MAC: Mines and Communities

Corporate Responsibility In India: Flying The Flag The Tata Way

Published by MAC on 2006-06-06
Source: Ethical Corporation

Corporate responsibility in India: Flying the flag the Tata way

Poulomi Mrinal Saha, Assistant Editor, Ethical Corporation

6th June 2006

Those searching for national champions of corporate responsibility in Asia need look no further than the 138-year-old behemoth Tata Group.

An Indian marketing consultant has been recently honoured with a patent for his eco-friendly packaging for steel.

Himanshu Sheth has developed Coir Atlas, a product that aims to replace timber packaging with a mix of bamboo and jute.

He was encouraged to create this biodegradable alternative not by an engineering or design academy, but by a company - Tata Steel.

Innovating while protecting the environment is one of the commitments the Tata Group, one of India's biggest business conglomerates of which Tata Steel is a subsidiary, has made towards what it calls "nation-building", which it sees as part of its responsibility towards wider society.

The group, which has 93 companies in seven sectors including chemicals, energy, consumer products and technology, is one of India's oldest businesses and has a well-established tradition of giving back to society.

The Tata Group does this through trusts, such as the Tata Institute for Fundamental Research, the Tata Institute for Social Sciences and the Tata Memorial Hospital.

These philanthropic trusts, endowed by the Tata family, are 65.9% shareholders in Tata Sons, the holding company for the group.

With a philanthropic culture that dates back to the mid-19th century, the Tata Group has long been involved in community initiatives across India, and has tried to adhere to consistent principles and values across all its operations.

In 1998, the group decided to formalise these value systems and the Tata Code of Conduct was formed.

The code is composed of 25 clauses of expected corporate and employee behaviour. These include "corporate citizenship", which demands an active involvement in communities with an aim to making them self-reliant; "political non-alignment", which prohibits companies either directly or indirectly supporting or funding any political party, candidate or campaign; "ethical conduct", which imposes a broad duty on directors, management and employees; and "conflicts of interest", which prevents management from engaging in any transaction that can personally benefit themselves or their families.

Implementation of the Tata code of conduct at company level is ensured by the Ethics Office, headed by an ethics counsellor.

Going local

Among the many annual events and activities the Ethics Office organises is "ethics month" at Tata Steel, designed to generate "awareness, sensitisation and reinforcement" of the behaviour expected of employees and suppliers.

Training and induction programmes are held for new employees and they are expected to sign an allegiance to the Tata code of conduct when accepting a job.

Suppliers, too, are expected to sign a memorandum of understanding, violation of which could result in blacklisting.

The ethics counsellor, who is independent of any department within the company, is the first port of call for employees who wish to blow the whistle on violations of the code.

But if they wish to report to a higher authority, they can seek the attention of the company's managing director or chief executive, who also carries the title of chief ethics officer at Tata companies.

Rekha Seal, ethics counsellor at Tata Steel, says the recently enhanced whistle-blower protection policy has seen many employees come forward to report apparent violations of the company's ethical code, although only four of five of these a year turn out to be major complaints worth investigating.

In fact, the harsh penalties ranging from demotion to sacking has seen a significant decrease in employee unethical conduct at the steel plant.

The company is currently deliberating on how it can factor in ethical behaviour in the performance management system of executives and develop a toolkit to assess prospective employees on their value-orientation at the time of recruitment.

The bigger picture

While ethics counsellors and their teams concentrate on the implementation of the Tata code at ground level, there are corporate social responsibility chiefs who spend their time liasing with the heads of environment, health and safety, human resources, business excellence and other departments devising responsibility programmes and seeking resources to fund them.

The Tata Centre for Community Initiatives helps develop a collective approach for Tata companies on corporate responsibility.

The formation of the TCCI was an attempt to institutionalise the Tata Group's long-established tradition of community development and welfare, and it has recently been extended to include environmental management in recent times.

Anant Nadkarni, vice-president for group corporate social responsibility at TCCI, believes it is Tata's workforce that can make or break its reputation for corporate responsibility.

"We need to make a group-level coherent statement [about our values] and I need the integrity of our people for it," he says.

Nadkarni says 11,000 of the 215,000 Tata employees are registered volunteers and are involved in unpaid community work, for example in health and education, during their weekends.

The TCCI has helped group companies agree a "minimum level of action" for its volunteering work and requires the bigger subsidiaries to submit reports on their volunteering work that should include details of exemplary projects and senior management involvement.

The companies, in their report-making, are helped by the Tata Index for Sustainable Human Development, which TCCI developed with the help of the UN Development Programme in 1997, since when it has been revised three times.

"The guidelines help build a sense of higher purpose into an activity and aim to put people above everything else," says Nadkarni.

All major Tata companies produce Global Reporting Initiative and Global Compact reports every year, and this year, 20 have so far agreed to comply with the SA8000 standard.

Corporate governance

Corporate responsibility experts in India believe the governance structure at Tata group to be extremely good, owing much to the philanthropic nature of the companies' ownership and high-level disclosure about group activities.

The stake the trusts own in the holding company demonstrates the group's commitment to uplift society not through what it calls "patchwork philanthropy" but by supporting individuals, causes and institutions that have the potential to improve the overall quality of life in India.

The trusts symbolise one of the Tata group's core beliefs: "What comes from the people goes back to the people many times over."

Last year, the Tata trusts won the corporate citizen of the year award at the Economic Times Awards for Corporate Excellence.

Chink in the armour?

But as with any large organisation, it is not all roses at the Tata group.

Sachin Joshi, senior researcher at the Centre for Social Markets, says the Tata group has failed to clarify its position when group companies' names emerged in recent scandals.

A recent example is the killing of 12 tribals or "adivasis" in Orissa's Kalinganagar district by police on 3 January.

The adivasis were protesting against their land being taken by the government for the construction of a Tata Steel plant.

The villagers alleged that the government had bought the land from them at a measly price and sold it on to the private sector for a much higher price.

When questioned by Ethical Corporation, Tata denied any wrongdoing in what transpired at Kalinganagar, but the company has not issued a public statement on the affair. Joshi believes this to be a mistake.

A silence has also descended over an ActionAid report last year that alleged companies including Tata Tea, makers of Tetley, of inhumane working conditions and low wages on their tea plantations in India.

Indian civil society and the media have been criticised for not being more questioning of big business. Their reluctance is blamed on a traditional sense of awe and respect towards large companies.

Some put this down to the role large firms are seen to have played in India's economic growth.

"Wealth in Asia brings power. It is idealised here in a way it isn't in European markets," says Chandran Nair, founder and chief executive of Global Institute for Tomorrow, a Hong Kong-based think tank.

Nair also believes that Asian civil society has to move away from its traditional confrontational approach to that of engagement in order to see results.

He says that the corporate social responsibility movement in Asia "is barking up the wrong tree" and needs to divert attention from small details to the bigger picture.

Those bigger issues are increasingly faced by groups like Tata as they expand into other nations. The conglomerate has a presence in 40 countries at present.

As Tata increasingly goes global it will need to raise the bar of responsibility and accountability.

Recognising cultural sensitivities and local operating conditions while retaining core values and communicating them to new employees in new markets amounts to a tough challenge.

Tata, with an enviable record for good conduct, says it realises the pressure and growing expectations and will continue to apply the "highest of ethical values" to its operations the world over, going beyond the minimum required by law in any host country.

In India, the group hopes to further the debate by indirect government lobbying. It cites its investment in projects such as the Tata Energy Research Institute, India's first research organisation on sustainability.

The group also leads collaborations with international organisations such as the UN and, at home, the Confederation of Indian Industry, in shaping Indian business's response to the global corporate responsibility debate. A values-driven heritage should stand it in good stead as it embarks on this monumental task.

Quick facts:

93 companies
32 publicly listed companies
Operations in seven business sectors
$17.8 billion turnover (2004-05)
Turnover 2.8% of India's GDP
215,000 employees
Operations in 40 countries across six continents
Exports to 140 nations

Sectoral contribution to Tata's financial make-up:

Communications and information systems - 27%
Engineering - 24%
Materials - 19%
Energy - 9%
Consumer products - 8%
Services - 8%
Chemicals - 5%

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