A grievance mechanism is an element of responsible business measures designed to provide individuals or groups to express and seek resolution for complaints related to specific issues, policies, or practices. The aim is to provide a fair, transparent, and effective means for addressing complaints in a timely manner, and to improve organisational practices and decision-making.
Businesses benefit greatly from a well-implemented grievance mechanism. At the core, the mechanism allows companies to maintain an ecosystem of trust that can resolve issues harmoniously and promptly.
The grievance mechanism has been a presence in Indian businesses for decades. Examples of it can be drawn from legislations such as the Industrial Disputes Act of 1947 which required employers with over 20 workers to set up a Grievance Redressal Committee as well as the POSH Act, 2013 which required companies with 10 or more employees to set up an Internal Complaints Committee for sexual harassment complaints.
The landscape in the Indian private sector continues to shift towards a structural mandatory framework that incorporates environmental and social responsibility. At the same time, there is a growing number of companies that wish to constitute responsible business measures voluntarily. With it, there is an expansion of the practical functioning of the grievance mechanism.
We look at the latest development behind the expansion of the practical functioning of the grievance mechanism:
I. SEBI’s expansion of sustainability reporting requirements
In 2021, SEBI issued the Business Responsibility and Sustainability Report (BRSR) which requires the top 1,000 listed companies in India to disclose ESG data. The BRSR requires companies to disclose information on their complaints procedure and points to the growing importance of the ESG perspective.
It seeks to encourage businesses to be transparent, ethical, and accountable, and operate sustainably ensuring the protection of the environment and those in their value chains.
Under the BRSR, the grievance mechanism must be accessible to the stakeholders of a business, which include, but are not limited to, its investors, shareholders, employees, workers (and their families), customers, and communities. [1] It specifies that listed companies must have a complaints mechanism to report bribery and corruption, as well as sexual harassment, discrimination, child labour, forced/involuntary labour, wages, and other human rights-related issues.
--------------------------------------- [1] SEBI GUIDANCE NOTE FOR BUSINESS RESPONSIBILITY & SUSTAINABILITY REPORTING FORMAT |
II. Regulatory Framework on Mandatory Due Diligence in India’s Major Trade Partners
Driven by globalisation and the impact of information and communication technology, there is a growing presence of Indian companies in the European market as well as European companies in India. As such, in addition to adhering to Indian laws, companies are required to implement measures in accordance with due diligence laws in Europe.
The German Supply Chain Due Diligence Law that came into effect at the beginning of 2023 mandates that companies establish a complaints procedure to report human rights and environmental risks/violations that arise due to the activities of a company or their direct/indirect supplier. In accordance with the Act, the grievance process should be accessible to employees and workers across the supply chain. It also makes it necessary a whistle-blower function to protect against bribery and corruption.
The Law is expected to have a trickle-down impact on German company’s subsidiaries in India and on their Indian business partners.
In November 2022, the European Council adopted the Corporate Sustainability Reporting Directive (CSRD) which extends the scope of mandatory ESG reporting in the EU and requires companies to meet due diligence obligations with respect to human rights and the environment. This includes disclosure of potential adverse impacts associated with the company’s activities across the value chain and reporting on social issues, governance, and business ethics. A well-functioning grievance mechanism can support companies in attaining this information about these risks and, additionally, help to mitigate them. [2]
III. Tomorrow’s Perspective
Due diligence measures and disclosure is becoming a central theme of business across the globe. While there are differences in national frameworks, there are also significant overlapping elements between them. Regarding the grievance mechanism, businesses should look into their capacity building to build a grievance mechanism that can cater to their existing need but also the incoming regulations that may impact them.
As the global movement towards sustainable and responsible business conduct takes place, we strive to support the Indo-German Business Community in this endeavour. In cooperation with Alliance for Integrity (AFIN), IGCC SustainMarkets will pilot an Inter-Company Grievance Mechanism this year that will offer companies an effective grievance platform geared toward due diligence compliance.
Do get in touch if you are looking for support in the establishment of a grievance mechanism or would like to be a part of a best-practice exchange with industry practitioners. Contact us at sustainmarkets(at)indo-german.com
--------------------------------------- [2] Article 9, EU Directive on Corporate Sustainability Due Diligence |
