As corporate social responsibility is becoming increasingly important in attaining and sustaining competitive advantage, many companies have signed on to pro-environmental and pro-social initiatives. But can such initiatives promote doing good while strengthening a firm’s competitive advantage? Starting with a Tata Workout in 2001, CEOs of the TATA companies have collectively evolved an integrated approach to embedding a sustainability mindset into their systems, people, and processes. In 2007, their efforts culminated in the launch of a Leadership Protocol that promotes both a systemic legacy and personality footprints for the next generation of TATA leaders. The authors discuss how this comprehensive approach for the execution of sustainability strategies can strengthen the connection between corporate social responsibility and global competitiveness.
Walmart has Sustainability 360. MacDonald’s is greening its supply chains to promote fair-trade coffee and sustainable fisheries. Monsanto developed a trans fat-free soybean, helping make KFC’s fried chicken a healthier choice and now works with farmers around the world to mitigate agriculture’s overall impact on our environment. And Toyota’s “Prius for the people” helps climate change mindful people make the right choice on their way to work.
Few corporate leaders would disagree that “today’s companies ought to invest in corporate social responsibility as part of their business strategy to become more competitive” (Porter & Kramer, 2006). But connecting doing good and doing well poses new challenges in strategy formulation and execution. There are a handful of systematic guidelines that have helped disseminate best practices among future-minded corporations: the ISO 14000 Environmental Management Standard , the Global Reporting Initiative’s Sustainability Reporting Guidelines, and more recently, the Social Accountability International’s SA8000 code of conduct. As more companies sign on to these agreements, both the internal learning and external credibility stemming from sounder practices have become a source of competitive parity. But can a corporation blaze new competitive advantage at the junction of sustainability and business?
Take Tata’s recently announced Nano, the world’s most affordable car – for some perhaps another 4-wheel greenhouse threat, for many a revolutionary new way to reposition the auto industry. But both critics and advocates agree that the $2,500, two-cylinder car showcased at the New Delhi Auto Expo on January 10 offers an affordable transportation solution with a low carbon footprint. For Tata Motors, India’s largest automobile company, the Nano is much more than a provocative new transportation choice for India’s people. This little safe car stands as another bold embodiment of Tata’s century of trust and cooperation with local communities. And the Nano is only one of the fruits of Tata companies’ painstaking commitment to surfacing the best of business in the service of people, in India and globally.
Tata Consultancy Services Limited (TCS), a world leading provider of information technology consulting services, is winning global accolades from Business in the Community’s (BitC) Corporate Responsibility Index (CRI), the leading UK benchmark of responsible business practice. In 2006, TCS achieved the gold band for its performance in the Community Index with a score of 94.7 percent. Known internationally for its business success, TCS has a warm spot in the heart of many Indians for the Computer Based Functional Literacy project. This program helped illiterate adults learn how to read in their own spoken language in a span of 30 to 45 hours spread over 10 to 12 weeks. The programme is multimedia-driven, and targets 15 to 30 year olds – setting them on the path to acquiring other literacy skills, including writing and arithmetic ability without any interruption in their productive activities. Five years later, the project has spread to more than 1,000 centres in Andhra Pradesh, Tamil Nadu, Madhya Pradesh, Maharashtra, Uttar Pradesh and West Bengal, and it has helped more than 46,000 people learn how to read. It has also inspired TCS employees to closely marry their IT excellence with local initiatives in their global operations, and to embody and share the Tata values wherever they work.
There are many differences between Tata Motors and TCS – but also important commonalities. Both companies strive to share the human touch everyday and everywhere they go. The social and environmental value their respective operations create helps strengthen and promote the TATA brand as the group becomes a global presence. Their initiatives boil down century-old values of community stewardship in ways that leverage core operational impact to make a lasting impression on the communities in which they operate. This deep awareness of how business can benefit multiple stakeholders by mission and design constantly renews the Tata corporate identity in ways that continuously strengthen its brand and competitive advantage in markets at home and abroad.
The TATA way
Why do so few corporations do business the Tata way? There is a catch. First, every single employee working for TATA companies, from the CEO to the most recent intern share in the deep values of their leaders, still a guidepost for every new project within the group. Second, Tata companies have evolved a collective commitment to evolving stronger connections between their values and first- in-class business practice – not by putting either one ahead of the other, but by finding mutually beneficial bridges between them.
“In a free enterprise, the community is not just another stakeholder in business, but is in fact the very purpose of its existence.”
Jamsetji N. Tata (Founder, Tata Group, 1868)
“The Tata philosophy of management has always been and is today more than ever, that corporate enterprises must be managed not merely in the interests of their owners, but equally in those of their employees, of the customers of their products, of the local community and finally of the country as a whole.”
– J. R. D. Tata
Starting in the early 1990s, the group has invested in structures and processes that would gradually align its pro-social and pro-environmental values with excellence in business endeavours. These efforts culminated in 2003 with the introduction of The Tata Index for Sustainable Human Development, a pioneering effort aimed at directing, measuring and enhancing the community work that assists all TATA companies in their social responsibility efforts. The index had been developed by the TATA Council for Community Initiatives (TCCI), a council of Tata companies CEOs chaired by Mr. Kishor Chaukar, in partnership with TATA Quality Management Services (TQMS). Since June 2004, the Tata Index has been deployed annually to assure continuous improvement in the delivery of social responsibility initiatives at the company level. In 2005, reporting companies averaged almost half of its intended goal, i.e. 452.95 points on a 1000 point scale, with companies scoring as high as 712 (Tata Steel). In 2006/07, TCS scored 490. Tata Motors, now at 663, was one of the best performers on corporate sustainability within the group.
These scores were only the start. The purpose behind the Index was to seed new benchmarks and motivate continuous innovation in sustainability across each company’s operations. TCCI offered a common platform where each company could share their challenges and achievements with the others and would learn how to nurture stronger internal leadership structures that promoted business excellence “the TATA way”.
The Human Development Index was the very first initiative of its kind, both within TATA and across the world. The framework, originally initiated by TCCI in collaboration with the United Nations Development Program in India in 2001, has then been refined with training input from the Confederation of Indian Industry (CII), Price Waterhouse Cooper, the ICICI Bank, and the Ashoka group. Internationally, the index has both impressed and challenged the business community. It was showcased to the UN Secretary General Kofi Annan and 700 CEOs and global business leaders at the UN Business Leaders’ Summit, as well as to governments and businesses in Switzerland, Australia, Singapore, Bangkok, and Canada. Yet despite the appeal of assessing social impact, few companies in India and internationally have so far modelled TATA’s approach.
The idea of explicitly tracking social impact originated with Tata Sons. Under the Chairmanship of Mr. Ratan N. Tata, the Group searched for a new way to harness collective synergies among the Tata companies. This led to the Business Excellence Model (TBEM), a detailed business process reform which began formalizing the set of core values that the Tatas had lived by for over a century. One of the offshoots of this effort was the adoption of a more systematic, unified TATA approach to CSR, rooted in Jamsetji Tata’s social legacy, and the creation of the Tata Index for Sustainable Human Development, a trendsetting approach to mapping and measuring the social development endeavours of Tata Group companies.
The Index is now operational in most major Tata companies. Within each firm, a Corporate Head Social Responsibility (always a senior executive) manages a cross-functional CSR team of facilitators with specific responsibilities for community development, environmental management and volunteering. Mr. Nadkarni heads the operations of these teams and their leaders, i.e. the TCCI team, and functions as the Secretary of the Council – a group of 43 chief executive officers of Tata companies. TCCI operates across Tata companies as a network of more than 200 trained facilitations and over 11,500 volunteers.
The Index itself was a remarkable innovation. First, it broke down sustainability responses into three nested levels: systems (275/1000), people (175/1000) and program (550/1000), making it easy to measure, and easy to identify areas for improvement.
Figure 1: The TATA Index
Source: TCCI, February 2008.
Second, the indexation exercise places great emphasis on process – not just outcomes. For example, here is how a company might apply the index to its own operations:
Figure 2: Example of Tata Company Self-Assessment using the Tata Index
|Systems Level Response|
|1||Leadership is by example||23||16||39|
|2||Deployment through networking and commitment||14||12||26|
|3||Strategy to build lasting businesses||12||8||20|
|4||Accountability towards value creation||13||12||25|
|Total for Systems Reponse:||62||48||110|
|People Level Response|
|1||Put the best people!||10||8||18|
|2||Train and empower them!||9||7||16|
|3||Make them Leaders!||10||4||14|
|4||Most employees are like that!||8||4||12|
|Total for People Reponse:||37||23||60|
|Program Level Response|
|2||Opportunities to serve people||44||30||74|
|3||Build Community and Livelihoods||25||21||46|
|4||Encourage entrepreneurs and self-employment||34||23||57|
|Total for Program Reponse:||131||99||230|
Source: TCCI, February 2008.
For each assessment, the Corporate Sustainability Facilitator representing a Tata company and the Community Head for the project would also identify specific opportunities for improvement. These might read: “The Company mentions of a regular convention of review. However, it is not clear as to how the review findings are incorporated into Company’s strategy.” or “The Company trains its Facilitators / project leaders for leadership. However, it is not clear how the training imparted is actually benefiting them.” or “The Company declares ‘underprivileged women’ as its key community. However, there is no evidence on the process of identification of this community.” or “The Company states that the key community has benefited in terms of self-reliance. However, it is not clear as to how the key community has actually built self-reliance.”
Each project leader is responsible for understanding the specific concerns of each community, defining the key beneficiaries, and placing a clear focus on how a company’s core capabilities would contribute to a specific need. They would specify tangible measures both in terms of what will actually be done and in terms of the human achievement. The project leader will also determine the human excellence indicators and clearly identify which aspects have clear sustainability payoffs for the community engaged.
Why do Tata companies care so much? Because that is the Tata way – and because their employees are trusted (and expected) to approach their tasks and their volunteering with society in mind. They do not do something because it pays. They do it because it matters – to their business model, to their own development as leaders, and to the legacy their company wants to leave behind. This selflessness may catch cynics by surprise, but it is part and parcel of forging a strong connection between sustainability and competitiveness. Much like, “Think not what society can do for your company, but what your company can do for society.” There has been recent recognition by Harvard Business School professors Clayton Christensen and Michael Porter, among others, that such an orientation can trigger disruptive innovations. At Tata, the Index has made the disruption itself a way of doing business, to ensure that Tatas’ commitment to sustainable business will expand in the future and across its increasingly global base of operations.
“One hundred years from now, I expect the Tatas to be much bigger than it is now. More importantly, I hope the Group comes to be regarded as being the best in India — best in the manner in which we operate, best in the products we deliver and best in our value systems and ethics. Having said that, I hope that a hundred years from now we will spread our wings far beyond India…”
(Ratan Tata, 2005)
The Group has been eager to leverage its learning by sharing the idea of indexation and the more practical how-to’s of the Index with Tata suppliers, collaborators and competitors within India through the Confederation of Indian Industry (CII), and international organizations, such as the Global Reporting Initiative (the Group has been a founding member of GRI) and the Social Accountability Initiative. Although not every company may share the sustainability history or the ethos of Tata companies, the systematic approach of indexation can be easily adapted to work for different corporate identities, much as the GRI can be customized for specific activities and areas of improvement. If your firm has mustered the strategic commitment it takes to make the world a better place, the Index helps you execute by providing a guiding (albeit not forceful) approach to getting your systems, people and programs better every step of the way.
And then? You will soon need a parallel track to develop strong leaders that will continue to push your organization to the next level. Like every resource, sustainability processes can get stale and need periodic rejuvenation to bring your firm a competitive edge. Spearheaded by collaborations among Tata’s strategic leaders on the Index, an even stronger linkage between sustainability and operational excellence was recently forged at TCCI’s 6th workout since its founding, suggestively titled “Leadership for Corporate Sustainability”. The deliverable was another world first: a Leadership Profile. This “offers a set of suggestions to assist a Tata Company to develop its CSR practice with a greater focus on content and specific initiatives that have been collectively agreed upon at a group level. This version is specially designed to encourage CSR Facilitators and the TBEM Internal Assessors to work together in embedding CSR into the Internal Assessment process.”(TATA Protocol – Corporate Social Responsibility, January 2007).
How do you develop Leaders for Corporate Sustainability? At Tata, this is a two-fold approach. On the one hand, the Index encourages a proactive application of the Tata Business Excellence model in ways that promote positive social and environmental contributions. Annual scoring ensures constant process improvement. The assessment triggers company-wide workouts that help strategic leaders work with their internal teams to jointly identify major risks, opportunities and innovations that can meet both sustainability and business excellence objectives. Using this collective understanding, the leaders then formulate a 3-5 year corporate sustainability strategy for their organization. This gives their company a more sustainable edge (competitively, socially and environmentally). It also gradually widens their own leadership bandwidth to make a larger difference in their community and competitive context by setting new standards of what businesses can achieve.
On the other hand, the Corporate Sustainability Leadership Profile guides their personality footprints to trigger a virtuous cycle of enhanced goodwill and reputation. First, the leaders assume responsibility for themselves and their leadership team, and work personally to tighten convergence between the trained corporate sustainability facilitators and their unit’s business excellence goals. They lead for sustainability by example – through involvement in volunteering initiatives and through regular integration of sustainability issues in business meetings. Their performance on corporate sustainability is reviewed periodically (including their ability to promote and recognize such leadership among their subordinates). There is even a flowchart showing how any organizations can systematically implement leadership for sustainability.
Figure 3: The Tata Corporate Sustainability Leadership Profile: Process of Deployment
Source: TCCI, February 2008.
At Tata, the Leadership Protocol translates the group mission statement into executable leadership for sustainability: “The Tata name is a unique asset representing leadership with trust. Leveraging this asset to enhance Group synergy and becoming globally competitive is the route to sustained growth and long-term success.” (Group Mission Statement, 2007). Projects like the Nano or adult literacy in 40 hours do not happen by chance. But they can happen by design. Tata companies have unleashed a virtuous cycle of evolution and execution of sustainability strategies. The Index assesses and guides sustainability-enhancing processes; the Leadership Profile articulates the steps for strengthening leadership capabilities. By embedding a society-minded logic to value creation, Tata have given back many-fold to society. Their learning in turn has strengthened their corporate identity, and encouraged bold steps in rethinking transportation, information technology, or steel manufacturing.
Could your company follow their lead and make a difference? The Tata’s approach is simple, but it is not easy. You can position your firm for a lasting competitive advantage by deliberately embedding sustainability assessments in both operations and leadership. Taking a comprehensive approach helps you indentify and configure the various capabilities needed to create value sustainably – in systems, people and programs. And if your company is not changing fast enough, you can. Become the change you wish to see, and lead others by example:
- Take a holistic view of value creation.
- Demonstrate unusual creativity in solving tough problems for society.
- Practice strong ethical leadership with a deep sense of human purpose.
- Recalibrate the connection between your inner self and your footprints.