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SOCIAL RESPONSIBILITY IN INVESTING (SRI): A MANDATORY OBLIGATION FOR THE MNCs

“Economically efficient, sustainable global financial system is a necessity for long-term value creation. Such a system will reward long-term, responsible investment and benefit the environment and society as a whole”, says UNPRI.Social responsibility in investing means that individuals and companies have a duty to work in the best interests of their environments and society. Social responsibility is the idea that businesses should balance profit-making activities with activities that benefit society. It involves developing businesses with a positive relationship to the society in which they function. The International Organization for Standardization (ISO) says that a business’s relationship to its society and environment is a critical factor in operating properly. Social responsibility, as it applies to business, is known as corporate social responsibility (CSR).
The United Nations-supported Principles for Responsible Investment (PRI) is an international network of investors working together to put the six principles into practice. The goal of it is to understand the implications of sustainability for investors and support signatories to incorporate these issues into their investment decision-making and ownership practices. As of August 2017, more than 1,750 signatories from over 50 countries representing approximately US$70 trillion have signed up to the Principles. Under UNPRI Principle 1,it is expected from the companies to follow ESG matters like the other aspects in their due diligence. PRI‟s six principles are outlined in the text of the PRI below-
  1. Incorporate ESG issues into investment analysis and decision-making processes
  2. Be active owners and incorporate ESG issues into ownership policies and practices
  3. Seek appropriate disclosure on ESG issues by the entities in which they invest
  4. Promote acceptance and implementation of the Principles within the investment industry
  5. Work together to enhance their effectiveness in implementing the
  6. Report on their activities and progress towards implementing the Principles
There are several importance of SRI which can help at advancement in renewable energy, human rights and other social issues. It helps by investing in corporations focused on improving the welfare of the community and environment. When following this investment strategy, the companies can receive a return on investment, while also promoting social responsibility. SRI is typically rewarding for both the investor and the community. With socially responsible investments (SRI), companies are held to a higher standard in terms of social and environmental practices. The funds encourage companies to take different factors into consideration, such as workplace practices, environmental concerns, product safety, and human rights, which contribute to the overall impact on society. The result is a better world today and in the future.Also, many of these investment approaches target specific themes, such as focusing solely on environmental issues, whereas responsible investment is a holistic approach that aims to include any information that could be material to investment performance.By managing human rights well, companies in the extractives industry can ensure inclusive socio-economic development and benefit from a number of opportunities, including:
  • being more attractive to prospective employees and investors;
  • enhanced employee motivation, leading to increased productivity and higher retention rates;
  • maintaining a diverse workforce and being better equipped to compete in the global economy;
  • having access to debt and equity markets;
  • developing/sustaining a social license to operate and the building of good community relationships.
The Guidelines code of conduct that enjoy the backing of governments whose territories are home to almost 90 per cent of foreign direct investment flows and to 97 out of the top-100 multinational enterprises. The Guidelines establish non-binding principles and standards covering such areas as human rights, disclosure of information, anti-corruption, taxation, labour relations, environment, competition and consumer protection. The Guidelines also “encourage, where practicable, business partners including suppliers and subcontractors, to apply principles of corporate conduct compatible with the Guidelines.”
The OECD Guidelines for Multinational Enterprises (referred to as the OECD Guidelines), were adopted in 1976. They cover a range of issues, including labor and human rights, bribery and corruption, the environment and information disclosure. The SRI community can use the OECD Guidelines. It outlines how the OECD Guidelines fit into the larger CSR normative framework, vis-à-vis other internationally-agreed guidelines and instruments. They are voluntary for companies, yet they reflect endorsing governments’ expectations and complaints can be submitted to “National Contact Points” (NCPs) for alleged breaches. Complaints alleging violations of the Guidelines, as well as corporate responses to these complaints, can serve as a useful indicator of concerns surrounding corporate practices.
There are several cases where the complaint has been filed against the MNCs in the NCP for the breach of due diligence with different responses being received from them. A complaint was filed with the Canadian NCP against Canadian First Quantum Mining, the Canadian co-owner of Mopani, a Zambian mining company, the company agreed to undertake positive actionsby setting aside land for farmers, dropping levies on land and withdrawing the immediate threat of evictions. However, in the long-term the company did not follow up and breached every aspect of the resolution. • A complaint was filed simultaneously with the UK and Australian NCPs against Global Solutions Limited (Australia) Pty. Ltd (GSL) – a wholly owned subsidiary of the UK parent company Global Solutions Limited – which runs Australia’s immigration detention centers, they agreed to implement significant changes to ensure they operate under international human rights standards. • In a case filed with the German NCP against Bayer, with regard to their Indian supplier’s use of child labor, the company refused to attend a meeting with the NCP because they objected to the participation of one of the complainants.
Amnesty International India has written to several MNCs operating in Australia ,South Korea, U.K, USA, Hong Kong, The Netherlands and urged them to:
  • Take steps to ensure that they are following the principles and guidelines mentioned under the OECD and UNPRI.
  • Ensure that the ESG factors mentioned on their website are being followed by them in reality or not.

 

ABOUT THE AUTHOR:

 

 

 

Rishabh Srivastava is a II year student pursuing B.A. LL.B. course from Ramaiah Institute Of Legal Studies, Bangalore. He has a keen interest in the area of Refugee Law. 

1 Comment

  1. Ishan singh says:

    Nicely pen down article. Great way of representing each and every point.

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