CORPORATE SOCIAL RESPONSIBILTY

SUSTAINABILITY ANALYSIS

INTRODUCTION
Larsen and Toubro is a USD 9.8 billion, technology, manufacturing, finance, engineering and construction conglomerate, with global operations. The company is headed by Mr. A.M Naik, CEO and M.D. During times when sustainability as the biggest challenge faced by mankind today, L and T has always pursued its long term strategic plans, remaining steadfast in its sustainability journey.

1.1 Sustainable Development

United Nations in 1983 defined it as Development that meets the needs of the present, without compromising the ability of the future generations to meet their own needs. 1.2 Corporate sustainability Strategies and business practices adopted by the company to achieve corporate growth and profitability as well as to pursue societal goals, specifically those related to sustainable development-environment protection, social justice and economic development. In simple words, the well being of the society depends on the economy and the economy depends on the global ecosystem.

1.2 Corporate sustainability report

L& Ts sustainability report is based on Global reporting initiative, i.e. GRI's Reporting Framework that is developed through a consensus-seeking, multi-stakeholder process. L and T reports are GRI Checked and graded as A+ reports, which is the highest grade for GRI reports.

1.3 L&Ts Take on Sustainability

L & T views sustainability in terms of three aspects: 1. Sustainability means Adaptability L&T believes that its big opportunity lies in building capability across nations. It has interwoven its business interests with the larger interests of India and progressive emerging economies. They have aligned their growth path to the missions outlined in the National Action Plan on Climatic Change (NAPCC).It has aimed to pursue sustainability based growth platforms such as renewable/clean energy, water, mass transit, energy efficient products and green buildings.

To propel sustainable growth in the nuclear power sector, the company has formed a joint venture with Nuclear Power Corporation of India (NPCI) to set up a Heavy Forging Manufacturing facility at Hazira, Gujarat. They are also taking up initiatives to explore and develop business opportunities in solar energy and installing a 2000 MW hydel power plant. As a part of developing a comprehensive carbon strategy for L & T, they have also carried out carbon footprint mapping and energy audits of their operations.

2. Sustainability means Developing Human Capital

They believe in continuous development of human capital to make them ready to face challenges. Over the years, the company has moved from traditional to more strategic training systems and has also tied up with reputed management institutes and e-learning programs. Their training program called Prayag is meant for grooming GETs, graduate engineer trainees to train them according to the industrys requirements.

3. Sustainability means Responsibility

L & T endeavors to impact the lives of underprivileged through intervention in education, health and skill building. More than 4500 employees volunteer for these initiatives. L &T Public Charitable trust engages in vocational training and livelihood creation program for the rural youth.

CORPORATE GOVERNANCE
Larsen & Toubro has a government structure designed to improve decision making and enhance long term prosperity. It comprises Strategic Business Unit Heads with Executive and NonExecutive Directors on the Board. It ensures: Greater management accountability and credibility Facilitates increased autonomy of businesses Propagates performance discipline Nurtures development of business leaders Boosts public confidence

2.1 Sustainability structure

A Sustainability Executive Board is a part of the top-down approach followed to:

Ensure effective formulation Implementation of sustainability strategy Increase the resources dedicated to sustainability programme Reviews sustainability performance

2.2 L&Ts processes in place

LARSEN & TOUBRO has a decentralized governance mechanism enabling them to benchmark performance against targets, review impacts, mitigate risks and challenges, identify and implement corrective and preventive action plans. In order to strengthen their foundation, LARSEN & TOUBRO has two ongoing projects: Project Prithvi and Project Lakshya

2.3 Risk Management

Identification, assessment and reporting of risks

The risk management process is determined in LARSEN & TOUBROs Integrated Management System. The management of each of the divisions and centralized functions identifies and assesses the most significant risks for its own area of responsibility, prepares contingency plans and determines responsibilities for risk management measures within its organization. Risk identification and planning primarily take place within divisions, areas and units responsible for business operations. Any risks identified and preparations for them are regularly reported to the President and CEO. A risk assessment in all divisions, areas, foreign units as well as centralized functions defined as being critical, is carried out annually to assess strategic, financial, damage-related and operational risk factors. The significance of risks is assessed using a risk matrix, and contingency plans for significant risks are prepared on this basis.

STAKEHOLDER ENGAGEMENT
With L&Ts operations extending all across the country, and the sheer scale of its domain, the manifestation of a vast and diverse set of stakeholders with varied interests is inevitable. One of the most unique features of India is that the environment and the culture change every few hundred kilometres, and one of the key challenges is to objectively balance and cater to the wide-ranging and sometimes conflicting interests of the myriad stakeholder groups. L&T thus believes in systematically and proactively engaging with its stakeholders, and possesses a fair understanding of the unique needs of each specific subset across its vast stakeholder universe.

3.1 Focus on ongoing stakeholder engagements

Educating stakeholder about the Companys efforts on sustainability reporting Soliciting feedback on improvement expectations Quantitative feedback on prioritisation of various sustainability issues and mapping the same vis--vis the view of the company management Response on quality, delivery and service aspects of the businesses Customer/ Employee grievances

3.2 Engagement framework

The Company has refined its journey towards developing a comprehensive framework for engaging with its stakeholders and identifying the materiality issues. In the third year of reporting they have gone a step further in order to better understand stakeholder concerns and get a holistic view of its sustainability efforts. It has opted for a two-pronged strategy of communicating with its stakeholders. The Company commissioned KPMG Advisory Services to conduct a detailed Stakeholder Engagement Exercise across Internal and External Stakeholders. One-to-one sessions with all the Executive Directors as well as each Operating Division (OD) Head ensured that

management insights and areas that various business heads wanted the organisation to concentrate on, were captured.

3.3 Modes of engagement

L&T pursues a fair, constructive, transparent and professional communication strategy. To extend the reach of its communication initiatives it had set up one of the largest corporate communication departments in India and has also stationed communication channels across stakeholder groups. Over and above continuous dialogue and open communication channels across stakeholder groups, this structure emphasizes the pace and accuracy of communication. Partnership, alignment of interests and forging win-win relationships are the core objectives. The Company publishes one of the largest numbers of in-house magazines, each catering to a distinct audience segment: L&T-ite: readership base comprising of all L&T employees and its subsidiary & associate companies. L&T News & Views: Addresses employees as well as customers and associates. Powai Pageant: a tabloid directed towards all Mumbai employees. Spot News: an online bulletin that carries all events and developments that are topical in nature. We R in News: an e-mail banner, presents news clippings related to the Company. CONCERNS Environment EXPECTATIONS Proceeding towards carbon footprint reporting COMPANYS RESPONSE Commissioned Carbon footprint mapping study of its operations as per the ISO 14064 Guidance Standard, to identify GHG baseline and emission reduction opportunities for its operations. Started responding to the Carbon Disclosure Project's (CDP) questionnaire. L&T deters its suppliers from using child, compulsory or bonded labour. The Company understands the need to articulate a detailed Sustainability Framework for its supply chain to address the Triple Bottom Line' in its entirety. As a first step, they have undertaken an awareness drive on sustainability and environmental performance across all levels in the organisation Helping suppliers strengthen their sustainability practices through implementation of EMS, OHSAS systems etc.

Demanding environmental and social standards from suppliers and promoting sustainability

Providing guidance to suppliers to manage their environmental issues through an audit and evaluation discipline

Setting up waste collection centres at project sites to facilitate responsible waste disposal

Economic

Labour Practices

Ensure L&T conducts life cycle analysis and persuades customers about overall benefits Need for increased collaboration with technical institutes for workforce development

Ensuring adequate health and sanitation facilities for contract site labour

Society

Liaisoning with the government in relocating the project affected communities Developing the corpus for social infrastructure

Provision of 'Debris Chutes' for the collection of wastes from each floor, during construction of high-rise buildings. This has helped to reduce the H&S risk and minimise the environmental impacts. Its significant advantages are as follows: Reduced risk of workmen throwing material directly to ground level. Waste is directly collected in the containers which are taken away for disposal. Waste is safely transported to ground level without dust generation. Facilitating best available technologies for its customers to reduce the environmental impacts throughout the lifecycle as compared to conventional technologies. Training and skill development of the Companys employees has always been a thrust area. L&T has collaborated with leading technological institutes like IIT to use their expertise in training. Employees are encouraged to identify their training interests at the beginning of the year and accordingly are nominated for the training programs. L&T ECCD provides accommodation to workmen in major sites including some facilities like administration, sanitation, water, canteen, shops, medical aid, entertainment, etc. At its DIAL site, labour colonies have been constructed with pucca houses for around 20,000 workmen. Migrant labour employed at construction sites in India mostly work on daily-wage basis and change organisations frequently. Statutory benefits like PF and Bonus are provided based on eligibility, restricted to their working period which can be encashed after the completion of employment. L&T ECCD has ensured contractors contribution to the welfare fund for the workmen enrolled at the DIAL site. A Board has also been constituted for this and all the workmen working at the DIAL site have been registered. Pass

Participation in providing infrastructure facilities and providing care centres

books have been distributed to them in presence of the Labour Commissioner. The funds shall be utilised for the social welfare of workers. The Company builds basic infrastructure for rural community such as schools, medical facilities, vocational training facilities etc. It also augments infrastructure in municipal schools etc. It maintains public assets like gardens, access roads and undertake road beautification projects among other things. Has set up Community Health Centres near its campuses.

TRIPLE BOTTOM LINE

The triple bottom line (3BL) is an expanded version of the business concept of the bottom line that includes social and environmental results as well as financial results. One is the traditional measure of corporate profitthe bottom line of the profit and loss account. The second is the bottom line of a companys people accounta measure in some shape or form of how socially responsible an organisation has been throughout its operations. The third is the bottom line of the companys planet accounta measure of how environmentally responsible it has been. 4.1 PEOPLE Training and talent acquisition Launched a Management Development Programme with IIM A. Regular training is conducted for communication skills, presentation skills, finance skills, etc Employees are also sponsored for certification on project management by International Project management Association, Switzerland. Till date around 300 employees have got this certification. Talent is absorbed from Larsen and Turbo Institute of Technology which conduct diploma courses for children of Larsen and Turbo employees. Option of e-learning is also given to employees. L&T has an e-learning portal called 'Any Time Learning' while HED has 'e-Vidyalaya'. In addition to this, assistance programmes are offered to employees for skill upgradation. These consist of funding support for external training, education and retirement planning.

Health and safety More than 400 EHS (Environmental, Health and Safety) professional work across Larsen and Turbo, highest in any construction company in India. Eight manufacturing locations had zero reported accidents. Larsen and Turbo efforts in promoting workplace wellness and the sustainability have received a well spread recognition.CII has honoured Larsen and Turbo with its corporate wellness award for best health practices. The safety committee made have equal number of management and labour employee. Larsen and Turbo have occupational health standards with specialist and fully equipped ambulances. EHS quiz at Vadodara to increase employee engagement. Four day scaffolding training programme conducted with help of Scaffolding Training Institute, USA.

Human rights Induction programme includes Human Rights training. We ensure that human rights clauses are included in our contract document and adhered to within our premises and project sites. It is ensured that subcontractors and their workmen undergo screening for age and are given induction training on eligibility of pay and benefits Larsen and turbo does not permit child labour and forced labour in its operations .This rule also applicable to vendors working in the premise.

4.2 PROFIT In Larsen and Turbo sustainability is the way of doing business. According to the company this approach has helped the company to survive global economic slowdown. This approach has also enabled to infuse confidence in investors. Company growth is very evident as their market capitalization increased from INR 393 Billion in 2009 to INR 980 billion in 2010.

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This strong financial position of the company will support its long term objectives and boost shareholder value. Company investment in Community development has increased from 44Cr to 66Cr.Also amount of dividend paid has increased from 6.15 Cr to 7.53 Cr. 4.3 PLANET L&T believes that there exists a symbiotic relationship between the environment and its operations. It continuously develops technologies, practices and business opportunities are in consonance with sustainable development. In order to integrate eco-efficiency into the core of business operations, it has identified five core environment management priorities: Optimizing energy consumption Following lean manufacturing practices Minimising waste through High-impact design Conserving water resources Propagating green buildings

In order to address these priorities, L&T has taken several initiatives over the past few years: Energy L&T remains alert to opportunities for conserving energy. The engineering expertise and innovative low carbon solutions can balance the energy intensive demands for growth with the need to protect the environment. Despite a rise in the production and increase in projects executed, there was a decrease in the consumption of direct and indirect energy per employee.

The share of renewable energy for L&T is 8%. L&T has set up wind power generation plants and solar plants in order to increase this share.L&T has also taken up initiatives to conserve

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energy by improving practices and processes. Major energy conservation initiatives are fuel conservation initiatives and improvement of manufacturing processes. Green Buildings Green buildings are fast becoming a norm in India. L&T is committed and capable of building buildings for the future. It is constructing green building in its own campuses and also for a growing eco-sensitive client base. Emissions L&T is integrating energy efficiency into its operations, processes, products and services, discontinuing the use Ozone Depleting Substances and finding alternative means to interact without travelling. The Greenhouse gas emissions have reduced considerably over the past few years as shown in the graphs.

Water Consumption L&T has taken initiatives like wastewater reuse, rainwater harvesting and monitoring consumption across locations to conserve water. Water consumption has shown a considerable reduction as shown in the graph.Another important initiative taken was to convert quarry pits into irrigation ponds. This was done in a village in Gujarat.

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Material, Waste and Spill Management L&T has realized that the larger challenges of energy use, climate change and economy are, in part, a consequence of how materials are used. Hence, sustainable use of materials is a goal for L&T. It maintains the concept of Reuse, Recycle and Recover throughout all its constituents. Waste management strategies are integral to the environment management plans of L&T. It has effective spill control measures to eliminate or contain any spill of chemicals, oils, fuels and hazardous waste to prevent any adverse impact on the environment. It has entered into agreements with certified vendors for recycling of PCs, laptops and servers.

SUSTAINABILTY TARGETS
No sustainability effort can be made without sincere and well-defined targets. And L&T leads the way among Indian companies in term of specific targets and well-structured follow ups and progress reports. Below is a snapshot of the short term corporate targets set by L&T for the period of 2009-12 and the progress they have made in this regard till 2010. Sustainability Area Corporate - Short Term Targets (2009-12) Conducting carbon footprint mapping of L&T operations To conduct energy audits at all manufacturing sites Progress Carbon footprint mapping of L&T manufacturing locations and project sites completed Completed at manufacturing locations of 4 operating divisions (ODs) and L&T Infotech. Audit for remaining OD (MIPD) will be completed in 2010-11 Areas for energy conservation identified from energy audits Wind farm of 8.7 MW commissioned in South India. Solar energy is used at Chennai, Powai, Hazina, Talegaon, Ahmednagar and Mahape campuses Feasibility assessment completed at 19 locations. 9 locations are zero water discharge campuses Based on a feasibility assessment report, detailed water audit of key campuses is planned in 2010-11 Road map prepared by Corporate EHS council. Eight manufacturing locations had zero reportable accidents 30% reduction achieved

Climate Change

Energy Conservation

Improve energy conservation metric by 10% Developing location-wise road map for increasing use of renewable energy Adopting zero-discharge approach

Water Conservation

Reducing per capita water consumption by 10% Achieving zero accident status at manufacturing locations Reducing FR and SR at

Safety

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Management systems

Health

Community Development

project by 50% Implementing ISO 14001:2004 and OHSAS 18001:2007 at manufacturing locations and major design offices Implementing ISO 14001:2004 and OHSAS 18001:2007 at project sites above INR 7.5 Bn Developing organization wide health index by implementing WoW (Working on Wellness) programme Continuing interventions in CSI Thrust Areas Increasing training and employability of underprivileged youth through Construction Skills Training Institute and L&T Charitable Trust activities Promoting employee volunteering Including EHS parameters in social engagements

19 out of 20 locations certified

2 OCs (Infrastructure and MMH&W) of ECCD have been certified for EMS during FY 2009-10 Completed Phase I comprising awareness programme, diagnostic camps & workshops

Ongoing Ongoing

Employee volunteers increased to 4,500+ from 400+ EHS awareness module is now a part of education programme in social engagement

These targets were defined as corporate level Objectives and the targets were set for areas applicable across the ODs. In addition, each OD has set targets specific to their operations.

AWARDS AND MEDIA COVERAGE

1. L&T-Komatsu (LTK) bagged the prestigious award for being The Most Innovative Company in Energy Efficiency & Conservation from the Bangalore Chamber of Industry and Commerce (BCIC) in Feb 2010. 2. Businessworld and the Federation of Indian Chambers of Commerce and Industry (FICCI) conferred on L&T the coveted Businessworld-FICCI-SEDF Corporate Social Responsibility Award in May 2010. 3. L&T won the Good Corporate Citizen Award 2009-10 instituted by the Bombay Chamber of Commerce & Industry (BCCI) in September 2010.

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4. L&T was ranked Indias Most Respected Company in the Infrastructure category. In the overall rankings, L&T emerged second in Businessworlds rankings of Most Respected Companies in February 2011. 5. L&T bagged the India Shining Star CSR Award, instituted by the Wockhardt Foundation, for Outstanding CSR in the sector for companies engaged in heavy engineering in Feb 2011. 6. L&Ts sustainability practices and its disclosures were ranked amongst the top in Asia in the Environment, Social & Governance (ESG) 2010-11 ratings of RepuTex, Hong Kong in June 2011. L&T was also the onlyIndian company listedamong the top 5 in Asia in the Industrial segment rating. 7. L&Ts Corporate Sustainability Report for 2009 had secured international distinction, emerging as the only entry from an Asia-based company to Win Global Distinction for its Sustainability Report in 2010. 8. L&Ts CSR initiatives were again in the limelight as it bagged the award for Company with the Best CSR and Sustainability Practices by the Asian Centre for Corporate Governance and Sustainability in Feb 2011. 9. L&Ts Corporate Social Initiatives won the Social Development Award from the Bombay Chamber of Commerce and Industry (BCCI) in June 2010. 10. L&Ts Corporate Social initiatives (CSI) were yet again acknowledged and applauded this time with the prestigious Golden Peacock Global CSR Award 2011. L&T is widely regarded as a unique company, with a remarkable lineage, ethos, management structure and style of operations and the press coverage it gets reaffirms that status. L&T is constantly lauded for the social impact, innovation and sustainability that characterized its business and the far-reaching social impact of its initiatives in education, construction skills training and mother-&-child care. A citation from the Asian Centre described L&T as an engineering giant associated with nation building that makes India proud. It also said that the companys technological and business accomplishments were supported by transparency and accountability at all levels. TheRepuTex rating also affirms international recognition of L&T as a company committed to global sustainability practices and disclosures. All these awards and coverage affirms the respect that L&T enjoys among its peers in India Inc.

OUR ANALYSIS
After studying the Larsen & Toubro Sustainability Reports in detail we, the members of Group I realize how a Company focusing on heavy engineering activities that can have hazardous effects on its stakeholders, can actually drastically minimize its negative impact ,if, it honestly tries to do so. We covered various facets of L&Ts attempt and partial success in correcting all that was detrimental to its stakeholders, and were quite impressed with the resulting numbers and achieved targets, which have also cumulated into a variety of awards and accolades for the Company.

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The fact that L&T could manage a strong growth even during heavy recession, without compromising on their sustainability targets ,is a proof of the fact that they have taken care to enhance the stakeholder value in every process that takes place in the company. Their vision statement itself says a lot about how they aim to create a relationship of mutual trust and continuous learning with the society. They believe that every employee in the company must be involved in achieving Sustainable Development. Their sustainable structure speaks volume about this, since it includes every individual in the company from the top level executive to the employee at the bottom most of the pyramid. L&T offers a well-defined Government and Sustainability structure. It demarcates the responsibilities of various committees to formulate strategies reviewed by Operating company heads, Executive Management Team and the Board of Directors. It facilitates autonomy and performance discipline. The decentralized governance structure and the specified Code of Conduct ensures corporate communication with an Internal Control System for protection of rights and implementation of responsibilities. L&T has been very clear about and dedicated towards its Stakeholders since its very first year of reporting. The Company has also gone to the extent of commissioning professional advisory services of KPMG to get a better insight about the issues that concern its Stakeholders-thus reinstating its level of commitment. However, we feel that more details of the KPMG study should have been shared in the Report to give the Stakeholders a much clearer view and understanding of the exercise- so that feedbacks regarding the study, if any, could be communicated to the Company. Triple bottom line analysis is not a mandatory disclosure to be made by companies but L&T in all its sustainability report since 2008 has made clear 3PL disclosure. L&T makes efforts to ensure safety and growth of employee hence it has been voted 8th in Best Company to work for in 2011 survey conducted by Business Today. Although company has taken enough precautions to prevent accidents like but a number of 29 deaths,66 near misses to accident is still very high.They should provide more training to their employees and make an effort to make accident free sites. It not only provides benefits to its employees, like life insurance, health care, ESOPs , PF ,gratuity ,etc but it also invests in providing every employee with required training based on their structured performance and career development review. It has also created many recreational centers for its employees at various locations. Employee satisfaction is visible from the fact their employee turnover came down by 26% as compared to last year 2009. The Company gives extreme importance to its environment practices. It believes that it is in a symbiotic relationship with the environment which cannot be severed. In order to integrate ecoefficiency into the core business, it has identified five core environment priorities. It has taken massive steps pertaining to each of the priorities and has shown considerable results over the past few years.However, L&T has to increase its share of renewable energy which stands at 8%,

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convert all its buildings to green buildings and take up more initiatives involving the community. It is easy to just keep talking about sustainability efforts and steps on corporate governance, but only when you put down concrete milestones in writing do your commit yourselves to them. And that is exactly what L&T has done. By clearly defining their short term sustainability goals, they have set themselves a standard to which they must now strive to live up to. An interesting observation is that most of these goals are designed in a way to integrate sustainability into their business strategy. And going by their current progress reports, they are well on their way to achieving these targets in the pre-decided timeframe. To close, as students we were delighted to have a direct practical experience regarding everything that was taught to us in class. We would humbly like to thank our Faculty for giving us this opportunity to acquire new insights and add to the knowledge that will guide us when we become Managers. After all, in todays age, the business of business is not only business.

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