At present, corporate governance and sustainability are integral part of business operations. The businesses' that ignore strategizing on these aspects, might have to bear the consequences, of being unable to balance the interests of the stakeholders. As part of corporation's relationship with the stakeholders, the framework of rules and practices which the board decides must ensure accountability, fairness and transparency.
In future, the businesses are expected to become more transparent, accountable and sustainable to survive in the global volatile markets. This means the businesses have to become more vigilant and have an efficient mechanism at place to overcome the abuse of the triple bottom line approach.
Despite other economies virtually going through recession, India remains positive from the global investor perspective. The principles of corporate governance and sustainability in India are slowly being incorporated by businesses in the last two decades. It may be understood that the business environment in India is significantly different to that of the western countries. Therefore, considering that aspect in the forefront, one may question, "would it be right and wise to refer to the principles of corporate governance and sustainability on the models developed for and in a market segment significantly different than that of India?
With 1.27 billion population, India needs to grow rapidly for the next two decades to be able to meet the demands of its citizens. The government has been working to make India a business friendly destination, for attracting investors from across the world to be part of India's growth story. Make in India is a campaign to attract foreign direct investments (FDI) to various sectors urging them to manufacture in India, instead of China. Other initiatives that the government is working to enhance capacity of the youth in terms of employmability and entrepreneurship are Skill India, Digital India, Start up India, etc. With these initiatives, India aims to become the global start-up hub, overcoming Israel and challenging China by becoming the global factory.
If these campaigns provide a major boost to the manufacturing sector to grow at a rate of 14-15 percent, it is expected that the Indian GDP will grow at 8-9 percent. However, only 10 percent of the manufacturing sector is essentially on a sustainability framework. Not only sustainability, corporate governance of these manufacturing firms are also crucial to improve the present situation. Taking into consideration the energy requirements, there has also been a significant boost in the investments on renewable energy to meet the additional demand, especially in solar power.
The gap in the realisation of the need to have sustainable development along with CSR by the corporations, made the government authorities enforce a law. Currently, India has only been limited to developing industrial parks, special economic zones and industrial estates largely due to boom in the IT sector. The recent push in developing industrial corridors is likely to boost the manufacturing sector along with the support of the Make in India campaign that opens the sector for FDI. Excluding the active systems such as Clean Development Mechanism, PAT scheme and SEBI guidelines, the government must come up with different laws or stricter regulations to ensure good corporate governance and sustainable development.
Regarded as the engines of growth, it is crucial to bring SMEs within the ambit of sustainable development plan and corporate governance. As SMEs have restrictive budgets, it can prove to be difficult for them to go green while ensuring their business prospers. This is an area where government intervention is required to ensure green funds are available to them. The SME sector has been looking at sustainability differently and are not much inclined towards environmental issues, resource conservation or energy efficiency, rather their focus is majorly on pollution control board regulations, labour laws, minimum wages etc. In future, the SMEs need to understand their role in ensuring sustainability, despite having lesser carbon footprints with adoption policies of water and energy conservation to reduce environmental impacts.
Economists around the globe believe that India is on its way to becoming $4-5 trillion economy in the next 7-10 years. Let us all work together, government, businesses and individuals, establishing corporate governance and sustainability frameworks to make India an sustainable nation.
The author, Soumitro Chakraborty of CEO, Fiinovation, a gobal CSR Consulting company.