INSTITUTE OF LAW

NIRMA UNIVERSITY

COMPANY LAW I
2BL541

SEMESTER 5

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Incorporation of Sustainable Development

Goals in Company Law

Sree Ganesh S S
19BAL113
 Incorporation of Sustainable Development Goals in
Company Law

Introduction to Sustainable Development Goals

The globalist concepts of sustainability and environmental protection are rapidly gaining
traction in business discourse. The concerns of sustainability have become significant to
business planning and corporate social responsibility, these are significant to enhancing
shareholder value and organizational strategies. i The UN Agenda 2020 has highlighted 17
different Sustainable Development Goals to realize the ideals of zero hunger, access to
electricity, water, good health care and education.ii

Company formation and SDG’s

The economic impact of undertaking corporate activities have a significant sway on the
achievement of the Sustainable Development Goals on a macro level. Companies therefore
analyze and understand these implications. Companies in order to then maximize the
economic impact have to streamline their business performance and whether this can be
achieved by a partnership or the company alone. It is the companies that invest in
underdeveloped markets with efforts being pushed not only through the core activities of the
company but also through social investment and philanthropy efforts. iii It is during this stage
of strategizing that a company can implement SDG goals employment policies, embedded
supply-chain management systems, or product design and development activities. Inclusion
of these goals in the prospectus of the company as per Sec 2(70) Companies Act 2013, leads
to higher incentives for investors to buy shares in the company owing to the sustainable
model that it functions on. These actions that a company may take during the stages of
planning are very effective in realizing the following goals of

 Eradicating poverty (SDG 1)

 Creating gender equality (SDG 5)
 Decent work and economic growth (SDG 8)
 Industry, Innovation and Infrastructure (SDG 9)
 Responsible consumption and production (SDG 12)
 Climate change intervention (SDG 13)
Companies can successfully incorporate these goals during the formation of the company and
active planning to fulfill these goals. Inclusion of individuals with expertise in SDGs as a
board member or as a promoter of the company can be extremely beneficial to a company.
Promoter has been described under Sec 2(69) of the Companies Act 2013. A promoter can
ensure that SDGs remain a focus during the promotion phase. This displays the commitment
of a company towards achieving SDGs to the investors and markets. Owing to the unique
position of the promoter as elucidated in the case of Erlanger v. New Sombrero Phosphate
Co. (39 LT 269), Lagunas Nitrate Co. v. Lagunas Syndicate. The fiduciary relationship offers
a unique advantage for the implementation of SDG policies.iv

SDGs in the Memorandum of Association

The Memorandum of association is an important document in the formation of a company as
it outlines the fundamental conditions which the company has been incorporated to fulfil (Sec
2(56) Companies Act 2013)v. Inclusion of SDGs within the MOA means by extension the
SDG has been included in the scope of operation of the company. In the manner that has been
elucidated by Lord Cain in the case of Ashbury Railway Carriage & Iron Co. Ltd v. Riche
([1875) L.R. 7 H.L. 653, the inclusion of SDGs in the MOA will affirmatively extend the
power and vitality by law and the transactions towards implementing policies focused on
SDGs will not be classified as ultra vires transaction. The Supreme Court has necessarily
green lighted expenditure in promotion of charitable objects and attainment of company’s
objects in the case of Lakshmanaswami Mudaliar v. L.I.C. AIR 1963 SC 887, expenditure
towards achieving SDG goals can be arguably considered under the same.

Corporate Governance and SDGs

In the modern Neo-Liberal economy companies have grown to expand in size and function,
with their sphere of influence extending over various countries at this size companies now
also utilize societal resources. OPEC states “Corporate Governance involves a set of
relationships between a companies board, its shareholders and stakeholders.” The enormity of
companies in the economy makes it necessary to establish an effective governance system
that provides a degree of confidence necessary for the functioning of a market economy.vi
The management has responsibilities towards shareholders, employees, consumers,
community and government.
Corporate good governance emerged in the world with the appointment of the Cadbury
Committee (1991-1995) in the UK, the recommendations of the committee resulted in the
Code of Best Practices (1192)vii. In India the talk of Corporate Governance began with the
Kumar Mangalam Birla Committee on Corporate Governance 1999, SEBI has also released a
large number of guidelines and regulations under Corporate Governance to protect the
Interest of the Investors.viii It can also be argued that sustainability is an important interest of
an investor. However, the requirement for protection of stakeholders’ interest requires the
company to protect society’s interest too.

Corporate Governance Voluntary Guidelines and Corporate Social Responsibility were

issued by the Ministry of Corporate Affairs (MCA) in 2009. CSR has been a flashpoint with
advocates arguing against the forced requirement for companies to undertake developmental
activities with no profit initiative involved, there hence is a dire need for development of new
mechanisms to implement CSRix. In 2011, National Voluntary Guidelines on Social,
Environmental and Economic Responsibilities was released as a finer version of the 2009
guidelines. This was later amended in 2011 requiring select entities to submit Business
Responsibility Reports, that highlight the initiatives undertaken towards environmental
conservation, social and mental health and governance as given under clause 55 of the listing
agreement. The Kotak Committee Constituted by SEBI further improved the standards of
governance in its suggestions in 2017. SEBI accepted most of these suggestions in 2018.
Corporate Governance is essential as it allows the Market to exert influence on companies
requiring them to implement policies that further the realization of SDGs. An example for
this could be the constitution of Sustainable Development Goals as a mandatory element in
International Contracts.x

e-Governance, Digitization of Process and SDGs

Electronic Governance and the application of modern technology to Governance has been an
important area of focus for the government. Virtual interaction in e-Governance reduces time
involved and cost of process, while increasing the citizen and company’s access to
Government information and servicesxi. The provisions related to e-forms and e-Governance
are Sec 398 to 402 of the Companies Act, 2013.

The rapid onset of digitization policies within Company Law is beneficial and contributes
towards the goals. The Ministry of Corporate Affairs (MCA) has launched project MCA 21
through which it has enabled online registration of companies. All the following steps
towards the registration of a company can now be completed online.
 Acquiring DIN (Director Identification Number)
 Acquiring DSC (Digital Signature Certificate)
 Filing new user registration and e-Form
 Incorporation of the company

The digitization in this manner especially with the introduction of the SPICe Form and the
fast-track nature of comprehensive creation of a company fulfils the SDGs by developing the
ease of business, the specific goals achieved are Goal 8 (Economic growth) and Goal 9
(Encourage industry).
It can also be concluded that digitization of documentation will have a huge impact on the
consumption of paper and paper products reducing the demand for wood and finally
contribute in conservation of green cover and terrestrial biodiversity fulfilling SDG goals 13
(Climate Action) and 15 (Life on Land).

Conclusion
It is fundamentally in the best interest of companies to place themselves as consumers of
effective governance and therefore forge partnerships to meaningfully contribute to policy
solutions for the SDGs. Companies can undertake risk assessment to business and supply
chains to understand the risks and impacts the business has on each SDG, allowing for
prioritization of plans and alignment of strategy. Companies can also choose a more
pragmatic route and understand the trend of globalist sustainability in order achieve higher
profits while aiming for a prosperous, safe and healthy world.
i
Hestad, D. (2021). The Evolution of Private Sector Action in Sustainable Development. International
Institute for Sustainable Development (IISD). http://www.jstor.org/stable/resrep29276
ii
THE 17 GOALS | Sustainable Development. (n.d.). THE 17 GOALS. Retrieved September 26, 2021, from
https://sdgs.un.org/goals
iii
Campbell, H. (2005). Business Economic Impacts: The New Frontier for Corporate AccountAbility.
Development in Practice, 15(3/4), 413–421. http://www.jstor.org/stable/4029972
iv
Harding, M. (2013). Trust and Fiduciary Law. Oxford Journal of Legal Studies, 33(1), 81–102.
http://www.jstor.org/stable/41811767
v
Dr. G.K., K., & Dr. Sanjay, D. (2021). Taxmann’s Company Law Ready Reckoner – A Comprehensive
Guide to Companies Act 2013 | As Amended by Companies (Amendment) Act 2020 & Updated till 10–01-
2021 | 9th Edition | 2021 - Sample Read (23rd Edition | 2021 ed.). Taxmann Publications Pvt. Ltd.
vi
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91–122.
http://www.jstor.org/stable/40282344
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viii
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https://garph.co.uk/IJARMSS/May2013/19.pdf
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Campbell, J. L. (2007). Why Would Corporations Behave in Socially Responsible Ways? An Institutional
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x
Kritika, B., Bimal Patel, M. B., & Aston, J. (Eds.). (n.d.). Can Tangible, Realistic & Measurable Yardsticks
Constituting the Sustainable Development Goals Be Made Mandatory Element of International Contracts? In
International Contracts I: Jurisdictional Issues and Global Commercial and Investment (pp. 43–59).
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http://www.scconline.com/DocumentLink/lhDfa2Cv
xi
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