Maratha Mandir’s Babasaheb Gawde Institute Of Management Studies CORPORATE SOCIAL RESPONSIBILITY & BUSINESS STRATEGY - A CASE STUDY ON THE TATA GROUP UNDER MR RATAN TATA Pednekar. Mahesh C. Research Student, JJTUniversity, Rajasthan firstname.lastname@example.org Dr. Jha Nishikant Associate Professor, Thakur College of Science & Commerce, & Research Supervisor, JJT University, Rajasthan, email@example.comIntroduction:As Chairman of Tata Group, Indias largest and most diversified industrial house, Ratan N. Tata presidesover a sweeping business and philanthropic landscape. The Tata Group operates more than 80 companiesranging from software and automobiles to steel, consumer goods and telecommunications. With 200,000employees across India, it is the nations largest private employer.The Tata Group is also unique in that nearly two thirds of the equity of the parent firm, Tata Sons Ltd., isheld by philanthropic trusts endowed by Sir Dorabji Tata and Sir Ratan Tata, sons of Jamsetji Tata, whofounded the family business in the 1860s. These multipurpose trusts, chaired by Ratan N. Tata, includetwo of the earliest and largest private grant making organizations in India. Through these trusts, Tata Sonsgives away on average between 8 to 14 percent of its net profit every year.Trained as an architect at New Yorks Cornell University, Ratan N. Tata opted instead to enter the familybusiness, putting in time on the shop floors in key Tata industries. After assuming the Chairmanship ofthe Group in 1991, he proceeded to streamline the sprawling Tata Group around seven core businesssectors.A pioneer in several areas, the Tata group has consistently followed the path of innovation, growth anddevelopment. Tata is credited with pioneering Indias steel industry, civil aviation and starting thecountrys first power plant. Tata was the market leader in several diverse fields - it had the worlds largestintegrated tea operation, was Asias largest software exporter, and is the worlds sixth largest manufacturerof watches (Titan).Objectives:We have undertaken this study to understand the importance of CSR in not just nation building but as astrategy to successfully build up a business. We shall try to understand how the Tata group under theleadership of Ratan Tata has successfully carried forward the vision of his forbearers and used it to furtherdevelop the business of the Tata GroupCSR and the Tata GroupIn a free enterprise, the community is not just another stakeholder in business but is in fact the verypurpose of its existence."- Jamsetji N. Tata, Founder, Tata Group."Corporate Social Responsibility should be in the DNA of every organization. Our processes should bealigned so as to benefit the society. If society prospers, so shall the organization..."- Manoj Chakravarti, General Manager - Corporate Affairs and Corporate Head - Social Responsibility, Titan Industries Limited in 2004.
Maratha Mandir’s Babasaheb Gawde Institute Of Management StudiesThe guiding mission of the Tata group was stated by JRD Tata in the following words: "No success orachievement in material terms is worthwhile unless it serves the needs or interests of the country and itspeople."Todays buzzword, Corporate Social Responsibility or CSR has been part of the Tata Group ever since thedays of Jamshetji Tata. Even while he was busy setting up textile ventures, he always thought of hisworkers welfare and requirements of the country. From granting scholarships for further studies abroad in1892 to supporting Gandhijis campaign for racial equality in South Africa to giving the country its firstscience centre, hospital and atomic research centre to providing relief and rehabilitation to natural disasteraffected places - they have done it all.From its inception, the Tata group has taken up a number of initiatives for the development of society. Aunique feature of the group is that 63 percent of the equity capital of the parent firm - Tata Sons Limited -is held by Tata trusts, which are philanthropic in nature. According to a statement on the Tata groupswebsite (www.tata.com), "The wealth gathered by Jamsetji Tata and his sons in half a century ofindustrial pioneering formed but a minute fraction of the amount by which they enriched the nation.Jamshed Irani, Director, Tata Sons Ltd, says, "The Tata credo is that give back to the people what youhave earned from them. So from the very inception, Jamshetji Tata and his family have been followingthis principle." Moreover he says that for any business to sustain in the long run they have to look beyondbusiness.Ages ago when Corporate Social Responsibility was either the government, or charitable organizationsheadache, the Tata’s aggressively worked for the upliftment of the community.Tata initiated various labor welfare laws, like the establishment of Welfare Department was introduced in1917 and enforced by law in 1948 or Maternity Benefit was introduced in 1928 and enforced by law in1946.The group has always been recognized as a value-driven organization. The companys values wereimbibed from the founder of the group and his successors who took on the leadership of the group. All theindividuals who headed Tata institutions emphasized the importance of philanthropy and the utilization ofwealth to enhance the quality of public life. The core values espoused by the group included integrity,understanding, excellence, unity and responsibility. The values of the founders are reflected in themission statement of the group, which lays great emphasis on CSR.The groups mission statement states, "At the Tata group, our purpose is to improve the quality of life ofthe communities we serve. We do this through leadership in sectors of national economic significance, towhich the group brings a unique set of capabilities...Considered as pioneers in the area of CSR, the Tata group has played an active role in nation building andsocio-economic development since the early 1900s. A survey conducted by the websitewww.indianngos.com revealed that Tatas spent Rs. 1.5 billion on community development and socialservices during the fiscal 2001-02 - the highest by any corporate house in India.Even when economic conditions were adverse, as in the late 1990s, the financial commitment of thegroup towards social activities kept on increasing, from Rs 670 million in 1997-98 to Rs 1.36 billion in1999-2000.Over the recent years too as earlier, the Tata philosophy to Give back what you get has been followed byall their enterprises across India. Be it relief measures, rural development, health care, education and artand culture, they have been very forthcoming. As result every year, the Tata Groups contribution tosociety has been phenomenal. In the fiscal year 2004 Tata Steel alone spent Rs 45 crore on socialservices.Different Tata companies have been actively involved in various social works. Like Tata ConsultancyServices runs an adult literacy programme, Titan has employed 169 disabled people in blue collarworkforce at Hosur, Telco is fighting against Leprosy at Jamshedpur, Tata Chemicals runs a ruraldevelopment programme at Okhamandal and Babrala, Tata Teas education programme and Tata ReliefCommittee (TRC) which works to provide relief at disaster affected areas.The groups policy is to provide livelihood instead of giving money. "How long can you give rice anddal? What is required is the means to live. And that is what the company does. During natural calamities
Maratha Mandir’s Babasaheb Gawde Institute Of Management Studiesthere are two phases of assistance — relief measures and rehabilitation programme. After the Gujaratearthquake the group built 200 schools in two years and they rendered help during the Orissa floods whenpeople lost cattle. Even after the Tsunami disaster members of TRC immediately reached the places andfigured out what is required.CSR and Business StrategyThe Tata group has long accepted the idea that CSR makes business sense. This was realized by JN Tataway back in 1895, when he stated, "We do not claim to be more unselfish, more generous or morephilanthropic than others, but we think we started on sound and straightforward business principlesconsidering the interests of the shareholders, our own and the health and welfare of our employees... thesure foundation of prosperity."Since inception, the Tata group has placed equal importance on maximizing financial returns as onfulfilling its social and environmental responsibilities - popularly known as the triple bottom line. Afterdecades of corporate philanthropy, the efforts of the group in recent years have been directed towardssynchronization of the Triple Bottom Line (TBL). Through its TBL initiative, the Tata group aimed atharmonizing environmental factors by reducing the negative impact of its commercial activities andinitiating drives encouraging environment-friendly practices. In order to build social capital in thecommunity, the group has got its senior management involved in social programs, and has encouragedemployees to share their skills with others and work with community-based organizations...JRD Tata, the son of RD Tata, who was a business partner and relative of JN Tata, strongly believed thatthe CSR initiatives of the Tata group should be institutionalized and it should not be left to individuals tocarry them forward. Therefore, suitable amendments were made to the Articles of Association of themajor Tata group companies in the 1970s.Newly included was an article stating that the "company shall be mindful of its social and moralresponsibilities to consumers, employees, shareholders, society and the local community." In another bidto institutionalize the CSR charter, a clause on this was put into the groups Code of Conduct.This clause stated that group companies had to actively assist in improving the quality of life in thecommunities in which they operated. All the group companies were signatories to this code. CSR wasincluded as one of the key business processes in TISCO. CSR was one of the eight key business processesidentified by TISCOs management and considered critical to the success of the company...Ratan Tata: Carrying the mission forwardIn corporate social responsibility he has given new direction and focus to the Tata Groups disparateactivities with the creation of the Tata Council for Community Initiatives (TCCI) in 1996.Named Business Man of the Year for Asia by Forbes in 2004, Mr Ratan Tata serves on the board of theFord Foundation and the program board of the Bill & Melinda Gates Foundations India AIDS initiativeA July 2004 cover story in Business Week [India] quotes an investment banking source as noting that thecompany’s r challenge is to "ensure that the Tata groups sense of social obligation doesnt collide withshareholder value creation . According to Ratan Tata’s view these two objectives are not incompatible.What the company has done in their discharge of social responsibility should be of value to theirshareholders. Their efforts result in a more prosperous country, and lead to a greater quality of life thatbenefits all. Their failure to do so would contribute to a poor India with continued shortages andinequities. Companies end up supporting these societal needs, either through the costs of corporate socialresponsibility or taxation, so all companies pay one way or another. However, the cost is relatively small,and the benefits are relatively great. He further states that there is not much difference in his fundamentalvision. His predecessors decided that their efforts would not only raise the level of the quality of life forpeople of India, but they would also deal in human development. None of that has changed, but the fabricof the field of work has changed with time and the demands of philanthropy in India are today both indimension and scope in some ways more intense than they were before.
Maratha Mandir’s Babasaheb Gawde Institute Of Management StudiesIn the early days, philanthropy was about creating development institutions such as hospitals, andinitiatives of a nature which at the time were more about nation building than ours are today. Today, thecompany’s philanthropic initiatives have greater focus, for example, on creation of awareness of thingslike discrimination against the girl child; on microfinance, to get people away from moneylenders; onwater harvesting and conservation; in moving more to small community initiatives. From their own grantgiving, they have found that the greatest challenge is to find appropriate, professionally managed granteesor NGOs. Its one of our biggest problems. There are a lot of calls for money but there is often inadequateprofessionalism and management, which doesnt give us a lot of comfort in channeling money in thatdirection. More and more people are being driven by a real dedication, but theyre still individuals, theystill need help in creating institutions. They have recognized that those people have to be encouraged,almost cajoled, into building an organization that will survive beyond them. Philanthropic institutions inIndia still believe theyre charitable and therefore must operate on a shoestring that creating anorganization is almost a luxury. This needs to change -- they have to recognize that a nonprofit has asmuch responsibility for being professionally run as a corporate body. There’s a tremendous need to moveinto grassroots levels and create savings programs in villages, education, hygiene awareness, and help forwater harvesting and water conservation, but not many organizations are doing these things. The few thecompany has found, they support very heavily, but not all of them have the organizational strength toreally grow in this area, to have a meaningful presence in the country.Where they do operate, the results are phenomenal. Some of their water conservation grantees havetransformed the areas in which they are working, and whatever they have seen there is just amazing. Anumber of their grantees have worked with villages -- villages starved of water that have had nolivelihoods -- and with water harvesting and conservation, theyve created year-round water supply andchanged the entire fabric of these villages. Thanks to a partnership between the research lab of softwaregiant Tata Consultancy Services (TCS) and a range of local NGOs, clean and safe drinking water isavailable for the first time for thousands of households in rural Maharashtra. These villagers are using ahousehold water filter that relies on commonly available agricultural waste to screen out harmfulpathogens, contaminants and sediments. Developed specifically for rural areas, the filter is the result ofyears of research and field trials by scientists at the Tata Research Development and Design Centre(TRDDC), the Pune-based R&D division of TCS. "Theyve been trying to bridge the divide between theIT world and the rest of India, and this has come out of that effort," explains Ratan N. Tata.While the connection between information technology and low-tech water filters may not be obvious, theproject exemplifies Tata philanthropys emphasis on rural communities and water conservation and issquarely in keeping with TRDDCs mission to use research to transform lives .TRDDC is working withSir Dorabji Tata Trust, the Confederation of Indian Industry and local NGOs to pursue scaling updeployment of the filter technology in various regions of the countryOne of the things Mr Ratan Tata is looking at with the Trusts is another round of building majorinstitutions, such as his predecessors had built. Another possibility is the computer learning initiative topromote literacy for adults. Simply putting more money into the same type of programs as they have beendoing is difficult, because they have problems locating and funding appropriate grantees.Further he states that the company will keep their efforts largely at home. A few years ago, the companyreactivated the Chair in development economics at the London School of Economics established by SirRatan Tata at the turn of the century, and they are looking at doing something similar in Indian or Asianstudies in another institution outside of India. Recently he donated a huge sum to Harvard University.They are also exploring opportunities in computer based functional literacy and vocational skills in SouthAfrica. But barring some isolated instances of this nature, their philanthropic activities will be focusedmostly on India.TBEM - Striving for Business ExcellenceTo ensure that Tata group companies achieved high levels of business excellence, Tata QualityManagement Services (TQMS - a division of Tata Sons) had been entrusted with the task of
Maratha Mandir’s Babasaheb Gawde Institute Of Management Studiesinstitutionalizing the Tata Business Excellence Model (TBEM).The role of TQMS includes setting up ofstandards of business excellence using the TBEM framework and assisting group companies in achievingthose established standards. The TBEM provides each company with an outline to help it improvebusiness performance and attain higher levels of efficiency.The TBEM is a tool based on the Malcolm Bald ridge National Quality Award. It aims to facilitate theunderstanding of business performance imperatives, manage planning activities and organizationallearning, enhance organizational performance capabilities and the delivery of results, and recognizeexcellent performance and identifying and sharing best practices.Recognition of CSRThe dedicated CSR efforts by various Tata group companies have been globally recognized. The differentgroup companies have received several awards for their fulfillment of social responsibility. For instance,TISCO was awarded The Energy Research Institute (TERI) award for Corporate Social Responsibility(CSR) for the fiscal year 2002-03 in recognition of its corporate citizenship and sustainability initiatives.As the only Indian company trying to put into practice the Global Compact principles on human rights,labor and environment, TISCO was also conferred the Global Business Coalition Award in 2003 for itsefforts in spreading awareness about HIV/AIDS...CSR as a future strategyWhile today eyebrows are being raised about corporate doing social work, the Tata Group feels it is theneed of the hour. Thus, where in the West companies are doubtful of spending the shareholders moneyand corporate are considering discontinuing Corporate Social Responsibility. Says Irani, "Which is finefor them, but not for a country like India. The governments of the western world have a strong socialsecurity net so corporate can concentrate on making profits and paying taxes regularly but in this regardIndia still lags behind. We are far away from reaching that phase of economic development wheregovernment is solely responsible for the basic needs of the public. We dont have a social security,adequate health and education services. So till then corporate houses should fill the gaps."Further he explains that for any establishment to be successful public support is vital. One cannot be aspike of prosperity on the sea of poverty. In any society there is one section that makes huge profits andricher than the rest which leads to disparity. Over a period of time it has been witnessed that corporationsdie out if they do not support the masses. Moreover, Irani proudly claims that none of the Tata Board ofDirectors will ever be in the list of rich people. They have a trust that accumulates the profits of thecompany, which are then disbursed for various social causes. "We generate wealth but personally dontget any of it. These trusts accumulate the funds and disburse accordingly," concludes Irani.In July 2004, B. Muthuraman, Managing Director, Tata Steel Limited (TISCO), announced that in futureTISCO would not deal with companies, which do not confirm to the companys Corporate SocialResponsibility (CSR) standards. Speaking at the annual general meeting of the Madras Chamber ofCommerce and Industry, Muthuraman stated, "We will not either buy from or sell to companies that donot measure up to Tata Steels social responsibility standards."SuggestionsThus, we have seen in our case that CSR is truly very important in the Indian context; given the state ofunderdevelopment in vast sections of the Indian Society and the success of the Tata group over the yearsshows that it is possible to reconcile social objectives with profitability and other corporate need toemulate this strategy and this will surely take India into the league of developed nations.ConclusionTata is a window into the rise of India. While that rise is often traced to free-market reforms that began inthe early ’90s, Tata executives emphasize that even now, the company grows despite obstacles thrown upby red tape and special interests. Unlike China’s boom, which was orchestrated by the state, India’s isprimarily the story of an enterprising private sector. The United States sees India as an outsourcing
Maratha Mandir’s Babasaheb Gawde Institute Of Management Studieseconomy that threatens to siphon off service jobs but India’s wider potential is mirrored in the range ofTata’s ambitions—from luxury hotels and jewelry to the 1 Lakh Nano cars.In recent years, as Tata began listing some of its affiliates on Wall Street, Americans often compared Tatato the model —conglomerate they know best: General Electric. But Tata executives, many armed withWestern M.B.A.s who have all read about GE and many of their American tactics—from mass layoffs tohostile takeovers say these are violations of the Tata way. Ratan Tata says his company is not driven togrow “over everybody’s dead bodies.” Some 66 percent of the profits of its investment arm, Tata Sons, goto charity, and executives make clear they have no intention of relinquishing control to Wall Street. AtTata, “corporate social responsibility,” to use the Western buzzword, has real money behind it.References 1) Visionaries, CSR Initiatives of Tata Group, www.indianngos.com, December 2004. 2) Tata Champions, Tata Group, www.indianngos.com, December 2004. Social Responsibility Vital for Tata Steel Dealings, The Hindu Business line, July 03, 2004. 3) Cover story –July, 2004; Business week 4) Forerunners in corporate social responsibility March 16 2005 The Indian express 5) Tata,Corporate Social responsibility, Milton & Milton friedman, Filed under: Business — Yazad Jal @ 7:49 am ,The Indian economy Blog Oct 24 2005 6) Excerpts taken from Case Study: The Tata Group: Integrating Social Responsibility with Corporate Strategy; Case Code: BECG050 - IBS center for management research