Company Law and Sustainable Development Goals

19bbl065- Adamya Ojha

Introduction

The modern corporate world and increased capitalist economies around the globe have
substantially augmented the standard of living and the range of opportunities for individuals.
It invites higher income, greater growth, room for innovation and accommodation. However,
such benefits come with a price. This price can be characterized under multiple tangents such
as oppression of a class of society, harming the environment, economic inequality etc.
Multiple studies prove that the modern-day corporate world has a key role to play in
catalyzing the aforementioned problems. Therefore, there arose a need to alter the company
law itself such that the corporate world could act as a tool for restitution of the harm that they
have inflicted. It was due to this, that the Sustainable Development Goals came into existence
under the auspices of the United Nations. These goals need to be a part of state policy of
countries around the world with an aspiration to achieve them. The most adaptable way to do
the same is to restructure the business world in conformity with these Goals.

The Indian Context

India foresaw the need of such law, way before the SDGs came into existence. Provisions
that invite sin tax or pollution tax exist as a measure to compensate for the harm inflicted by
the industries. However, compensation in the monetary form, does not necessarily get utilized
in the restitution of the harm caused. Therefore, the government was of the opinion that
restoration must also be in kind and not only through liquid cash. Section 135 of the
Companies Act, 2013 calls for Corporate Social Responsibility that is a mandatory service for
a specific class of companies that operate within the jurisdiction of India. This class
constitutes of companies with a net worth greater than or equal to Rupees 500 core, turnover
of greater than or equal to Rupees 1000 crore or Net profit greater than or equal to Rupees 5
crore. There exists a list of activities under Schedule 7 of the said act that falls within the
ambit of CSR activities. It is important to note that all these activities under schedule 7 aim to
achieve fully or partly, the goals enshrined under the Sustainable Development Goals.
SDG and Company Law

The 17 Sustainable Development Goals need to translated into legislations to ensure their
enforceability in member nations. Therefore, enshrining them in company law itself is a
viable option because of the strict monitoring that the corporate world is subject to by the
state authorities. These SDGs are inclusive of a variety of aspirations such as No Poverty,
Zero hunger, Good health and well-being, Clean water and sanitation. If we were to
draw a nexus with Companies Act, 2013 then we would notice that Schedule 7 comprises of a
provision that calls for Eradicating hunger, poverty and malnutrition and sanitation [this is
including contribution to the Swach Bharat Kosh set-up by the CG for the promotion of
sanitation] and to make available safe drinking water. The enforcement of this and many
other provisions need to be administered under the auspices of a CSR committee that is
mandatory for the eligible class of companies. This committee has to be inclusive of at least
one Independent Director in case it has at least three directors. Therefore, its functioning is
transparent and non-partisan. This is in accordance with the Companies (CSR Policy) Rules,
2014.

Subsequent SDGs include Gender Equality and Reduced Inequality. The corresponding
CSR provision under Schedule 7 is promoting gender equality, empowering women, setting
up homes and hostels for women and orphans; setting up old age homes, day care centres
and such other facilities for senior citizens and measures for reducing inequalities faced by
socially and economically backward groups. In the backdrop of gender equality, it is not only
the CSR provisions that call for such a social reform, but this is also enshrined within other
regular provisions of the Companies Act, 2013. The second proviso to Section 149(1) of the
Companies Act, 2013 calls for compulsory vacancy of Woman Director on the board of
company if the company is a listed company. However, in case of an unlisted public
company, there exists a minimum requirement of paid-up share capital and turnover to
constitute compulsory compliance and unlisted private companies stand exempted. If the post
of the woman director is vacant for any reason, it has to be filled within three months or the
next board meeting, whichever is earlier.
Furthermore, other SDGs such as Clean water and sanitation, Affordable and clean
energy, Industry innovation and infrastructure, Sustainable cities and Communities,
Climate Action, Life below water Life on land correspond to provision such as ensuring
environmental sustainability, ecological balance, protection of flora and fauna, animal
welfare, agroforestry, conservation of natural resources and maintaining quality of soil, air
and water.

Indian Corporates Initiatives

1. TATA Motors – The annual CSR Report 2020-2021 shows implementation of their
initiatives including such as Aarogya for health, Vidyadhanam for education,
Kaushakya for employability and skilling, Vasundhara for employment, Amrutdhara
for clean drinking water, Aadhaar for Affirmative Action and Seva for Volunteering.
2. Adani Foundation – The Adani foundation holds massive social and economic
capital which allows it to penetrate through the societal fabric and be an instrument of
change. Their initiatives include Udaan, Suposhan for fight against malnutrition and
Employee volunteering programs to touch multiple tangents of social welfare.
3. Reliance Industries Ltd. – Considering the fact that it is the biggest economic giant
of India with its footprint expanding globally and regionally, it is obvious that they
have a huge moral debt from the society and therefore they are bound it repay it
through their welfare programmes. Their CSR report displays that they cover the
entire spectrum laid down by Schedule 7. Their works include Sports and
Development, Disaster Response, Art and cultural heritage, Rural Transformation,
health and sustainable housing followed by clean drinking water inter alia other
activities.

Conclusion

India with its variety has a particular test concerning executing tasks to accomplish SDGs on
the ground level. In spite of the fact that there is an idealism about the public authority drive
that upholds SDGs, however, there are numerous difficulties on execution. Administration of
India has entrusted NITI Aayog to plan and foster a system characterizing arrangements,
strategies and guide to carry out the SDGs by government’s administrative mechanism.
Nonetheless, organizations through CSR play a solid role by going about as a facilitator in the
execution of SDGs.