Let me first start with the subject of Compliance and Ethical Responsibility
As a social animal, we are expected to live life to be in compliance. Being compliant is everyone’s responsibility. In many situations however, we do compromise on compliance despite penalties, closures and loss of reputation. We find our ways.
There are a few who go beyond compliance and follow social norms and ethical standards that are not imposed by hard law. Compliance is following the law while ethics is doing what is right, sometimes even regardless of the law. Some call this as self-regulation.
Perhaps, main difference between legal compliance and being ethically responsible is that the legal compliance is bound to be obeyed whereas ethical responsibility is a choice.
Ethical responsibility is the ability to recognize and act upon the ethical values according to the standards within a given context. Ethics are the moral codes that are followed by people in a certain country, society, organization, company, etc. It is entirely possible to be ethical without being compliant – but not necessarily always. Generally, we see ethical organizations to be compliant.
For any organization that is struggling to maintain compliance standards, the conversation will inevitably come around to whether or not to offer incentives to encourage behaviour change. If constant legal notices, trainings, and town hall meetings aren’t doing the trick, then perhaps it’s time to consider putting a carrot at the end of the stick.
Should we reward to be compliant ?
In some situations, providing rewards for compliance can be effective in encouraging positive behaviours. For example, in educational settings, rewarding students for completing assignments or exhibiting good behaviour can help motivate them and reinforce desired actions. Similarly, in certain workplace scenarios, providing incentives for meeting targets or following safety protocols can encourage employee compliance and engagement.
Years ago, Gujarat Pollution Control Board in India incentivized industries that had established an ISO 14001 Environmental Management System (EMS). The incentive was priority in processing of consents (permits) and longer duration of the validity of the consent. This incentivization was smart as under the EMS, the companies had to maintain records on their environmental performance and face internal and external audits on a regular basis.
The question of whether to reward compliance however depends on the specific context and the nature of compliance being considered. While incentives and rewards can sometimes be used to encourage certain behaviours, it is very important to consider its potential implications and long-term effects.
It is crucial therefore to be mindful of potential drawbacks of incentivising compliance. Relying solely on external rewards for compliance can create a situation where individuals become motivated solely by the prospect of the reward, rather than developing intrinsic motivation or a genuine understanding of the importance of the desired behaviour. Once the external rewards are removed, compliance may decrease. Additionally, if rewards are not distributed fairly or consistently, it can lead to feelings of unfairness or demotivation.
Our usual breakfast meeting
It was a Sunday morning and as usual me and my Professor Friend met at our usual coffee shop. Two cups of an Ethiopian coffee and a large ash tray was on the round marble table. I spoke to Professor on my views on incentivizing compliance and ethical responsibility.
Professor lighted his cigar. He asked me if I had gone through the proposed draft Green Credit Programme Implementation Rules 2023. These draft rules were notified by Indian Ministry of Environment, Forests and Climate Change on June 26, 2023. I nodded YES as it was the most amusing notification I had come across. The notification introduced the most hilarious (sorry ambitious) Green Credit Trading Platform that was expected to benefit millions of people of India.
The term Green Credit sounded to me like accumulating punya (good deeds in the interest of efforts made on pollution reduction and environmental conservation). When I spoke about the equivalence between the punya and the Green Credit concept, Professor started our conversation on a rather philosophical note.
He said
“In the broader understanding of karma, punya is generally seen as a result of one’s own actions, intentions, and moral choices. It is a reflection of an individual’s personal growth, spiritual development, and adherence to moral principles.
The concept of “trading” punya is not typically emphasized or encouraged within Hindu Philosophy. The accumulation of punya is considered a result of sincere efforts to cultivate virtue, selflessness, and righteousness, rather than a commodity that can be traded or bartered.
I thought Professor was perhaps hinting my narration on going beyond compliance and was echoing the point on ethical and responsible living.
He continued
“The idea of trading punya implies a transactional approach to spirituality, where one could exchange or transfer their accumulated positive karma or punya for personal gain. Such an approach goes against the underlying principles of selflessness, moral responsibility, and the law of cause and effect that are central to the concept of karma. In many ethical and moral frameworks, including various religious and philosophical traditions, the idea of monetizing or seeking personal gain from good deeds is generally discouraged”.
He paused to have few sips of the Ethiopian coffee and then continued.
“It is important to approach the concept of punya with a genuine intention to do good, help others, and cultivate a virtuous life. Acts of kindness, charity, and selflessness and passion towards protection of environment should be undertaken selflessly, without the expectation of personal gain or rewards. This is everybody’s ethical responsibility and not just a matter of compliance. The focus is on inner transformation, moral growth, and the well-being of oneself and others, rather than seeking to exchange punya for personal monetary benefits”
I could not disagree.
Monetizing good deeds can introduce potential ethical concerns. When the focus shifts towards personal gain or financial transactions, it may dilute the genuine intention behind those acts. It can also lead to the exploitation or commodification of virtuous actions, potentially undermining their inherent moral value. When monetary gain becomes the primary motivation, the focus may shift away from these important aspects, potentially diminishing the transformative impact on one’s own character or business.
Professor got up extinguishing his cigar. He had an appointment.
In parting, he paused and asked me a question
“Dr Modak, while I understand the spirit behind incentivization to the sellers, who will be the buyers of these Green Credits, and tell me why should they buy? Don’t tell me that the buyers will be using these Green Credits to meet their existing compliance related obligations? ”
I could not find answer to Professor’s question in the draft Notification, except a paragraph that kind of hinted the possible use of purchased Green Credits.
According to the notification, “apart from incentivizing individual/community behaviour, the Green Credit Programme will encourage private sector industries and companies as well as other entities to meet their existing obligations, stemming from other legal frameworks, by taking actions which are able to converge with activities relevant for generating or buying Green Credits”
I wished that Notification should have clarified more on the potential buyers and their purpose of buying or benefit that they will accrue.
One possibility could be that the buyers (companies) could purchase the Green Credits from their CSR budgets and reward/encourage those individuals and organizations that are going beyond compliance. In that case the Ministry of Corporate Affairs should make purchasing of Green Credits eligible under the section 7 of the CSR Act. I thought of letting MoEFCC know about this idea.
While returning home, I thought that if implemented as conceived, this Green Credit Platform will make India into a country of “sellers” and “buyers” and a vibrant (sorry a flamboyant) marketplace. Every other day there will be conversations at farmer producer organizations, universities, CSOs, board rooms on “how much did we sell green credits today?”. Companies in their annual (greenwashing) reports will publish how many Green Credits were purchased from the CSR budget.
Fortunately, knowing the complexity of the proposition (with ambiguities in the definition of the so called “fungible” Green Credit at Himalayan scale), I was not seriously alarmed nor worried. The idea to me of the draft notification was essentially selling Green Dreams.
Indeed, it is a blessing in disguise that we have poor implementation capacities at the Ministries. Thank you, God.
About the Proposed Green Credits Programme in India
The Indian government is coming up with a national program called Green Credits. The Green Credits Programme is designed to incentivise voluntary environmental actions undertaken by individuals, private sectors, small scale industries, cooperatives, forestry enterprises and farmer-produce organisations for their environmental actions. The Ministry of Environment, Forest and Climate Change (MoEFCC) has proposed the draft Green Credit Programme Implementation Rules 2023 in a notification issued June 26, 2023. Ministry has invited for objections and suggestions within 60 days.
According to the notification, apart from incentivizing individual/community behaviour, the Green Credit Programme will encourage private sector industries and companies as well as other entities to meet their existing obligations, stemming from other legal frameworks, by taking actions which are able to converge with activities relevant for generating or buying Green Credits. The notification also mentions a wide range of entities that will be benefited from this programme that includes small-scale enterprises, individuals, farmer producer organisations, cooperatives, forestry enterprises and sustainable agriculture enterprises.
The green credits will be tradable and those earning it will be able to put these credits up for sale on a proposed domestic market platform. The Green Credit Programme boasts that it will be far beyond just carbon credits but will encompass all major attributes of environment and social sustainability.
For the implementation of the Green Credit Programme, the government has identified sectors to start with, which include increasing the green cover through tree plantation across the country, promoting water conservation, water harvesting and water use efficiency/savings, including treatment and reuse of wastewater, promoting natural and regenerative agricultural practices and land restoration to improve productivity, soil health and nutritional value of food produced, waste management, reducing air pollution, conservation and restoration of mangroves, sustainable building and infrastructure and more. These sectors will be introduced progressively.
Thresholds and benchmarks will be developed for each Green Credit activity for generating and issuance of Green Credits. To maintain fungibility across sectors, the environmental outcome, achievable by any Green Credit activity, will be based on equivalence of resource requirement, parity of scale, scope, size and other relevant parameters, and will be considered for allocation of one unit of Green Credit in respect of each activity. Digital processes will be developed and established for the Programme including self-assessments of eligible Green Credit activities, registration of activities, issuance of Green Credits, monitoring of performance and other relevant processes.
The guidelines for the establishment and operation of the trading platform shall be issued by the green credit’s administrator with the approval of a steering committee. The trading platform for the exchange of green credits shall be established by the trading service provider accredited by the administrator in accordance with the approved guidelines.
Cover picture sourced from https://www.agoda.com/green-dreams-by-adventure-stay/hotel/coorg-in.html?cid=1844104
Very thought provoking blog Dr Modak.
It will require the next generation of corporate leaders and community leaders to have a conscience and make Ethical behaviour as a norm.
The draft Green Credits proposal is very vague – and in my opinion, not meeting the ‘ethical’ compass around which it should be designed. Let’s hope the final version after public comment will be ‘harsh’ enough too drive the right behaviours.