Behave ethically and contribute to economic development

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Different organisations have framed different definitions - although there is considerable common ground between them. "Corporate Social Responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of local community and society at large." - World Business Council for Sustainable Development

Carroll definition of CSR:

"CSR encompasses the economic, legal, ethical and philanthropic expectations placed on organisations by society at a given point in time."

3.1.2 Areas of CSR

Given the broad definition there are many areas of business operations that are affected by it. The most often mentioned elements of CSR are:

Governance: Sound governance, ethical conduct of staff, transparency of operations, no conflicts of interest, compliance with corporate law and listing rules.

Employees: turnover, morale, satisfaction, work-life balance, internal culture (transparency), labour practices, training, diversity, remuneration, equal opportunities, job security.

Social: community engagement, human rights, charitable donations, staff volunteering, philanthropic activities, social benefit and investment.

Environment: waste & pollution avoidance, environmental footprint, eco - efficiency, greenhouse gas emissions, product recycling, sustainability, resource reduction.

Risk management: organisational health & safety, product safety, reputation management, regulatory compliance, responsible business practices, stakeholder engagement.

3.1.3 Benefits of CSR

CSR should not be viewed as a drain on resources, because carefully implemented CSR policies can benefit the organisation in following ways:

Win new business

Develop and enhance relations with customers, suppliers and networks

Attract, retain and maintain a happy workforce and be an Employer of Choice

Differentiate yourself from your competitors

Save money on energy, operation costs and manage risk

Provide access to investment and funding opportunities

CSR helps to comply with regulatory requirements

Activities such as involvement with the local community are ideal opportunities to generate positive press coverage and build a local business brand

Thus, a well implemented CSR policy can benefit an organisation in every major area of business such as Risk Management, Human Resources, Brand Image and Reputation, Financial Management and thus provides an organization a Licence to Operate.

3.1.4 CSR in INDIA

Corporate responsibility is not something new in India. In its oldest form, it has been reflected in corporate philanthropy and the Gandhian Trusteeship Model. This is characterized by corporate donations in cash or kind, community investment in trusts, and provision of essential services such as schools, infirmaries, etc.

CSR has been on agenda for a considerable period now. Most big Indian corporations are engaged in some CSR activities. Several major CSR initiatives have been launched in India since the mid 1990's. In India, CSR has evolved to encompass employees, customers, stakeholders and notions of sustainable development or corporate citizenship. Some Indian companies are also embracing the 'stakeholder model' whereby companies respond to the needs of stakeholders.

3.2 Tata Steel's CSR Activities

100 years ago, Tata Steel first marked its imprint on a small, insignificant place called Jamshedpur, the birthplace of Indian Steel. Today, Tata Steel is an inspiration to corporate world, in its endeavours to enrich lives of people and communities it touches.

The company's CSR strategy was inspired by Jamsetji Tata's conviction that, "In a free enterprise, the community is not just another stakeholder, but is, in fact, the very purpose of its existence".

The mandate given to Tata Steel CSR team was to work for welfare of socially and economically disadvantaged communities living in and around its areas of operation.

The CSR programme is managed by:

Tata Steel Rural Development Society (TSRDS)

Established in 1979, to share its resources with the rural areas within which company operates extending to mines and collieries, spread over Jharkhand and Orissa.

The objectives of T.S.R.D.S. are:

To create a self sustaining process of integrated rural development

To build a model that could be replicated by like minded industrial houses and other organisations elsewhere with similar Socio-economic situation in India.

Networking with agencies- Government, Non Government - National, International for bringing best available resources and practices for the rural community it works with.

(http://jamshedpur.nic.in/tsrdc.htm)

The Tribal Culture Society (TCS)

TCS started in 1993 by Tata Steel in Jamshedpur, India with an aim to deliver a sense of self-respect and dignity to lives of those who belong to weaker sections of the community by providing basic education, clinics and preservation of tribal heritage that is almost on the brink of extinction.

The society makes numerous efforts to bridge the vast gap between tribal culture and modern civilisation by providing healthcare to conducting workshops. (http://eishasarkar.blogspot.com/2008/02/tribal-cultural-society-sonari.html)

Tata Steel's Family Initiative Foundation (TSFIF)

Founded in early 1950's, TSFIF provides health and family welfare services in and around industrial city of Jamshedpur. TSFIF covers a wide spectrum of heterogeneous population including industrial workers, urban areas and rural community dwellers within the steel city and in the rural areas.

It covers the rural and urban population through basic health care amenities. The company has 21 maternal and child health clinics. TSFIF is also involved in the population stabilization program. It works to improve the reproductive and sexual health of the communities by focusing on Maternal and Child health, Quality of Care, HIV / AIDS, Family Planning and Gender.

3.3 Analysis of Tata Steel's CSR activities in context of Carroll's CSR Pyramid

Carroll's four part definition of CSR makes explicit the multi-faceted nature of social responsibility. According to Carroll, "An organisation could be referred as a good corporate citizen only if it satisfies all the four components of the Pyramid consecutively."

Block 1 - Economic Responsibilities:

Tata steel strives to increase shareholders value by creating sound business strategies and productive community building exercises. The Company's endeavour is strengthened each year through newer and challenging initiatives, which not only enhances shareholders' value but also benefits the community at large.

Analysis of Tata Steel financial performance to its competitor JSW Steel:

Turnover & Profit:

JSW Steel ranks in top 10 steel producers in India. Though, its Turnover has grown over the years, it is still far below Tata Steel. Tata Steel over the years has been able to grow at a steady speed bringing increased return to its shareholders. Both, PBT & PAT are considerably satisfying and higher than that of JSW Steel Ltd. Though the profit margin of Tata Steel has been falling over last three years, it has been above its competitor. Tata Steel margin in the year 2007-08 was 33.7%, 2008-09 was 30.1% and 2009-10 was 28.8% whereas that of JSW Steel margin in the year 2007-08 was 20.8%, 2008-09 was 10.5% and in 2009-10 was 15.5%. (Margin=PBT/Turnover*100)

JSW Steel Ltd

TATA Steel Ltd

Figures in Rs. Crores

Graphical Analysis of Tata Steel and JSW Steel shows Tata Steel over the years has been successful to increase its revenue and has always strive to be the key player in Indian Steel industry. However, when the recession in 2008-09 rocked the international markets Tata Steel was able to maintain its revenue levels in 2009-10. Therefore, company was able to perform satisfactory in these hard times.

Dividends & EPS:

Shareholders investing in company require a fair return on their investment. Every company should ensure they fulfil their obligation fairly and provide reasonable return to its shareholders.

Tata Steel maintained a steady payout ratio of 160% in years 2007-08 and 2008-09 which has fallen by 50% to 80% in year 2009-10. The Payout ratio of JSW Steel has been very fluctuating over the last three years. However, except in year 2008-09 company has a satisfactory payout ratio. It needs to ensure that it maintains it payout ratio at a steady level to keep its investors happy.

Tata Steel paid Rs.16 per share as dividend in years 2007-08 & 2008-09 and Rs. 8 per share in year 2009-10 on each Equity share with a par value of Rs.10 compared to Rs.14 in 2007-08, Rs. 1 in 2008-09 and Rs. 9.5 per share on Equity share of Rs.10 of JSW Steel Ltd. Thus, Tata Steel has been providing reasonable returns to its investors and has always been maintaining a level above its competitor.

EPS (Earnings per share) shows the portion of company's profit allocated to equity shareholders after paying the dividends to preference shareholders. It is an important indicator of company's profitability. It is also used by investors in making their investment decisions. Calculated as:

Figures in Rs.

Tata Steel EPS during year 2007-08 was 66.80, 2008-09 was 69.45 and in year 2009-10 was 60.26 whereas that of JSW Steel Ltd in year 2007-08 was 95.26, 2008-09 was 22.70 and in year 2009-10 was 106.34 on Equity Share of Rs.10 each. It seems that JSW Steel has been generating profits at better pace than Tata Steel for its investors. It could be a better option for investors. However EPS is not the only indicator that investors take into view when deciding their investments. Tata Steel has a stable EPS over the years.

Some of the Corporate Awards won during year 2009-10,

The rating of being one of the world's top ten "Most Admired Companies" by Fortune Magazine.

The Economic Times company of the year Award.

The Best Establishment Award by President of India, Mrs Pratiba Devi Singh Patil.

Observation:

The above financial review suggests Tata Steel has been successful in meeting its obligations to its shareholders. The increasing revenue and profits suggest it has good long term prospects. Thus, it has fulfilled the 1st Block of Carroll's Pyramid. Tata Steel has met its obligations to its shareholders far better than its competitor. However, one cannot outlook JSW Steel. I would like to state that Tata Steel performance has been reasonably better.

Block 2 - Legal Responsibilities:

Being a respected member of society, Tata Steel has a responsibility as well as a duty to operate within the guidance of law. These include compliance with Health & Safety Law within its factory, Employment Law, Environmental Law and Financial Reporting Laws.

Tata steel efforts at environment management are well recognized. Its steel plant in Jamshedpur, India, all its mines, collieries and manufacturing divisions are certified to ISO-14001. Jamshedpur is the only town in India which has an ISO certified service provider. As a millennium gift for future generations it planted, thousand trees for thousand days. The eventual count was 1.6 million in the year 2003. In the past five years Tata Steel has been able to achieve a 20% reduction in material consumed.

Believing that a happy workforce is a productive workforce, Tata Steel has always extended its support for employee welfare and development thereby ensuring an enriched life for its employees. All employees need to follow Tata Code of Conduct.

Some of the landmark achievements in the field of Employment Law and Services:

1912 - 8 hour work day

1916 - Social Welfare scheme launched for employees

1920 - Leave with Pay

1934 - Profit Sharing Bonus

Tata Steel was the first Indian company to introduce employment laws in the country and many government laws are been written by this ideology adopted by Tata Steel.

Safety at work place continues to be an area of critical importance. In line with the vision of achieving 0.4 Lost Time Injury Frequency Rate (LTIFR) by 2012, there was significant improvement in Tata Steel safety performance in FY10 with a 30% reduction in LTIFR with compared to FY09 due to implementation of many process related safety initiatives.

Tata Steel also has a legal duty to publish its financial statements (standalone) as well as group financial statements as a whole. It has to comply with Indian GAAP as well as International Accounting Standards (ISA's). Tata Steel has been publishing these as well as Sustainability Report to demonstrate its efforts in improving the lives of others and to be seen as a Law abiding citizen.

Tata Steel was rewarded with the following awards:

Recognition from World Steel Association to Tata Steel for demonstrating excellence in safety and health programmes in 2009.

The CSR Leadership award 2009 to Tata Steel at the Orissa State Safety Awards, India.

National Safety awards to its Divisions in West Bokoro and Jharia, India.

The Most Admired Knowledge Enterprise (MAKE) Asia Award (Five Times).

Asia's Best Employer Brand Award 2010.

Observation:

The above performance and achievements of Tata Steel's suggests it has complied with government regulations and laws, recognition and awards honoured by various national and international bodies, suggests that, it has successfully achieved the 2nd Block of Carroll's pyramid.

Block 3 - Ethical Responsibilities:

With a workforce of more than 35,000 in India, Tata Steel provides all its employees with medical and housing facilities as well as a monthly allowance is given to any employee who incurs work related injury to support his family financially till injured employee reaches the age of 65.

Tata Steel considers Jharkhand, India as its birth place and has undertaken a wide range of activities. The three organisations formed by Tata Steel as mentioned above focuses its resources to fulfil the ethical and social commitment Tata Steel has to the society. The wide ranges of activities undertaken are:

Health - A Critical Focus

850 bed hospital, two super dispensaries and nine dispensaries in Jamshedpur.

Several immunisations, maternal and family welfare programmes have touched the lives of more than 27,000 people.

Over 60,000 people have been made aware of the AIDS and its effects through various awareness programmes and over 250,000 people have been covered in last 5 years.

Ensures 98% Immunisation coverage in the city of Jamshedpur.

"Lifeline Express" hospital on wheels - Over 4,000 patients have been treated and 702 surgeries have been successfully conducted in 2009-10.

20531.jpgLife-line-Express-B.jpg

Tata Steel's - Life Line Express

health04.jpg health05.jpg

Free Health check up Employee Health Facility

Civic Amenities - Water, Sanitation, Wasteland & Agricultural Programmes and Sports

Jamshedpur has been selected by United Nations to participate in its 'Global Compact Cities' programme.

Providing potable water to communities through tankers or piped water distribution systems and hand pumps or via construction/ repairs of wells to create self-sufficiency for over 50,000 people.

Several agricultural programmes in the states of Orissa and Jharkhand are working towards improving agricultural productivity and helping sustain livelihoods of poor farmers and their families. Among encouraging results has been an increase in income, food security for 12 months in every household, lower migration, additional income for education and a visible improvement in health.

A large proportion of land (around 9%) in Jharkhand, India is considered to be wasteland. To bring this land into productive use, the TSRDS with the National Horticulture Mission has launched a 5 year horticulture project. During 2009-10 an additional area of 2,075 acres were covered under Horticulture Crops.

In India, the Tata Football Academy has long been involved in nurturing and training young footballers. It has an outstanding record for producing players for Indian National Team.

plantation.jpginfrastructure04.jpg

Wasteland Development Bridge Construction, Orissa, INDIA

ruraldevelopment.jpgagriculture-porductivity.jpg

Happy Farmers in Jharkhand benefiting from Tata Steel's Agricultural Programmes

sports3.jpghealth07.jpg

Tata Football Academy Tubewell Installed by Tata Steel, Jharkhand

Human Capital - Employees, Volunteerism, Culture & Heritage, Woman Education

Tata Steel has made available several scholarships and programmes to encourage quality education. Among these are the Sakshar Samaj Programme for functional literacy among adults, the Jyoti Fellowship for financial assistance, the Moodie Endowment for financial assistance to students pursuing professional courses, Early Child Education Centres, Coaching Programmes and Camp Centres to accelerate education.

Tata Steel encourages its employees to volunteer their services for Community Development Programmes.

TCS promotes various initiatives such as Kati Tournament (a traditional game played in states of Orissa and Jharkhand), the Tribal Culture Centre that illustrates the ethnic identities of major Tribal communities of Jharkhand, the Gram Shree Mela - an event that provides an opportunity for rural producers to sell their products directly in major markets.

Three primary schools, six high schools and one college run by the company. 312 private schools assisted by Tata Steel. Jamshedpur has the highest literacy rates in the country.

Untitled-1 copy.png

Employee Volunteerism in Jharkhand, INDIA

empowerment01.jpgsocial-01.jpg

Women Education Tribal Culture, Orissa INDIA

education01.jpgcommunity-development7.jpg

Tata School in Jharkhand, INDIA Primary Education for Children in Orissa

Observation:

The above analysis of Tata Steel's ethical and social commitment to society clearly shows that it has more or less fulfilled the 3rd Block of Carroll's Pyramid.

Block 4 - Philanthropic Responsibility:

Since the beginning of its operations, Tata Steel envisaged its steel works, mines and collieries as symbol of nation building, and an endeavour to improve quality of life of its people, with a special interest in community where it operates.

Tata Steel's contribution towards social causes is clearly reflected in its strategies and policies, as well as in efforts undertaken by its 3 organizations as stated above. The scope of these initiatives reaches far beyond the employees and their families to communities that are directly or indirectly impacted by the company. In its global operations as well, Tata Steel has ensured that several specific initiatives are taken towards benefiting extended communities through its business.

'Tata Parivar Programme'

The word 'Parivar' means family. This programme was adopted for rehabilitation and resettlement of all those families affect by new Greenfield Project (A new steel plant in the state of Orissa, India.).

Activities under this programme include:

Fair and just compensation for land given up.

Rehabilitation colonies developed in collaboration with villagers - with basic civic amenities, drinking water, streets lights, sewerage, dispensaries, schools, access to education, community areas and places of religious worship.

Basic health and hygiene services.

Employment opportunities for one nominee of each displaced family in the company plant - or associate companies.

Though it could be argued that, it was responsibility of Tata Steel to rehabilitate people affected by its plant, Tata Steel has not only fulfilled its responsibility but also brought smiles and new hopes in all those people. The people affected were those living below poverty line, in tents without proper shelter. Education, Health facilities which were absent in the life of these people was provided to them by the company. Tata Steel's efforts have brought a 'New Life with a New Hope' in around 765 displaced families. Today, these people live a satisfying life, and have access to all those facilities which human deserves.

Disaster Relief Management:

The Tata Relief Committee (TRC) is a voluntary organization promoted to serve people, often society's poorest, whose lives have been severely affected by natural calamities.

TRC took up massive relief operations during 'Tsunami' in Tamil Nadu, India during 2007-08. It distributed engine boats, family kits and nets to fishermen. It also set up a water desalination plant for supply of safe drinking water, helped in the construction of houses and also helped set up infrastructure for electrification, water distribution, sewer network and roads.

During FY10, Tata Steel aided the people of Mandar Block of Ranchi district in Jharkhand, India in the wake of cyclone 'Aila', which destroyed villages, leaving hundreds of people homeless. Relief materials to the tune tarpaulin sheets, medicines, packets of consumables and other essentials were distributed.

Awards for Excellence in Corporate Social Responsibility during the year 2009-2010

The Golden Peacock Global Award

The Significant Achievement in Sustainability certification from CII-ITC

The TERI CSR Award

The Times of India CSR Award

The Rashtriya Khel Protsahan Puraskar

The Ispat Paryavaran Puraskar Special Award

CSR Excellence Award 2010 by Associated Chamber of Commerce & Industry of India

Honoured by Prime Minister of India, Dr Manmohan Singh in 2007-08 for being most reputable employer and for its CSR activities in 2009.

Observation:

The exceptional work undertaken by Tata Steel as described above clearly shows that it satisfies the 4th Block of Carroll's Pyramid. Tata Steel have contributed its resources in each major field i.e. education, sports, infrastructure building etc. The analysis of its activities clearly supports the above view.

Conclusion:

On the basis of Carroll's CSR Pyramid and results of my analysis of various CSR initiatives of Tata Steel under various headings of Carroll's Model, I have come to conclusion that Tata Steel has fulfilled all 4-Blocks of Carroll's Model and could be referred to as a "True CSR" and "Good Corporate Citizen".

JSW Steel's CSR investment in last 3 years has been INR 24 crores ($6m) in 2007-08, INR 15 crores ($3.75m) in 2008-09 and INR 13 crores ($3.25m) in 2009-10.

(http://www.jsw.in/investor_zone/pdf/Annual_Results/JSW%20Steel%20Full%202010.pdf)

On the other hand Tata Steel has contributed INR 150 crores ($37.5m) on average over the last 3 years.

Thus, Tata Steel has been able to undertake far more projects than JSW Steel because of its higher contribution and resources the company contributes. Tata Steel is currently undertaking projects in 850 villages in Jharkhand.

(http://www.indianmba.com/Faculty_Column/FC955/fc955.html)

JSW has also made contributions to society in various forms and it would not be appropriate to judge who the better is. It's the commitment and dedication to society and can't be enforced. However, companies who do contribute to society are the one who gain public respect and loyalty.

3.4 Impact of Tata Steel's CSR Policies & Business Ethics on its Business Practice and Key Stakeholders

Tata Steel's Business Ethics Policies are inspired by J N Tata, who once mentioned that, "We do not claim to be more unselfish, more generous or more philanthropic than others, but we think, we started on sound and straight forward business principles considering the interest of shareholders, our own health and welfare of our employees... the sure foundation of our prosperity."

The key stakeholders of Tata Steel appears to be its Owners (Shareholders), Customers, Employees (Direct & Indirect), Government, Suppliers, Environment and the Society at large. The effects of which are:

Continuous Improvement: To create value for its stakeholders and to improve its efficiency and effectiveness, it applies ISO9001 global standard for quality assurance to enhance customer satisfaction in supplier-customer relationship. In 2008, Tata Steel was the first integrated steel company outside Japan, to be awarded the Prestigious Deming Application Prize in TQM.

Products & Services: The quality standards of its products meet the required national standards. Its main steel works at Jamshedpur are certified to ISO9000, ISO14000, TS16949 and SA8000.

Increasing Profitability: With the continuous improvement in its products and services, sales and profits are gradually increasing year by year. As a result of this the return to shareholders has been rising steadily.

Return to Shareholders: As a result of increasing profits, dividend paid to shareholders of the company is constantly growing. In the FY 2004-05, company issued Bonus Shares in the ratio of 1 share for every two shares held followed by a Rights Issue in the ratio of 1 for every 5 shares held @ Rs 300 ($5) in the FY 2007-08.

Transparency: CSR and Business Ethics Policy of Tata Steel aims at complying with all relevant laws and regulations governing shareholder rights. Tata Steel shall duly and fairly inform its shareholders about all relevant aspects of companies business, and disclose such information in accordance with relevant laws and regulations.

Number of Employees: At the end of March 2009, Tata Steel in India employed about 35,000 as permanent employees in addition to providing indirect economic benefits to many thousands more through its contractors and suppliers. In India, Jamshedpur where Tata Steel main plant is located has the highest per capita income and the highest per capita expenditure by consumers.

Tata Code of Conduct (TCOC): The TCOC comprises of 28 Clauses with National interest being given foremost importance. The code also embodies values such as clarity in communication, respect for others, transparency and an ethical approach in conducting business, all of which contribute towards building team spirit and enhance integrity in the company's involvement with all its stakeholders.

Sense of Belonging: Tata Steel has put into practice many initiatives, events and programmes that have helped to create not only enduring loyalty amongst employees but also enabled them to have a more fulfilled life.

Environment: Tata Steel realises that the growing energy needs of the world can only be attained through energy conservation, which needs adoption of new and efficient technology, modernisation of equipment and new ways of operation.

Government (Country): Tata Steel is committed to the economic development of the country in which it operates. It tries to avoid any activity or project that is against the wider interest of the community. Tata Steel also refrains itself from any illegal activities that is against the National Interest.

Thus, from the above points it is clear that an organizations CSR policy, Business Ethics Policy and its Practices have a wider impact on its stakeholders. Shareholders have more trust in company operations and therefore more loyal to company, as they believe their company will provide them with all necessary information. Employees enjoy a healthy and happy work and social life, Customers derive value for money, suppliers more willing to trade with a company who cares about all its stakeholders and thus the society becomes more loyal and faithful to the company. This in turn brings sustainable growth to the company and this is one of the reasons why Tata Steel is one of the most successful Indian Enterprise and a Respected Name worldwide.

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