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Dear Friends,

Once 'Milton Friedman' said- 'There is one and only one social responsibility of business- to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.'

The Supreme Court of the state of Michigan, USA in case of Dodge Vs. Ford Motor Company, held that the primary objective of a business is to make profits, and that any business is responsible to its shareholders  and not to the community and its employees.

The above decision was not overruled by various courts at that time and that judgement defines the prime objective of a business. Even though various industrialists are donating and doing charitable works for welfare of the society and their employees at that time also.

We know that philanthropy is an act to provides help and resources for welfare of society or a section of society, where government grants or attention is not available. Since resources of a government are limited and it cannot approach to each and every section of public. Thus it become important and necessary for business houses to contribute in the welfare of the society and environment by utilizing those they are earning profits for their shareholders.

Evolution Of Responsible Business and the Concept Of Sustainability

'Milton Friedman'-said that the responsibility of a business is to make profits and any Social Responsibility Act done by the business is in conflict of interest between the shareholders and the managers. The managers running a business may do social activities on their personal basis and not utilize the funds of the company for that purpose. The Social Responsibility will at the cost of funds available for shareholders.

After 1980, the economists and businesses have been moved away by the principle propounded by the 'Milton' and  adopted business model presented by 'Peston and Carrol', which was embodied in a structure they called the 'Corporate Social Performance(CSP)'framework , which combines the principles and philosophy of Social Needs with economic responsibility of the business.


These principles set the path for kore research ab understanding of theses theories ,and led to the interpretation of the environmental, social and governance responsibilities of a business with the otherwise predominant economic aspects.

The stakeholder concept has facilitated the inclusion of the sustainability concepts in the core business practices of a company.

The concept of sustainability and stakeholder inclusion have been motivated by the belief that adopting sustainability practices, in the long run, would lead to improved financial performance of the firm, increased competitive advantage, profit maximisation and long-term success of the firm.



Bruntland Commission (Appointed by UN) define - 'development that meets the needs of the present without compromising the ability of future generations to meet their own needs.'

It is an approach to developing or growing by using resources in a way that they will be renewed or continue to exist for future generations. It means the resources whether it is environmental, social or human must be used by such that they will be renew or exist for our future generation also.           

WIKIPEDIA -Sustainable development is an organizing principle for meeting human development goals while simultaneously sustaining the ability of natural systems to provide the natural resources and ecosystem services on which the economy and society depend. The desired result is a state of society where living conditions and resources are used to continue to meet human needs without undermining the integrity and stability of the natural system. Sustainable development can be defined as development that meets the needs of the present without compromising the ability of future generations to meet their own needs. 

The quest for sustainable development started with environmental concerns , and climate change has now become one of the biggest developmental challenges.

The 'Triple Bottom Line'(TBL), a term coined by Ellington(1997) , implies that corporations should focus 'not just on the economic value they add, but also on the environmental and social value they add-and destroy'. The idea inherent in TBL approach is rooted in the concept and goal of sustainable development.

'Devgan(1999)'-indicated ,'for an organization and community to be sustainable( a long run perspective) , it must be financially secured ,it must minimize its negative environmental impact and it must act in conformity. With society’s expectations, that is ,it is inadequate to measure and present only economic performance, which is the focus of the Intellectual Capital. Research. In order to sustain themselves in long run the organization must therefore ,strive to achieve better performance across the three dimensions of Triple Bottom Line.

This new dimension to the role of the Corporate Sector, wherein organizations are only  managing scarce resources , but also responsible for the impact of their operations on society and the environment , requires a strategic commitment to mitigation of hardships/challenges ,renewal of resources and promotion of responsible consumption. The maintenance of balance between such cause responsible and effect is influenced. By the manner. In which the business is governed.

Therefore, sustainability encompasses. The three dimensions of Environment, Social Criteria and Governance, known as 'ESG' Parameters. This ensures long term sustenance and continuance of responsible business. 

In globalized economy, investors are increasingly accessing data on sustainability to facilitate. Decision marking. Disclosures on the non-financial parameters offer a holistic view of a company’s performance , and helps in creating a great share value.

The Sustainability Reporting is therefore a vital step for managing change towards a sustainable global economy- one that combines long term profitability with social justice and environmental care.


A key development that brought reporting. On ESG. Parameters to prominence in India was launch  of Standard & Poor's (S&P) ESG India Index in 2008. This is the first index of companies in India that measures and ranks 50 National Stock Exchange listed companies on their ESG performance. The initiative was sponsored by the International Finance Corporation and executed by Credit Rating Information Services India Limited( CRISIL). And KLD Research & Analytics. It the first index in India comprised of companies whose business strategies, performance and investment  Decisions demonstrate their commitment towards ESG Obligations.

The recent launch of new index called 'BSC-GREENEX' measuring performance of companies in terms of Carbon Emissions-by the Bombay Stock Exchange and supported by GIZ is expected to assist investors in their decision making based on the Carbon Efficiency of stocks according to purely quantitative performance based criteria. There are legal framework of the Indian Government which is promoting greater transparent disclosures of ESG Parameters and new anew laws and regulations are being drafted to make such respecting mandatory for business.


We know that in the early age of industrial development the business houses are profit centric and working to maximize profit and value of their shareholders. They were utilizing available resources whether it was  Human or mineral or other natural without keeping in their mind of their sustainability. After year 2000 it was considered that the condition of environment is  deteriorating day to day and natural resources are vanishing and will not be available for use of future generations. So a concept of sustainable development has been evolved and business houses are instructed to follow the same. It is utmost important to follow ESG Parameters for sustainable development of the Society ,Environment and Governance   of business houses. In India there are a lot of rules and regulations governing ESG Parameters and non-compliance will lead to heavy penalty. A business house having good ESG Performance have a good image in the view of investors and profit maximization and sustainable development will go hand by hand.

DISCLAIMER: The article is only for information and knowledge of the readers. It is advisable to consult with professional before acting on any part of this article.  

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Category Corporate Law, Other Articles by - FCS Deepak Pratap Singh