of foreign multinationals, firms affiliated with business groups, and stand-alone firms.Footnote ¹¹ In business groups and stand-alone firms, family-owned firms constitute 85 per cent of India’s total number of companies.Footnote ¹² However, nearly 81 per cent of all employed people in India work in the informal sector, with only 6.5 per cent in the formal sector and 0.8 per cent in the household sector.Footnote ¹³ Placing the accountability of promoting human rights explicitly and squarely on large businesses provides an opportunity for corporations to positively influence the human rights agenda in the large informal sector, which constitutes a substantial part of their supply chains.

While the spirit of the NVGs was laudable, our analysis reveals that the weak and patchy implementation has undermined the larger purpose and intent behind the national framework. We identify seven reasons for the weak implementation.

• • Multiple policies and regulatory changes done by the State in quick succession lacked coherence and consistency. The implementation of the policies required several actors to act in tandem, which did not happen. While SEBI mandated the BRR disclosure framework for listed entities, MCA left the disclosures voluntary for unlisted and privately held companies under its purview. This inconsistency in policy implementation meant that listed companies carried an excessive burden on disclosures. The disclosures for private and unlisted companies, whose operations equally impacted human rights, were voluntary under the policy.

• • The modalities of how the large informal sector would come under the purview of the NVGs were not clear. While the NVGs mention that businesses have to be responsible for their supply chains, it does not spell out how exactly this will occur in the face of a large informal sector. The informal sector consists of unincorporated private enterprises owned by individuals or households engaged in the sale and production of goods and services and operated on a proprietary or partnership basis and with less than ten total workers. Informality refers to a situation where labour protection and employment security are not available due to contractualization, flexibilization and casualization of labour.Footnote ¹⁴ These enterprises do not come under the purview of labour laws.Footnote ¹⁵ Therefore, informal employment occurs not only in the unorganized sectors where labour laws do not apply but also in sectors where such laws do apply but are not enforced.Footnote ¹⁶

In the last decade, increased economic activity in the formal sector has occurred through contract manufacturing and production outsourcing. In such cases, firms have used more numbers of temporary and contract workers instead of permanent workers to augment production, thereby increasing the percentage of informal workers, leading to the ‘informalization of the formal’.Footnote ¹⁷ Workers and producers in the informal economy are linked to the global economy through supply chains. The formal–informal sector linkages are tight, and the supply chains cross over at several places. Most of the workforce in key export industries, including garments, textiles, sports shoes and electronics, work under informal employment arrangements. For example, in the garment sector, production is highly fragmented and globally distributed. Only 3.7 per cent of India’s garment sector workers are under formal employmentFootnote ^{18 ,} Footnote ¹⁹ The production occurs through a complex system of subcontracting and in-contracting networks across different segments of the supply chain where garments ‘enter and exit production lines, move from unit to unit, and may enter homes before going back to the production premise in a sort of ‘semi-assembly line’.Footnote ²⁰ Nearly 30 per cent of the informal workforce are illiterate; 52 per cent of the informal labour force are those only with education up to secondary level, and 40 per cent of these 52 per cent have less than eight years of schooling. As recently as 2017–2018, only 2.4 per cent of the workforce have formally acquired vocational education or training. Most of the illiterate are either casual workers or self-employed, usually engaged in low productivity work.Footnote ²¹ Gross human rights violations often occur in the informal sector. From a policy perspective, it is unclear what mechanisms are available to large firms to demonstrate their accountability in this sphere.

• • CSR is globally understood as voluntary by companies.Footnote ²² CSR’s unique definition in India, as mandatory monetary spend on social development projects, posed challenges for multinational companies. The companies approached this regulation with a dominant compliance orientation. The companies act requires a CSR committee’s constitution at the board level responsible for the formulation, implementation and monitoring of the CSR policy. Given their unfamiliarity in handling social development projects in partnerships with not-for-profit organizations, the companies focused on short-term impact-oriented projects, mostly geared towards corporate philanthropy, rather than on projects that could contribute to the SDGs. In the initial years, the MCA spent significant effort in providing clarifications and conducting awareness-building workshops across the actors to implement the act effectively. It took the MCA five years to clarify that the CSR clause intended to harness the power of business as a force for good and bring innovations into the social sector to achieve the SDGs. More deliberate integration of the SDGs into CSR and the business and human rights agenda can strengthen human and social development at a national level.

• • There have been significant changes in the political context in the last decade, which have impacted the implementation of the policies. The Indian National Congress, the ruling party until 2013, took five years to shape the policy changes, including the CSR mandate and the NVGs to align with the inclusive growth agenda. In 2014, the Bharatiya Janata Party that came to power was responsible for implementing the NVGs and the CSR agenda. Business and human rights was not on their immediate political agenda. This shift in focus among the political actors stalled the implementation of the NVGs and the human rights agenda. The Government has only recently revived the agenda.

• • SEBI has been excessively dependent on voluntary disclosures through BRR by large, listed companies. Unfortunately, the NVGs, rooted in the ‘comply or explain’ approach, do not elaborate any process or medium to explain non-compliance. Such disclosure of non-compliance is critical so that stakeholders can exert pressure on companies that fail to comply.Footnote ²³ Subsequent studies have shown that reporting and disclosures through BRR have been weak and do not provide any insights on companies’ responsible conduct.Footnote ²⁴ While India’s corporate governance processes align with the global trends of mandating through disclosures, such disclosures require to be analysed. In case of non-compliance, companies need to be held accountable. The absence of institutions that can exert pressure on companies through disclosures has also thwarted the policy makers’ intent.

• • With business and human rights subsumed under the umbrella of responsible business conduct, the rights holders’ centrality that characterizes the UNGPs has been lost. Business and human rights are one of the nine principles elucidated in the revised NGRBC. The remaining eight principles focus on stakeholders like customers, sustainable product, community and environment. The propensity exists at a firm level to treat human rights as another aspect of responsible business and embed it into the existing structures. However, the substantive nature of human rights that brings corporate accountability into the public realm to mitigate or prevent adverse impacts moves away from the responsible business approach.Footnote ²⁵ It focuses on victims or affected individuals and communities and provides a basis for remedies and justice. The focus on responsible business potentially could miss this significant and nuanced difference in implementation.

• • There are significant differences in economic and social development and legislative capacity across India’s twenty-nine states. Similarly, the organizational landscape of the businesses in these states is also significantly different. In a federal structure, where both the central and state governments can legislate on the environment and labour-related matters, policy incoherence is inevitable and has the potential to result in human rights violations. There are also significant variations in awareness of business and human rights across all the actors. There is also a belief that human rights are more relevant in core sectors like manufacturing than in the agriculture and services sector. Given the diversity arising out of the geography of operations, nature of industries, awareness of human rights, and states’ legislative capacity, strengthening implementation mechanisms is essential to move the business and human rights agenda forward.

To summarize, while policy intent on human rights and responsible business has moved in the right direction, the implementation has been patchy, fragmented, inconclusive, and lacking in vision. The inconsistent policies on disclosures on responsible business across the different types of organizations, weak mechanisms to integrate the large informal sector into the business and human rights agenda, the changes in the political context, the distraction of policymakers and corporates because of the CSR agenda, inadequate enforcement mechanisms even in the case of disclosures by listed companies, the dilution of the centrality of rights-holders within the larger responsible business discourse and finally the differences across states in the legislative and enforcement capacity to champion the business and human rights agenda create unique implementation challenges in developing countries like India.

IV. Strengthening Implementation

Prior research on CSR in developing countries has noted the prevalence of complex institutional and macro-level antecedents. Firm ownership, economic relations between actors and employee–employer relations differ across the countries and create unique systems.Footnote ²⁶ The salience of multiple actors involved in formal and informal governance and hybridized CSR forms impact CSR policy and practice. There is growing recognition that CSR forms in the developing world are invariably contextualized and locally shaped by multi-level factors and actors embedded within wider formal and informal governance systems.Footnote ²⁷ The evolution of India’s responsible business and human rights journey appears to mirror all the challenges identified in the literature.

The high compliance requirements on disclosures for the listed companies compared with the large private and unlisted companies accentuates the problem further. The NGRBC attempts to mitigate this problem by seeking disclosures across all companies, including medium-sized companies. The large informal sector consisting of small and medium enterprises that form parts of the supply and value chains of large businesses is embedded closely within the formal sector. These linkages are complex. Unbundling these economic relationships and placing accountability for implementing the responsible business and human rights agenda is a massive challenge.

In section II, we identified several actors who played a key role in the formulation and implementation of the responsible business and human rights agenda. Systematic collaboration between the actors can ensure that adequate formal and informal governance mechanisms are in place. The State protects the rights-holders; the companies promote and respect human rights in their realm of influence and impact; finally, the civil society and the NHRI can ensure that adequate redress and remedy mechanisms are available for victims. In this section, we outline each of the actors’ roles to strengthen the implementation.

The State’s role in ensuring that rights-holders are protected and adequate access to remedy is available to victims of human rights abuses is central. The NAP implementation will require harmonization and alignment of the laws. MCA’s role in the responsible business and human rights agenda is twofold, aiming to serve as a regulator and an evangelist of responsible business through the IICA. The NGRBC and BRSR are robust instruments and can alter the behaviours of companies. If companies are required to be socially responsible, they must also be socially accountable, and any report of their CSR activities must be made available for scrutiny to society. As the custodian of data from the disclosures, MCA can use analytics effectively to shape responsible corporate behaviour. The MCA’s regulatory role through appropriate enforcement and incentives to create a conducive context for responsible business will be vital. As governments are the largest procurer of goods and services, it may be appropriate to link the disclosures to the public procurement process. Such disclosures could hasten the company’s response to the responsible business and human rights agenda.

IICA, as the extended arm of MCA, can be tasked to provide thought leadership in building capabilities of companies to comply and abide through self-regulation. IICA has a crucial role in convening CEO forums to foster leadership commitment to NGRBC. IICA needs to create a multi-stakeholder platform to ensure that companies’ grievances related to adverse human rights impacts are highlighted and brought to the fore. While the NAP will strengthen the State’s role in protecting and remediating, building capacity among corporations to report adverse human rights impact is key to supporting the responsible business agenda. MCA can set up a committee consisting of all the stakeholders to review the implementation of the NGRBC periodically.

Respecting human rights is not a passive responsibility: it requires businesses to have appropriate policies and processes in place. The UNGPs require policy commitment, a human rights due diligence (HRDD) process, and processes to enable remediation and disclosures. HRDD has to provide sector-specific insights on potential and actual impacts that a business may have on its rights-holders through its activities. Companies should use these insights to mitigate or remedy the adverse effects on rights-holders. The NGRBC envisages BRSR disclosures as the mechanism to hold companies accountable. Such accountability would require companies to create awareness among senior leaders, sensitize key personnel engaged in activities that cause harm and violate rights-holders’ interests, and train all their employees to identify risks from rights-holders’ perspectives. The CII has already begun to support the implementation of the NGRBC through its advisory. However, the industry associations can exercise informal peer pressure on companies to develop, participate and create industry-specific human rights standards and submit themselves for audit.

The NHRI has played a crucial role in promoting and protecting human rights in cases concerning violations and abuses committed by the State. Now, the NHRI needs to integrate business and human rights aspects into its activities in a deliberate manner. The recent intervention of the NHRI through suo moto action during the migrant labour crisis reaffirms its role in engaging with labour issues in the informal sector. The NHRI can play a key role in strengthening human rights awareness in the value chains and in the informal sector. Such understanding and education will ensure that rights-holders are aware of their rights and seek appropriate redress in case of violations. The NHRI needs to partner with think tanks and other civil society institutions and proactively use data and analytics to ensure oversight of companies and industries involved in gross human rights violations and abuses. It also needs to provide training to businesses and human rights defenders and support them to continue to raise their voice on gross human rights abuse and violations.

Many civil society organizations have worked on business and human rights issues even before the NVGs and UNGPs introduced the terminology. Civil society has two crucial roles in strengthening the human rights agenda: firstly, it can act as an independent rights-watch that can assess and audit compliance specific to human rights report adverse impacts. They will require specialist skills like understanding the sector and companies’ value chains to play their role as trusted advisors to business and government. Secondly, they need to advocate for victims of human rights abuses and act as a countervailing power to corporations. They need to partner with the NHRI in ensuring that redress and remedy is available to victims of human rights abuses by companies.

Tertiary level academic institutions need to train future managers and technical professionals on responsible business and human rights by building this into their curriculum. Young professionals need training in business and human rights with an emphasis on HRDD. Specialist training to support human rights defenders to pursue their agenda is key to effective remediation. Trade unions and labour groups will require new capabilities to use the disclosures in order to prevent and highlight abuses. Capacity building of the specialist groups through education and more systematic research and policy advocacy by academic institutions and think tanks on responsible business and human rights can accelerate the adoption of the NGRBC.

Collaboration between the various actors could create a co-regulation process for the responsible business and human rights agenda. The idea of ‘co-regulation’ is that the State’s legislated obligations are implemented through private control mechanisms, such as certification schemes, audits, and standard-setting entities, to demonstrate compliance with those obligations. CII, civil society and academic institutions could play a critical role in this process. CII as an industry body can, through a co-regulation framework, exercise peer pressure on its member companies to comply with the guidelines. Civil society organizations can provide guidance and support to build capacity and act as a watchdog in the co-regulation process. Academic institutions could create frameworks necessary to embed the responsible business agenda into the organizations. Through their research, academia could help track and report on disclosures and monitor the performance of companies.

Professional bodies like auditors, lawyers and accountants need to be a part of the responsible business and human rights agenda. With increased emphasis on integrated reporting, which seeks to provide a more holistic picture of an organization, including its intangible non-financial performance, a data and audit perspective on human rights and materiality matrix issues could become crucial. The professional bodies can help in embedding the framework into their engagement. Beyond the short-term measures proposed to strengthen human rights, there is a need to re-imagine how to embed and integrate human rights into the fabric of social thought for the next generation.