Sustainable HR Practices And ESG Audit

 

Once 2024 approaches, most of the Indian Companies who have Europe oriented business, shall loose export potential, if not changing to the European Union ESG practices. Other companies are also synchronizing with the ESG Practices including India through the SEBI. 

In India no one can say HR Practices are very strong. There are many loopholes and poor practices which impacts workforce. In Axis Bank women's attrition rate is very high.  The Axis Bank has failed in controlling the visual complains on sexual harassment cases against the women employees. In this circumstances if HR and company claims to give women empowerment. This is nothing but an eyewash and greenwash. This is not only the story of the Axis Bank.  But many other companies in India  are adopting the short cut and hanky-panky poor HR practices for cost cutting and easy gateway to the capitalism approach. For them the ESG is burden. But, if such companies  are doing export in any European Union countries, now they should forget such hanky-panky routes. They will not get export business. Now stringent measures have been introduced to examine and raise the curtain against the HR practices which renders impacts on the product and quality. The ESG introduces the approach of  "social capitalism", which is far separate then the "capitalism" approach.  

In ESG the quantum load of more than 50% is shifted towards the "S" factor practices in the ESG. This is the HR practices. The HR department has to own this practices. The HR Practices in India is the black world. Sexual harassment against women employees; no maternity benefit to the women employees; late salary payment; poor compensation for women employees; no salary benchmark; little job opportunities for the women employees; wrongful termination of employment; non payment of suspension allowance; illegal hurdles to the trade union rights; punishment transfer, pretending as business necessities; illegal obstruction on joining new job; illegal salary deduction for joining any new job-market; illegal retrenchment of human resource or manpower;  illegal lockout are some poor examples of the dark HR practices in India. These activities are not sustainable practices. All these activities, promote waste and increase greenwashing. HR has responsibility to bring such quality manpower from top to bottom, which doesn't involve in unethical practices and reduces waste with sustainable approach. The Environment and the Governance parts are related with HR. See following important two cases:  

Volkswagen foolishly tags a label - "Best Place To Work". But, this company, beats the ESG Practice. The Volkswagen emission scandal had global impact, including India. In this case Volkswagan adopted "unethical practice" for installing intentionally a software in its diesel vehicles, which manipulated emissions results. This allowed many vehicles to pass the emissions tests. This was the worst example, where deceitful route has been used by the Volkswagan's people to promote green environment - this was "Greenwash". The "deceitful" and "unethical" practice to cheat "Environment" is a concern for discipline. Discipline is the part of HR. In Good and strong discipline, HR has autonomy to conduct disciplinary practices against the people involved in such deceitful conduct. No matter, Whether the defaulter person is MD of the company or any worker? Hence this is also a testing point in the Social Audit, whether HR has autonomy of disciplinary conduct or not ? 

In Wipro vs. Hindustan Unilever Limited case, the  Kissan Tomato Ketchup of HUL promoted an advertisement,  claiming Tomato Ketchup contained with “natural ingredients". This was cheating with "mass public", where company lost its reputation. On examination the "Kissan Tomato Ketchup" was found with food grade "chemical substance".  This was deceptive practice. Such deceptive practices are not allowed by strong HR. Hence, strong HR in disciplinary law brings strong ESG practices and sustainability.  

In this situation, Social Auditor has higher responsibility to look for the "Greenwash" practices. If "Greenwash" practice rate is zero, definitely HR is strong. If HR is strong, definitely ESG is strong. "Greenwash" rate is also zero, if HR owns the responsibility of introducing "Lean 5S programmes" inside the company.  Many companies have foolish idea that 5S is just housekeeping work. Who ever thinks so, is the foolish people. If you visit ICICI Bank, you may find 5S policy hanging somewhere, but in practice 5S missing from the ICICI Bank ! same case with all Government banks in India and the Indira Gandhi International Airport in particular. You will not find red marked area as "Right Place" for the fire cylinders. "Right Place" for the "Tools" is a long continuous practice of 5S. If this is strong, wastage is very low. I shall give here one more example. If at the "place of work" more movement is seen of people, then this is sign of "high wastage" and "less productivity" or "less sustainable" practices. This is only HR, which has the responsibility to restore sustainability. Japanese might have invented this practice, but real owner now is only the South Koreans, who are the aggressive implementers. This 5S practice is absolutely missing in Indian and the American companies. The commercial black belt approach of "Six Sigma", is a route of promoting separate  "commercial brand" of original 5S. This is nothing but "the old wine in new bottle".  The 5S approach in original form,  has assisted in waste elimination and demonstrated to achieve the ESG sustainability practice. So Social Auditor should must check how 5S practice is driven by the HR. This is poor or strong?    

As year 2024 is approaching the HR departments should start homework on the ESG with "internal audit" engaging professional social auditors.  Following measures can be taken: 

1) The HR Head should collaborate with the  executive leadership and discuss about the  risk and investor relations expectations  to understand the challenges on the  ESG criteria and standards.  

2) Analyze Internal Audit on the ESG and measure where the company  stands. Leverage this metric information to track and measure the company’s human capital.

ESG is on everyone’s radar.  Investors and stakeholders want transparency. They want to know about  company.  What you’re doing to improve sustainability and the efforts you’re making to do no harm to the environment and achieving excellent governance.  Now SEBI has tightened the nose of the listed companies in India. The Board of Directors have responsibility now to report with the Annual Report on the ESG Compliance. This report is only done after conducting third party social audit assurance on the ESG. As there is an urgency of the  emergence of ESG compliance, the HR leaders must have a seat at the ESG table because he  represents the  employees — the human capital and the  greatest asset of the "Social Capitalism".

( Birendra K Jha,  is a Pan India Practitioner on the "Social Impact Assessment Audit" & "ESG Audit".  He is a Qualified & Certified  Social Auditor from the ISAI (ICAI). He is Director of HR Lab, a Social  Audit firm.  He is based at Delhi-NCR. He overlooked at senior position as General Manager and Deputy General Manager in the previous South Korean MNC Company in India handling human resource and social audit of ESG practices for more than a decade. He may be approached at: birendrajha03@yahoo.com )