Known as progressive and forward thinking in its Corporate Social Responsibility (CSR) initiatives for over 140 years, the Tata Group’s past CSR initiatives have fallen under four pillars: 1) Philanthropy, 2) Emergency Response, 3) Specific Community Initiatives, and 4) Quality Management Practices. Supporting these pillars are a variety of programs that have organically developed over the years to create an internal structure for executing the organization’s sustainability efforts.
This situation occasionally creates challenges in measuring effectiveness and economic benefits of CSR, which obscures the return on investment (ROI) and could diminish future funding. The ten year sustainability strategy is designed to complement the business growth of the organization. This global growth will focus on the following industries: hotels, automobile, steel, software consulting, energy, chemicals, tea, engineering, and communications.
It will target the following markets: Brazil, Canada, China, Gulf Cooperation Council (United Arab Emirates, Saudi Arabia, Oman, Bahrain, Kuwait, and Qatar), Germany, the Netherlands, South Africa, Sri Lanka, Thailand, the United Kingdom, United States, and Vietnam. To continue its global growth while maintaining its practiced sustainability, Tata needs to address creating and capturing value, while addressing uncertainty in its global sustainability strategy. Defining Sustainability for Tata’s Future In order for the ten year strategy to be developed, the definition of sustainability itself needs to be refinement.
Tata’s current definition of sustainability was developed as part of a series of group-wide meetings. Although Tata has had a great deal of success in preserving a culture of sustainability, the rapid global expansion of the company threatened to dilute the power of this working definition. Our team proposes a refined definition of sustainability: “Corporate Sustainability is a local, national, and global endeavor for creating long-term economic, social and financial growth for the enterprise and its stakeholders. This definition would be easier for Tata employees to internalize and will allow for interpretational flexibility, as there are continually evolving worldwide definitions of sustainability. Beyond a basic corporate definition, we recommend Tata promote the continuity of sustainability innovation through a set of guiding principles, a “Sustainability Credo”, that provides employees with a roadmap for evaluating social business practices.
The Credo below provides a concrete, measureable way to define the operation and implementation of sustainability initiatives. Tata must first seek parity and sustainable best practices across their collective group of companies. Points of parity must be established to measure the success of sustainability efforts over the next ten years. The Tata Group must leverage its areas of expertise across all businesses going forward to enable the sustainable development of the entire group.
These efforts include consistent employee equality and management training programs, centralized innovation practices that look at all major businesses, formalized water and waste conservation policies for companies operating in particular regions, Leadership in Energy and Environmental Design (LEED) certification for all new construction, and energy efficiency initiatives for all existing buildings. Figure 1: Tata Group Sustainability Credo DECISION ANALYSIS
A thorough consideration of the impacts of the new TSS structure and its initiatives on both internal and external stakeholders was conducted in the development of the recommended ten year sustainability strategy. The current structure and coordination of sustainability initiatives was a starting point for our analysis. After reviewing the current structure and discovering a lack of continuity across business units in sustainability tracking and reporting, our consultancy identified several options for creating a structure that would allow implementation of the sustainability strategy.
These options included: 1) scaling back social initiatives, while focusing on the environmental efforts, 2) maintaining current structure in India but giving directly to charities in expansion markets, and 3) creating a subsidiary that houses the communications, tracking, and long-range sustainability efforts while allowing individual business units to maintain ownership of short-term projects with an Economic Value Added (EVA).
Critical issue consideration included ensuring leadership continuity, appropriateness for global growth, sensitivity to shareholder reaction, meeting coordination challenges across the entire enterprise, maintaining the corporate culture and commitment to sustainability from the employee level through leadership, fostering innovation, and leveraging core competencies. External considerations were also considered including impact on the ability to raise capital, relationships with local governments and regulating bodies, Non-Governmental Organizations (NGOs), and local community members.
Figure 2: Decision Analysis Matrix A strategy suggesting elimination of social initiatives would be contrary to Tata’s vision but would address short-term investor ROI concerns. This option would still address Tata’s need to meet previously set climate change goals by diverting the focus from social to environmental issues. Our consultancy concluded that one of Tata’s core competencies is its CSR leadership, thus the first option was eliminated.
The second option included philanthropic giving directly to charities and has several advantages; this approach would raise Tata’s profile with local NGOs and allow for seamless global expansion. However, this option fails to leverage Tata’s leadership and expertise in CSR. Reporting and measurement metrics would still be an outstanding issue with this approach as individual charities may or may not have the capabilities to quantify their impact. The recommended option, development of a wholly-owned TSS subsidiary, addresses the internal business challenges while remaining sensitive to Tata’s external stakeholders.