DEVELOPMENT OF CORPORATE SOCIAL RESPONSIBILITY 1 IN INDIAN FAMILY BUSINESS: A CASE OF TATA IRON & STEEL COMPANY

by

Sarika Tomar Faculty, NIILM CMS, New Delhi. Mobile : 9891084563 Email : sarika1974@yahoo.com

Rakesh Gupta Associate Professor, IILM- GSM, G.Noida Mobile: 9313999520, Email: rakesh.gupta@igsm.in

From hereon CSR

DEVELOPMENT OF CORPORATE SOCIAL RESPONSIBILITY IN INDIAN FAMILY BUSINESS: A CASE OF TATA IRON & STEEL COMPANY

Abstract

After carefully studying the literature of family businesses it has been noticed that researches in this field have centered on organizational issues such as structure, governance, succession, managerial behavior and some policies and practices that differentiate them from professionally managed firms. There are many other facets of this area which still remain unexplored and untouched. And one such area that also characterizes Indian family business is corporate social responsibility. Within the world of business the main responsibility for corporation has historically been to make profits and increase shareholder value. In other words corporate financial responsibility is the main driving force for any business. It is only in last twenty-five years that a radical change has taken place in the business whereby these businesses are expected to contribute to the public. A value shift has taken place within businesses where they not only feel responsibility for wealth creation but also for social and environmental good. India has a long history of corporate philanthropy and business involvement in social causes for national development. And if we carefully study the origin of corporate social responsibility in India, we find its roots in family businesses that evolved more than a century ago. Corporate social responsibility in India is based on family values and communitarianism. This

philanthropy grew out of the need to develop India socially, politically, and economically in order to meet the challenges posed by colonization. A family-owned business in India can be defined as a business governed and/or managed on a sustainable potentially cross generational, basis to shape and perhaps pure the formal or implicit vision of the business held by members of the same family or a small number of families (Chua, Chrisman, and Sharma, 1999). Tata Group is a pioneer in promoting CSR in India. The Tata Group is a giant family of businesses that dominates Indian markets. And Tata Steel is one of twenty-eight major corporations within the Tata Group. Founded in 1907, it is the largest private 1

sector steel company in India, with a capacity of 3.5 million tones per annum crude steel production. Operations are spread across the country, with steel manufacturing and mining activities situated in the states of Jharkhand and Orissa at eight locations. The company employs approximately 48,000 people as at April 2002. Tata Steels CSR activities started as early as its inception. Initially, these activities were only philanthropic in nature and the company believed more in giving back to the society. But over a period of time CSR activities of this company moved from pure philanthropy to a strategic CSR with a multi stakeholder approach. CSR activities are now ranging from community development, improving health care, reducing poverty, occupational health and safety risk control and protecting the environment that means covering almost all the stakeholders. The ideals and philosophy of the TATA Group originated from the founding father, Jamshedji Nusserwanji Tata (1839-1904). In 1895 he explained: We do not claim to be more unselfish, more generous or more philanthropic than others, but we think we started on sound and straightforward business principles considering the interests of the shareholders, our own and health and welfare of our employeesthe sure foundation of prosperity. These sound and straightforward principles carried through the generations of Tatas still has influence on the prevailing businesses and practices. With such a strong tradition of corporate responsibility, it is no surprise that very recently Ratan Tata has been honoured with Carnegie Medal of Philanthrophy in Pittsburgh on Wednesday October 22, 2007. The award is given every two years to individuals who like Andrew Carnegie have dedicated their private wealth to public good The purpose of the research paper is to study why, how and to what extent corporate social responsibility is being implemented in leading family owned business in India. The paper investigates that how a giant family business like Tata has been able to carry the tradition of corporate social responsibility so strongly over the years. The research focuses on the impact of the philosophy of Tata family on CSR policies and practices of TISCO. 2

Introduction
Business today are experiencing profound pressures to reform and improve stakeholder related practices and their impacts on stakeholders and the natural environment-in short, to manage responsibly as well as profitably (Waddock, Bodell & Graves 2002). Although the concept of corporate social responsibility has

changed substantially over the past two decades but still scholars have yet not been able to define it precisely.

There is tremendous pressure of wide range of stakeholders in pushing companies to respond in a more responsible way. This pressure not only comes from the primary stakeholders such as owners, employees, customers and suppliers but also from the secondary stakeholders such as non governmental organizations, activist, community and governments who are also seeking greater corporate responsibility. Lately a third source of pressure is generated from the social trends and institutional expectations, reflected in the proliferation of best of rankings, the steady emergence of global principles and standards that define expected levels of corporate responsibility, and the new initiatives to publicly report the triple bottom lines for measuring economic, social and environmental performance (Waddock, Bodell & Graves 2002).

With this kind of enormous pressure we find more and more organizations transforming themselves into a more responsible organization. But if we understand the concept of social responsibility from the point of view of business then there are several issues that are still unresolved and unanswered. Most companies face problems in addressing the issues of social responsibility. The three issues that remain unclear are the understanding of social responsible behavior and how any organization does manages these issues on an ongoing basis. As these activities are not the primary objective of any business it is evident that they are usually not taken up with full commitment. The fundamental problem in the field of business and society has been that there are no clear and precise definition of corporate social responsibility that provide a framework for systematic collection, organization and analysis of corporate data on this important concept. 3

Hence, in order to fully understand the concept of corporate social responsibility it is extremely important for us to develop a model that helps us in bringing clarity about the intentions of organizations and the phases its of development in any organization. This is further explained by considering a case of Tata Iron and Steel Company. As this company

There are two objective of this paper, first, is to develop a framework that integrates the intention and the concern of an organization towards corporate social responsibility and the degree to which these activities are operational. This framework will facilitate analysis of corporate social activities as well as the behavior or intentions behind these activities. This would further help us in understanding that how a family managed business like Tata Iron and Steel Company can follow a tradition of corporate social responsibility so strongly for as many as 100 years. What are the policies, practices and systems that have helped this organization to embrace corporate social responsibility so effectively?

This paper will also help us in addressing two key challenges in social responsibility management. First how to measure corporate social performance and second what capabilities an organization should have to be socially responsible. The first issue regarding measurement of social performance has been addressed by classifying the activities on the basis of intent i.e. the objective and the purpose of these activities ranging from economic to responsible and extent i.e. the degree to which these activities are operational in a firm. The second issue regarding the capabilities a firm should have to be socially responsible has been addressed by looking at all the dimensions and the organizational development of CSR in any organization.

This framework would be able to accommodate all the activities related to corporate social responsibility on the classification made in the given framework. While the nature and the extent of the activities may change but still the framework should be able to ascertain that all the activities can be included here.

There are several milestones that can be identified towards a theory of corporate social responsibility but so far there has been no such framework that focuses only on the responsible domain which is defined as

Our concern here is also to address the extent to which TISCO has evolved practices and procedures for implementing CSR activities and the involvement and commitment of these companies towards such issues.

This conceptual framework should prove valuable to managers seeking to establish, develop and institutionalize CSR principles, policies and practices in and organization.

This research paper is divided in 3 sections. The first section focuses on the review of literature regarding definitions and model of corporate social responsibility. The second section focuses on the construct of responsible domain. And the last section focuses on the practices, policies and systems of TISCO that have evolved over a period of time and help the business to be socially responsible.

Definition of Corporate Social Responsibility

The concept of corporate social responsibility has not yet been defined adequately and satisfactorily. Several research scholars have made an attempt to define the social responsibility of business but so far we have not been able to give a definition that could be accepted uniformly. Definitions of corporate social responsibility fall into two general schools of thought. Those that argue that business is obligated only to maximize profits within the boundaries of the law and minimal ethical constraints (Friedman 1970; Levitt1958), and Bowen (1953) advocated that businessmen have an obligation to pursue those policies, to make those decisions or to follow those lines of action which are desirable in terms of the objectives and values of our society. The concept of social responsibility here emphasizes on the objectives and value of the society and rests on two fundamental premises. First business exists at the pleasure of society; its behavior and methods of operation must fall within the

guidelines set by the society. The second premise underlying social responsibility is that business acts as a moral agent within the society.

Strand (1983) argues that the three dimensions of responsibility, responsiveness and response are fundamentally linked to form a system of corporate social involvement. Social responsibilities are determined by society, and the tasks of firm are: a) to identify and analyze societys changing expectations relating to corporate responsibilities b) to determine overall approach for being responsive to societys changing demands, and c) to implement appropriate response to relevant social issues. Davis (1973) suggested that social responsibility refers to businesses decisions and actions taken for reasons at least partially beyond the firms direct economic or technical interest. Elles and Walton (1961) argued that CSR refers to the problems that arise when corporate enterprise casts its shadows on social scene, and the ethical principles that ought to govern the relationship between the corporation and society. Carroll (1979) proposed a concise definition in favour of a three dimensional model, which consisted of social responsibility categories, social issues, and philosophies of social responsiveness. Jones (1983) favoured social control as a central variable for business and society research. The attention was shifted from social responsibility to social responsiveness by several other academicians and scholars. There basic argument was that emphasis on responsibility focused exclusively on the notion of business obligation and motivation and that action or performance was being overlooked. The social responsiveness movement therefore emphasized corporate action and implementation of a social role.

Corporate social responsibility was first described by Caroll (1979) as a three dimensional integration of corporate social responsibility, corporate social responsiveness, and social issues. Wartick and Cochran (1985) attempted to construct a general model of corporate social performance. They defined the CSP model, as the underlying interaction among the principles of social responsibility, the process of social responsiveness, and the policies develop to address social issues. Although this definition represented a conceptual advance in researchers thinking about business and society, but it left some of the issues unaddressed. First, the term performance speaks of actions and outcomes, not of integration or interaction. Thus, the definition of CSP model, which integrates these concepts, could not define CSP itself unless an action component was added. Second, there is a problem, which examined in the following section, with addressing social responsiveness as a single process rather than set of processes. Third, the final component of the CSP model is too restrictive. Policies are the only one outcome that helps in judging the social performance of any company, if policies does not exist, it cannot be inferred that no social performance exists. Further, formal policies may not be reflected in behaviors or programs that are governed by informal, unwritten policies. Understanding the Construct of Responsible Domain

As the central focus of the study is the responsible domain of socially responsible activities the classification of these activities is prepared on the basis of two dimensions. The first is the intent i.e. the objective and the purpose behind these activities and the second dimension is the extent i.e. the degree to which these activities are operational.

Thus, the framework developed herein would provide a logical and systematic criterion against which a corporations social performance can be measured. It would also suggest a rationale by which corporate activities can be analyzed in terms of social relevance so that comparisons overtime and across industries are possible.

Classification on the basis of Intent: Intention here basically refers to the concern of an organization towards socially responsible activities. It also means the objective and the purpose of an organization behind initiating these activities. A thorough literature survey reveals that organizations have a responsible behavior because of any of these three reasons first, they see a long-term benefit in being responsible, second they want to abide with the prevailing law and thirdly have a genuine concern for the society. It is not only important but also relevant to understand the intention of an organization behind being responsible, as it will help us in understanding the motives behind an organizations move towards becoming socially responsible.

Hence, it can be concluded that the responsible behavior is generally driven either by a profit motive; legal motive and or there is a high concern for society.

Concern for Profit: Corporations like all other social institutions are an integral part of society and must depend on it for their existence, continuity, and growth. As organizations usually behave in response to market forces, they initiate certain socially responsible activities that may have a direct impact on their economic performance. Although these activities are social in nature and aim for community welfare and societal development somewhere they have a hidden concern for profits. Here the management cares only about its companys gains, profitability and organizational success at any price. Their main strategy to have these activities is to exploit opportunities for corporate gain. These activities have a direct economic benefit that is clearly visible. Activities that are undertaken to improve the image or reputation of an organization can be included in this category. As the criteria for legitimacy for such activities is economic in nature the cost that is incurred in implementing these activities is treated as an investment. This is the also termed as the required behaviour of any organization. Such activities are undertaken after a detailed planning and doing a thorough cost benefit analysis. These activities generally become an investment that helps the organization in improving long-term economic performance. Organizations following these activities are called as Economic Citizens.

Concern for Law: Organizations prefers to conduct its operations within the legal framework imposed by social system within which it operates. Those activities that are driven in response to legal constraints fall under this category. Responsible behaviour that is driven by legal concern aims either at compliance with the existing laws or to avoid any litigation. As the criteria for legitimacy here is legal in nature it implies that bringing corporate behaviour to a level where it is congruent with the prevailing legal framework. These activities intend not to violate laws and equate social responsibility with fulfilling minimum legal requirements. This is the expected behaviour of any organization. And those organizations that do not abide with the legal framework are termed as illegal organizations. Organizations following these activities are called as Legal Citizens.

Concern for Society: These activities have very limited relevance of legal and market forces and they are above such criteria. Although these activities are not compulsory for any organization to undertake but these are definitely appreciated by the stakeholders. Organizations or activities belonging to this category are driven by a high concern for society. As these activities are not legally forced they are in congruence with the prevailing social norms and values. Organizations having these activities do recognize the importance of profitable operations but also takes definite stand on issues of public concern. All ongoing community development programmes that are voluntary in nature and are ultimately implemented to benefit the society at large come under in this category. This is the desired behaviour of any organization Organizations having such activities are progressive; they are the leaders in the industry and are called as Responsible Citizens.

Classification on the basis of Extent: This is the second dimension that addresses the recognition of social issues; involvement and commitment of an organization towards these issues and finally, the intensity of enforcement or in other words it can be said that these activities would have a degree to which they would be institutionalized. Extent can also be referred to evaluating the level of responsibility that an organization demonstrates.

Learning phase:

Here social responsibility is merely considered as corporate

obligation and hence the social response pattern is reactive in nature. There is minimum responsibility with respect to social activities. In this stage the top management acknowledges the organizations responsibility in a certain area or on a certain issues and a policy statement is generated. As social programs are taken as less ambitious goals for success the commitment towards these activities is very low. Such programs and activities are forced in place because of crisis or legal mandate. The management does not do anything until they have to do. Problems that are taken up are usually specific in nature and they are taken in isolation with no systematic causes, symptoms or ramifications. There is minimum implementation on a continuous basis. Emphasis is more on policy formulation than on implementation. Enforcement of policies in this phase is very low. There are no formal legal, or ethical standards existing in the company. There is no consistent planning for such activities. Policy statements are generally not very well defined and poorly communicated to the employees. Little or no direction, guidance, or support is given with respect to what the company will do about choosing or implementing such activities. Employees are usually not involved. Little or no control exists over the consistency of such programs. Hence corporate social performance here is usually non-instrumental.

Commitment phase: This stage is one step above learning phase where policies are clearly defined and organization starts focusing on the implementation of the programs. Here the organization acquires the knowledge and skills to implement the policies, the details of the programs are outlined, and monitoring systems are developed. As careful and detailed planning takes place before the implementation the commitment is much higher than the learning phase. Social activities are not only connected to the core business in this phase but we also find consistency with respect to the continuity of such programmes. The response pattern is proactive in nature. Employees are aware and they are communicated through written and orally communicated policy. The onus of implementation of these activities lies usually on staff people. Emphasis is laid on pertinent data collection and analysis but the ways

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of measuring and reporting are not very well developed. CSR programmes are formally addressed but outcomes are not clearly defined and measurable.

Institutionalization phase: This stage is defined as the degree of sustained organizational commitment, and is determined by degree to which the firms performance/control (PC) system, the system for measuring, reporting, rewarding, performance is modified to reflect the programs goals. Social response pattern is proactive and there is maximum responsibility with respect to social activities. Here the organization acquires the knowledge and skills to implement the policies, specialists are appointed, the details of the programs are outlined, and monitoring systems are developed. Responsibility for program is usually transferred from staff to line. Resources are committed, performance and expectations are communicated and evaluation instituted. Demonstrates high level of internal commitment. These programs are in place prior to legal mandate and those that exceed the standards set by law. Clear problem identification, problem-solving focus exists. In this stage an organization anticipates future social changes and develops internal structures and procedures to cope with them

Table1

Conceptualization of Socially Responsible Activities

Ideological Phase
ECONOMIC

Learning Phase Economic Actor

Commitment Phase Economic Citizen

(Concern for profit)

LEGAL

Economic Employer

Legal Employer

Legal Actor

Legal Citizen

(Concern for law)

RESPONSIBLE

(Concern for society)

Responsible Employer

Responsible Actor

Responsible Citizen

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Table2 Organizational Development of CSR Phase I

Learning Social Responsibility is considered as corporate obligation. Organization acknowledges responsibility in certain areas towards legal and traditional stakeholders. Emphasis is on generating policy statement.

Phase II
Commitment Social responsibility is connected to the core business. Organization acknowledges responsibility towards all the direct stakeholders. Policies are well written and documented.

Phase III
Institutionalization Social responsibility is not only connected to core business but it is also proactive in nature. Organization acknowledges responsibility towards all the stakeholders. Policies are well written, embedded and translated across the organizations. Social activities are undertaken on an ongoing basis.

As the level of commitment Social activities are well is very low social activities planned and strategic in are limited and ad-hoc in nature. nature.

Organizations in this phase have high concern for Organizations concern for profits High concern for profits as well as society. profits and low concern for as well as society is high. society.

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Table3
Organizational development of CSR

Parameters Interaction with focal stakeholder Concern for stakeholders Driving Force

Learning Phase Legal and traditional stakeholder Low Pressure from traditional stakeholders High profits and low concern for society Policy statement generated but not very well defined. Ad-hoc and reactive Spontaneous Limited, sporadic and connected with immediate future Low commitment

Commitment Phase Direct stakeholders

Institutionalization Phase Broad range of stakeholders from direct to external stakeholders Very high Values and vision of the organization that are community driven High profits and high societal goals (All stakeholders) Policies are embedded and translated across the organization. Proactive

Medium to high Changing stakeholder expectations High profits and concern for direct stakeholders Very well written and documented policies Strategic and reactive Consistent Connected to the core business

Goals of an organization Policies

Approach towards CSR activities Continuity of CSR programs Immediate future activities

Level of commitment Allocation of resources Organization culture

High commitment

Minimum support Adequate Neutral Supportive

Consistent and with long term plan Connected to the business and based on the requirement of the stakeholders Extremely high commitment for responsible activities Adequate and committed Supports, encourages and reward such activities

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Parameters Employee Volunteering (Involvement)

Learning Phase Employee involvement is negligible

Recognition to employees

No recognition for these activities

Awareness Levels Performance measures and outcomes Practices and programs

No training programs

Does not exist

Commitment Phase Employees are aware and communicated through written or orally communicated policies involvement of staff people is found in CSR activities No special programs to recognize the efforts of employees Training programs to make employees aware of these activities. Not clear and defined

Institutionalization Phase Employees are not only aware and communicated properly but they are involved and also actively participate in CSR activities.

Special recognition programmes for employees for their contribution towards the success of CSR programs Internal training programs geared towards increasing the involvement of employees Clear and communicated properly.

Practices and programs poorly implemented

Organization acquires knowledge and skills to implement policies and implements programs and processes.

Organization acquires knowledge and skills, appoint specialists to implement and monitor such programs and policies

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Parameters

Learning Phase

Implementation Minimum. As the approach is adhoc and reactive there is hardly any mechanism that exists for implementation and monitoring of CSR activities. Do not exists Mechanisms are in Feedback and the stage of Evaluation development mechanisms Reporting and communication Not defined and does not exist at all

Commitment Phase Specific mechanism exists for implementation monitoring and evaluation

Institutionalization Phase Maximum implementation and proper mechanism for meaningful performance monitoring and evaluation.

Mechanisms are developed and institutionalized in the form department or units. Reporting and communication to all the stakeholders

Reporting channels defined and communication to the relevant stakeholders

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A Case of Tata Iron & Steel Company

Tata Group is a giant family of businesses that dominates Indian markets. There is a long history of corporate responsibility within the group. This case study concerns initiatives undertaken by Tata Steel, as these initiatives are not mandated by law and the company has taken them voluntarily we classify them in the responsible domain.

Company Profile Tata Steel is one of twenty-eight major corporations within the Tata Group. Established in 1907, Tata Steel is Asia's first and India's largest private sector steel company. Tata Steel is among the lowest cost producers of steel in the world and one of the few select steel companies in the world that is EVA+. Its captive raw material resources and the state-of-the-art 5 MTPA (million tonne per annum) plant at Jamshedpur, in Jharkhand State, India give it a competitive edge. Determined to be a major global steel player, Tata Steel has recently included in its fold NatSteel, Asia (2 MTPA) and Millennium Steel (now Tata Steel Thailand) (1.7 MTPA) creating a manufacturing network in eight markets in South East Asia and Pacific rim countries. Tata Steel's products are targeted at the quality conscious auto sector and the burgeoning construction industry. With wire manufacturing facilities in India, Sri Lanka and Thailand, the Company plans to emerge as a major global player in the wire business. Products Tata Steel's products include hot and cold rolled coils and sheets, galvanised sheets, tubes, wire rods, construction rebars, rings and bearings. In an attempt to 'decommoditise' steel, the company has introduced brands like Tata Steelium (the world's first branded Cold Rolled Steel), Tata Shaktee (Galvanised Corrugated Sheets), Tata Tiscon (re-bars), Tata Bearings, Tata Agrico (hand tools and 16

implements), Tata Wiron (galvanised wire products), Tata Pipes (pipes for construction) and Tata Structure (contemporary construction material). Community Outreach and Environment Management While the Company is focused in the pursuit of its operational goals, it is also committed to being a good corporate citizen. Tata Steel extends support to the economically underprivileged not by charity but by strengthening and empowering them with expertise and knowledge. Its community outreach programmes covers the Tata Steel managed city of Jamshedpur and over 600 villages in and around its manufacturing and raw materials operations. Its steel works, mines and collieries and civic services in Jamshedpur are ISO 14001 certified for Environment Management. The Company's steel works is the first in the world to be conferred the SA 8000 certification for work conditions and improvements in the workplace. It's Ferro Alloys and Minerals Division is also SA 8000 certified. According to the UNEP and Standard & Poor's survey, the Corporate Sustainability Report filed by Tata Steel, according to the Triple Bottom Line Reporting Initiative, is the strongest by any corporate in the emerging economies and the Top Reporter in corporate India. Global Compact, United Nations

Founder member. Conferred the prestigious Global Business Coalition Award for Business Excellence in the Community in recognition of its pioneering work in the field of HIV/ AIDS awareness.

Jamshedpur city has been chosen to participate in the UN Global Compact Cities Pilot Programme.

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Awards and Recognitions World Steel Dynamics has ranked Tata Steel as the world's best steel maker (for two consecutive years) in its annual listing in February 2006. Tata Steel has been conferred the Prime Minister of India's Trophy for the Best Integrated Steel Plant five times. It has been awarded Asia's Most Admired Knowledge Enterprise award in 2003 and 2004. Project History and Development The ideals and philosophy of the Tata Group originated from the founding father, Jamsetji Nusserwanji Tata (1839-1904). In 1895 he explained: We do not claim to be more unselfish, more generous or more philanthropic than others, but we think we started on sound and straightforward business principles considering the interests of the shareholders, our own and the health and welfare of our employees the sure foundation of prosperity. Throughout the last century, Tata pioneered the notion of employee benefits in India. It introduced the eight-hour working day in 1912 an astonishing thirty-six years before the Indian government. Maternity benefits, schooling facilities and leave with pay are just some examples of benefits the Tata Group bestowed many years before it became law to do so. These sound and straightforward business principles carried through the generations of Tata Chairmen to influence Ratan N. Tata, Chairman as of 1992. With such a strong tradition of corporate responsibility, it is no surprise that Tatas current initiatives target community development and corporate sustainability. The following section provides an overview of some of the initiatives Tata Steel has implemented and encouraged in recent years. The first part considers before-profit practice and corporate governance, that is to say the companys conduct in the process of manufacturing steel. This includes employee welfare, Codes of Conduct, environmental regulation, and internal structures for improving the companys

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accountability. The second part reviews after-profit practice, social investment projects that are not directly related to the business of Tata itself.

Corporate Governance Tata Steel has articulated its policy position regarding human resources, the environment, and health and safety. It has a statement of purpose, a vision, and a mission that shape business-community relations as well as organisational structure. Tatas organisational structure is called the Tata Business Excellence Model (TBEM). This has been introduced across the Tata Group as a means of increasing efficiency and tightening business processes. Activities are broken down into the following; Market development Planning, control and risk management Investment management Operations (production and maintenance) Supply management Human resources management Social responsibility and corporate citizenship

Good corporate governance should be an integral part of all of these processes, not just (as often assumed) social responsibility and corporate citizenship. After all, a good corporate citizen needs to be accountable to stakeholders while conducting business as well as when investing in the community at a later date. Tata Steel has gone some way in ensuring corporate governance at all stages of the business process. Every year the company aims to exceed its targets on the Employee and Customer Satisfaction Indexes, and the Corporate Citizenship Index. In order to improve its internal management systems it has also adopted two systems of evaluation: Tata Code of Conduct Follows guidelines established by the UN Global Compact (to which Tata is also a signatory). A company signing to the Tata

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Code of Conduct entitles that company to use the Tata brand name. It prescribes principles by which all employees are expected to act. Audit Committee

Environmental Sustainability Tata Steel was the first integrated iron and steel plant in India to have been certified with the ISO-14001 Environmental Standard, and one of only a few in the world to have this accreditation in 2000. It operates its own Environmental Management System (EMS), aimed at increasing efficiency and limiting environmental impact at all stages of steel production. This system focuses on improved staff education (including contractors), instituting a system of waste segregation and its eco-friendly disposal, the safe disposal of industrial waste and where possible, a 100 per cent recycling of hazardous wastes such as tar sludge, oil soaked jute, and waste acid from batteries. Departments Tata Steel has also established several social departments and societies that work within the structure of the company. Table 1 lists them and details when they were established. Programmes implemented under these departments and societies are described in the next section, Social Investment. Table 1: Departments and Societies established by Tata Steel

Department / Society Family Welfare Community Development and

Year established 1951 1958 1974 1979 1986 1990

Social Welfare Tribal and Harijan Welfare Cell Tata Steel Rural Development Society (TSRDS) Environmental Management Tribal Culture Society

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Tata

Steel

Family

Initiatives

Foundation

1998

Social Investment This section reviews after-profit practice, work in and for the community that is not directly related to the business of business. Again, Tata Steel has internal procedures that guide policy, meaning that community initiatives are seldom ad hoc. Below are six of these initiatives or procedures, three of which are organised by some of the departments listed in Table 1 above.

Tata Council for Community Initiatives (TCCI) TCCI is a product of the Tata Groups commitment to the community. It serves to help the Tata companies in their business-community relations, by drawing up Tata Guidelines for Community Development, designing programmes then implementing them. Programmes include training courses in which Tata companies conduct technical (IT, vocational) training to members of the community. This is done with the help of company volunteers, often management staff. A forthcoming project involves forming a Tata Corps of Volunteers, under which employee volunteering will play an increasingly important role in developing business-community relations.

Tata Social Evaluation, Responsibility and Accountability (ERA) ERA is a procedure by which Tatas community projects are evaluated for their impact on the target communities and their level of accountability. Although ERA is not independent of Tata, such procedures are influential in improving programme delivery and ensuring continuing self-evaluation and learning.

Global Business Coalition (GBC) The Global Business Coalition on HIV/AIDS aims to check the growth of the disease with the help of over a hundred major international companies. Believing that business holds the necessary marketing skills, management and infrastructure to be

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able to raise awareness in rural communities, the GBC encourages companies to campaign with imagination and consistency. Tata Steel has done just that, and won an award in June 2003 for Best Initiative. Initially Tata focused on educating employees, but now targets over 600 villages in the State of Jarkhand. This is done through the dissemination of mass media, as well as more inventive schemes, such as student workshops which employees are trained to deliver, or travelling street plays in local languages that reach the rural illiterate. Tata paid for six condom-vending machines in the city of Jamshedpur in public places, which are also proving to be a success. At one of these locations, a busy coach station, there is also a clinic where passers-by can have free check-ups and learn more about HIV/AIDS.

Volunteer Database A Directory of Employee Volunteers was established by the Tata Group as an efficient way of matching jobs in the community with employee skills and interests. A corporate committee, comprised of a senior executive, union and government officials, interacts with the communities to ascertain their needs. This is done on a quarterly basis with senior citizens of each village, and biannually with target womens groups.

Health Initiatives Working with government to prioritise projects, Tata Steels involvement in health initiatives remains largely philanthropic, with the exception of the Global Business Coalition for HIV/AIDS awareness scheme (see subsection 3 above). Tata Steel has invested in a local hospital which treats an average of 2,300 people per day. It has also bought specialist cancer-treating equipment, and part-finances the running of one blood bank, two rehabilitation centres and five homeopathic clinics. Donations to the clinics and centres are regular and on a long-term basis, which does indicate a move from ad hoc sponsorship to a more strategic social investment. This is organised by the Family Welfare department.

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Culture and Education Education and Youth Development Programmes have built and maintained infrastructure for sports across Jarkhand. Over 1,500 young people are currently training at Tata Steels two sporting academies, six training centres or their Adventure Foundation. Awards are given to employees who excel in sports. A Tribal Cultural Centre was built in 1993 and a Jubilee Amusement Park in 2001 to enrich the cultural heritage of the city of Jamshedpur. Tata Steel has also invested in education, part-financing eleven schools and colleges that teach nearly 10,000 students per year. Looking to the future Along with the TCCIs forthcoming project to formalise employee volunteering, Tata Steel also hopes to align more with global standards and initiatives. In 2001 Tata Steel produced a Corporate Sustainability Report following guidelines established by the Global Reporting Initiative. This is another step forward for the company looking to make its mark on the new corporate responsibility agenda.

Key Issues and Lessons Learned Tata Steel has provided many examples of how business-community relations are approached by the private sector in India at the present time. Summaries of Tata initiatives reveal that the company is working to improve both before and afterprofit practice. As these practices are voluntary undertaken by the organization they showcase that the organization has a very high concern for the society. These practices are very well planned by the organization and they are integrated with the other practices which aim towards maximization of profits. These policies and

practices are embedded and institutionalized in the organization. The organizations not only have a high concern for profits but they also have a high concern for society. As these policies are strongly entrenched in the system they are consistent and connected to the business. Like Tata Code of Conduct means that the company holds certain principles, based on value judgements, that influence its policies and procedures. One result of this has been the adoption of various organisational structures that are responsible for targeting particular issues, such as the Family Welfare and Environmental Management Department. 23

Tata Steels has also started employee volunteering whereby employees are not aware and communicated properly but are also actively participate in CSR activities. The employees are given incentives for volunteering. This has implications on the real motivation behind employees giving up their time for a local cause.

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References:
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