A business index is a compilation and analysis of statistical and policy-related data that sets the context for financial and economic conditions in a particular sector or region.
A ‘responsible business’ index, as the name suggests, measures what businesses are doing in terms of their social, environmental and ethical impact, apart from making profits. In today’s scenario, a responsible business index matters more than ever before and here are 5 reasons why:
5. It acts as the voice of the civil society
Civil society organisations hold companies accountable to their responsibility towards community, workers, environment, etc. Their efforts to hold the corporate sector accountable include advocacy, dialogue, demonstrations, protests, petitions and campaigning. However, civil society voices are often unheard due to the lack of substantial data or due to limited access to outreach platforms.
A responsible business index is a scientific and systematic way of measuring the private sector’s impact on people and the planet. It has the capacity to garner industry wide attention and throw light on crucial social, environmental and ethical issues.
4. It covers all aspects of business responsibility and not just 2% CSR
We often confuse business responsibility with the concept of Corporate Social Responsibility (CSR).
In 2013, the Indian government made it compulsory for companies to disclose how much they spend on CSR. According to a recent news report, 460 listed companies disclosed spending Rs 6,337 crore towards CSR activities in 2014-15.
Though these big numbers may suggest increased accountability of the corporate sector, they do not indicate the impact of usual business practices on the community, supply chain, consumers and environment. This is why a responsible business index is needed. It acts a tool that qualitatively and quantitatively measures the policies, disclosures and commitments made by companies in accordance with the National Voluntary Guidelines instituted by the government.
3. It is a data driven tool
A responsible business index matters because it is backed by concrete data. It organizes and analyses different streams of data disclosed by the private sector in the public domain. IRBI data consists disclosures, policies, mechanisms and commitments made by companies their responsibility. It is set within the NVGs framework, which are a set of 9 principles prescribed by the Indian government for good business practices. Indices become important tools to present authentic data to influence change. Data is especially important to influence business processes and management decisions.
2. It brings out policy and practice gaps
Many companies have dedicated teams for making policies aimed at the welfare of their stakeholders. However, this initial action does not guarantee the implementation of these plans. A responsible business index is able to identify and reveal the gaps between what is promised and what is practiced. This serves as wake-up call for institutions, which may not practice what they preach. It also gives them room to adopt corrective measures.
1. It helps businesses see where they are lacking as compared to their competitors
A responsible business index is a comparative analysis of a group of companies. It includes specific parameters to make an overall comparison of companies within a certain range. Companies always strive to stay ahead of competition. Nowadays, investors, workers, consumers, media, governments and the civil society pay close attention to how companies conduct themselves versus their competitors. A responsible business index also gives insights into existing policy and/or practice gaps prevalent across industry sector. A company can assess its performance against its competitor or peers within the same sector. It motivates them to take initiative and introduce positive changes internally to become leaders in their sector.
These are some of the reasons which led to creating India Responsible Business Index in 2015 which looks at the top 100 companies listed on Bombay Stock Exchange. The next index – IRBI 2016, is scheduled to launch on 14 February 2017. If you want to see how the top 100 Indian companies rank on IRBI in 2016 and attend its launch, register here.