Documente Academic
Documente Profesional
Documente Cultură
Mathew Ashley
Bill OBrien
Rachel Reiter
Kevin Richards
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 Tatas vision but would address short-term investor ROI
concerns. This option would still address Tatas need to meet previously set climate change goals by diverting the focus from social to
environmental issues. Our consultancy concluded that one of Tatas 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 Tatas profile with local NGOs and allow for seamless global expansion. However, this option fails to leverage Tatas 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 Tatas external stakeholders.
PROPOSED TEN YEAR STRATEGY
Creation of Tata Sustainability Solutions (TSS)
Tata currently has four pillars of sustainability within the organization Tata Trusts, Tata Relief Committee (TRC), Tata Council for
Community Initiatives (TCCI), and Tata Quality Management Services (TQMS). Tata also has individual think tanks (such as the
Tata Chemicals Innovation Center) and initiatives each business silo, with annual groupwide meetings devoted to sharing best
practices. The individual responsibilities of TCCI and TQMS overlap, although TCCIs functions are more organic and less rigid than
the TQMS process. This organizational structure can be rightly credited with maintaining Tatas cultural core values. However, much
of Tatas sustainability measurement is ad hoc. An all-encompassing sustainability report is not currently being produced, leaving
uncertainty around the funding and returns of Tatas sustainable investments. Finally, this loose four pillar structure is likely to
become harder difficult to maintain and navigate as the companys global growth continues.
One solution that would allow Tata to continue sustainability in its rapidly-expanding operations is the creation of a company
subsidiary devoted to social and environmental stewardship. This subsidiary, TSS, would function like any other Tata business unit
(Tata Motors, Tata Chemical), except that it would operate at first as a cost center/support function rather than a profit center. TSS
would centralize a number of company functions, including educational trusts, TRC, and TCCI. The subsidiary would have a number
of key functions (see Exhibit 1 in Appendix), including internal (and eventual external) consultation support for sustainable initiatives,
a division for social projects that do not meet traditional definitions of EVA (as determined by TQMS), intra-company knowledge
sharing and training functions, a cross-functional innovation center, a financial reporting & analysis and auditing unit (which would
produce an annual sustainability report), and an internal/external fundraising team. Some advantages of this arrangement would
include:
Centralized Consulting Support for All Business Units. TSS would have a heavily staffed and funded group ensure that
sustainability opportunities are promoted, monitored, and cross-utilized between Tata businesses. In the medium-to-long term,
this same consulting function could be used externally to provide the same services as consulting firms such as Blu Skye and
Domani, effectively monetizing a Tata core competency and providing funding for future internal sustainable initiatives.
Increased Transparency. TSSs reporting function would utilize outside auditors and consultants to validate its numbers. Its
social and environmental metrics would cross all Tata organizations. Capitalization and financial information would be key to
providing outside stakeholders (especially shareholders) with a transparent view of funding and returns for sustainability projects.
Financial Independence. The new subsidiary would be funded through a pool of funds approach. This is analogous to US
bond covenant contracts for dividend payments. Just as bondholders want to control how profits are paid out of the firm,
shareholders who are skeptical of financial returns on sustainability would contract with Tatas management to ensure that cash is
infused into the subsidiary after certain profit and dividend/stock buyback criteria are met. This would continue the movement
towards transparency in finances and satisfy all shareholder groups (those who want the company to focus on sustainability
regardless of profit and those who are concerned about firm use of excess funds) and would ensure funding reserves for
sustainability in recessionary times.
Management Development. Management development would involve a significant rotation in this subsidiary, and training on
relevant sustainability practices and measurements would be provided. This would not only ensure top managerial talent in the
group but also continue to spread ideas and best practices throughout the organization after employee rotations are complete.
Fundraising Ease and Scalability. Tata has established itself as a forward-thinking company that has often predated the Indian
government (a major Tata shareholder) in key worker protection policies. With the increased transparency of TSS, Tata could
organize funding from employees, outside investors, and government agencies. This fundraising power could help TSS duplicate
the rapid growth of Tatas other lines. TSS management ability, knowledge, and continued success help other donors maximize
the social and environmental impact of their contributions.
Strategic Continuity. Creating a separate business subsidiary and a document with shareholders/stakeholders that details the
funding and reporting processes for TSS would ensure that the companys sustainability initiatives themselves are clear
throughout the organization and allow for quick implementation in the event of a CEO leadership transition.
Consistency of Business Practices. Tata will need to maintain clear and consistent treatment of employees, business partners,
and NGOs in all of its worldwide markets. TSS would maintain these standards and modify them with the Group Executive
Office (GEO) and Group Corporate Center (GCC).
businesses. These initiatives can be further developed through TCSs new sustainability software initiative beginning in the
second year.
Implement the Tata Tea Groups new global strategy, including the transparent reporting of ethical sourcing through the Rainforest
Alliance Certification for both its Western European and North American tea products over the next five years to remain
competitive with industry leaders. Nine in ten Americans say that the words conscious consumer describes them well and are
more likely to buy from companies that manufacture energy-efficient products, promote health and safety benefits, support fairlabor and fair-trade practices and commit to environmentally friendly practices. 2
o In the effort to become leaders in the sustainable packaging of tea, Tata Tea must compete with industry leaders, such as
Green Mountain Coffee Roasters Life-Cycle Analysis, through their tea product, which is sold in a portion pack made
from renewable materials.
Tata Power should consider diversifying its energy mix and develop strategies to meet the expanding demand for power over the
next ten years, as coal currently provides 68% of the electricity. 3 Unfortunately, the pay-back period for coal alternatives cannot
be addressed in a ten year span due to unpredictable renewable energy technology improvements and government regulatory
barriers.4 Tata Power must begin working with government stakeholders and exploring the possibility of developing alternative
energy technology. Central to this effort are carbon footprint reduction opportunities through the use of nuclear, wind, solar and
hydro.
Year 2
European Union (EU) standards have expanded to include mandatory ELV processing for vehicles. Anticipating this trend in
other countries, Tata Motors should undertake the development of a complete ELV system in India and Asia. Tata would partner
with Tata Chemical and Tata International to create this process, splitting the proceeds with consumers.
Expand current supply chain management initiatives to include additional trucks and trailers in growth markets to decrease diesel
fuel consumption and meet carbon footprint, utilizing Tata International expertise.
The sustainability software consulting market predominantly revolves around Enterprise Carbon Accounting (ECA) software.
Tata Software Consulting should develop a strategy to enter this market, engage its existing customer base, and consider
expanding this market to include social sustainability measurement (a Tata core competency). The ECA market is estimated to be
$7 to $9 billion with the highest concentration in North America and the EU. 5 TCS should determine whether the software should
be developed internally or purchased externally.
Year 3
The three year old TSS organization should seek to monetize its sustainability implementation best practices by looking for
opportunities to serve as external consultants.
Pursue longer-term, higher cost sustainability certifications including LEED building standards and Fair Trade certified products
and standards.
Year 4-10
The goal of this longer timeframe is to get high value sustainability certifications for Tatas businesses.
o Compared to sustainability reporting leaders Green Mountain Coffee Roasters Tata Tea does not adequately address how
they source their raw materials in an ethical manner. Tatas competitor, Lipton, has certified all its Yellow Label tea bags
sold in Europe by Rainforest Alliance. Tata Teas long-term goal for the last five years of their ten year strategy should
be to reassess their supply chain in order to get Fair Trade Certification for their products. The increased use and
reporting of Fair Trade goods will allow Tata to measure, manage and report on the scope of ethical methods in their
sourcing.
o LEED certification for all Taj hotels.
o C2C certification for Tata Motors, enhancing the existing ELV processes discussed earlier.
o After the TSS is established, revenues can be used to support long term development initiatives including water
purification, education, and health projects in developing markets.
VALUATION
All of the costs associated with the creation and staffing of TSS, along with the costs and benefits associated with our specific global
strategy recommendations, have been incorporated into a ten year valuation model. The assumptions in this model were necessarily
broad, as many of these initiatives are new ideas in new markets with uncertain demand. However, empirical research and reports
2
were used as sources whenever possible, and in all other cases assumptions are documented in relation to financial projections (see
Exhibit 3 in the Appendix). Two key assumptions in the financial modeling should be clarified; given Tatas conglomerate nature
(both in geography and line of business), Company-wide required rates of return estimates were not feasible and our analysis uses a
range of discount rates in order to gauge the sensitivity of that particular assumption. In addition, the brand enhancement of Tata is a
key assumption. Rather than randomly choosing one of the many brand valuation techniques available (revenue multiples, % of
advertising spend, marketplace share of voice), we estimated the brand valuation needed to achieve break-even financials at key points
in the ten year timeframe. In this way, a management gut check" of the brand values reasonableness can be conducted. (see Figure 3
below and Exhibit 3 in the Appendix)
Figure 3: Strategic Plan Timeline
CONCLUSION
Our strategic recommendations for Tata are intended to address all of the organizational, cultural, strategic, and operational
considerations that a ten year sustainability strategy would necessitate. Specific sustainability initiatives need strategic support to
flourish, and the creation of TSS would be useless without innovation and creativity to fuel its growth. With a new definition of
sustainability, a framework for growth and transparency, and specifically tailored global strategies, Tata will be ideally positioned for
the next ten years to sustain its culture and evolve.
APPENDIX
Exhibit 1: Organizational Chart (Current & Proposed)