A recent Forbes India report has brought to light a distressing surge of 101% in reported complaints of workplace sexual harassment against women for the year ending in March 2023. These statistics are indicative of not only a substantial backlog of unresolved complaints but also a concerning delay in addressing cases of sexual harassment against women at the workplace.
An analysis of annual reports from companies in the BSE100 ESG category revealed that out of 772 complaints in the same financial year, 147 remained unresolved. Additionally, when considering the BSE100 Index Companies, 205 cases out of a total of 1186 cases were still pending. Among BSE100 ESG companies, Wipro stands out with the highest number of pending cases at 19, closely followed by HDFC Life Insurance Company and Kotak Mahindra, each with 14 unresolved cases in FY23. During the same financial year, Wipro reported 70 cases, HDFC Life reported 60 cases, and Kotak Mahindra reported 56 cases. HCL Technologies had 16 unresolved cases out of 55 complaints in FY23. Nifty Companies, too, demonstrated a concerning trend with 165 out of 883 cases pending in the financial year ending in March 2023. PoSH (Prevention of Sexual Harassment) practitioners attribute this increase in reported cases to potential heightened awareness initiatives by employers and the unfortunate reality of inept Internal Committees (ICs) to adequately address these matters within the required timeframe.
The Nexus of Corporate Governance and ESG Norms
In the context of fostering sustainable enterprises, corporate governance assumes a pivotal role as a fundamental element of Environmental, Social, and Governance (ESG) norms. It is therefore imperative to explore the potential influence of a well-crafted PoSH Policy on a company's ESG rating within the legal landscape of India. Swati Agrawal, CEO of CareEdge, a distinguished credit rating company, offered her insight on the matter asserting that a surge in PoSH cases may be indicative of the potential gaps in the implementation of PoSH policies which could adversely impact the company’s performance on social indicators on labor and human capital. She also opined that a higher number of cases can also be construed as a step towards transparent disclosures of labor management practices. However, she underscores the critical importance of expeditiously resolving these cases to effectively align with the principles of corporate governance and ESG norms.
PoSH and NGRBC: Aligning Ethical Governance with Sustainable Principles
In March 2019, the Ministry of Corporate Affairs (MCA), in alignment with the Sustainable Development Goals (SDGs), introduced the National Guidelines on Responsible Business Conduct (NGRBC). The primary objective behind these guidelines was to urge businesses to actualize its 9 principles in letter and spirit. While adherence to these principles is not mandated, the guidelines are intentionally structured to be universally applicable, irrespective of a business's ownership, size, structure, or location. The MCA delineated specific components of each principle, making it the responsibility of the highest governance body within a business (the board/owner/partner or equivalent), to oversee the effective implementation of these guidelines.
Principle 1 of the NGRBC states that Businesses should conduct themselves with integrity and in a manner that is ethical, transparent, and accountable. It recognizes that ethical behavior in all operations, functions, and processes is the cornerstone of businesses, guiding their governance of economic, social, and environmental responsibilities.
A core element of this principle requires the governance structure to take the responsibility to meet all its statutory obligations in line with the spirit of the law, enabling fair competition and ensuring it treats all its stakeholders in an equitable manner. Additionally, it necessitates the establishment of appropriate structures, policies, and procedures to address conflicts of interest involving its members, employees, and business partners.
Principle 3 of the NGBRC states that Businesses should respect and promote the well-being of all employees, including those in their value chains. The principle encompasses all policies and practices relating to the equity and well-being and provision of decent work (SDG 8) of all employees engaged within a business or in its value chain, without any discrimination and in a way that promotes diversity. A core element of the principle requires businesses to create systems and practices to ensure a humane workplace free from violence and harassment, including sexual harassment, where employees feel safe and secure, with adequate provisions for grievance redressal. It is evident that the core elements embedded within these two NGRBC principles can be closely aligned with compliance under the PoSH Law.
PoSH and BRSR
Built on the framework of the NGBRC and ESG parameters, is the Business Responsibility and Sustainability Reporting (BRSR)- a mandatory reporting framework introduced by the Securities Exchange Board of India (SEBI) for the top 1000 listed entities. This framework, rooted in 9 pivotal principles, is designed to inspire listed companies to adopt sustainable business practices and divulge pertinent information regarding their environmental, social, and governance (ESG) performance. It harmonizes with global sustainability reporting frameworks like the Global Reporting Initiative (GRI) and the United Nations Global Compact (UNGC).
Among these nine principles, Principle 5 shows direct relevance to reporting on compliance with the PoSH Law, stating Businesses should respect and promote human rights. To adhere to this principle, listed companies must make specific disclosures regarding complaints filed by employees and workers concerning sexual harassment and discrimination in the workplace, including details on the complaints received during the year and the pending resolutions at year-end.
Specifically relating to the PoSH Act, companies are obligated to disclose both the total number of complaints reported and the percentage of female employees and workers involved, along with the number of upheld complaints. Moreover, these disclosures should encompass the percentage of facilities and offices that underwent assessment, as well as provide insights into the assessment of value chain partners. This multifaceted reporting approach ensures transparency and accountability within the scope of PoSH, aligning with the BRSR's broader goal of advancing sustainable and responsible business practices.
What about Unlisted Companies?
Unlisted companies currently face minimal ESG disclosure requirements, with the obligation to report compliance with the Prevention of Sexual Harassment (PoSH) law being a common denominator across all companies.
Nonetheless, companies have the opportunity to proactively embrace the Business Responsibility and Sustainability Reporting (BRSR) framework. By doing so, they position themselves as trailblazers in sustainability reporting, recognizing the global significance of this initiative. While legal requirements mandate reporting on the internal handling of PoSH cases, companies should also contemplate the benefits of publicizing their endeavors to create awareness among employees and manage PoSH cases. This transparency not only enhances their reputation but also underscores their competitiveness in meeting global governance standards.
Parting Thoughts: The Nexus
Although reporting under the BRSR framework is currently mandated only for the top 1000 listed entities, there are compelling advantages to be gained from embracing these reporting standards while meeting ESG parameters. While the MCA only requires a statement of compliance with the PoSH Act, voluntarily complying with the BRSR standards by providing a detailed account of PoSH cases received and disposed of can greatly benefit companies. From a global perspective, such reporting aligns with international governance standards and exemplifies a commitment to transparency and ethical business practices. It sends a strong message that companies are not only meeting their legal obligations but are actively striving to create inclusive, safe, and equitable workplaces.
