With the historic 1991 economic reforms in India, the Tata group embarked on a new era, transforming itself from a respected domestic business house into a global competitor comprising nearly 100 companies with combined revenues of more than $100 billion and over 600,000 employees. Yet the rise to prominence in automobiles, hotels, communications, power, steel, chemicals, consulting, and a variety of other major industries, tells only half the story. Behind the scenes, the Tata group has been working on the next great industrial transformation—by incubating scores of disruptive new economically empowering, socially inclusive and environmentally sustainable technologies and business models that will be key to success—and sustainability—in the years ahead.[i]
In fact, the Tata group views solutions to the world’s economic, social and environmental challenges as nothing less than the future of the business.
Business Solutions to the World’s Problems
The Tata group traces its roots to 1868 when Jamsetji Nusserwanji Tata started India’s first large-scale textile mill to compete with the British. His vision was to free India through economic self-reliance rather than political revolution. While J.N. Tata is warmly remembered as the “father of Indian industry,” it was his belief that “the community is not just another stakeholder in our business, but is in fact the very purpose of its existence” which provides the unique genetic code and defines the soul of the group.
Today, the Tata group is focused on addressing socio-economic and environmental problems in communities both to expand current businesses and create new markets. The company has a strategic interest and obligation, as we believe all global companies should, to design products, services, and business models to serve the poor – not as charity cases – but as customers. Why? Because the poor still constitute an underserved market waiting to explode: There are still more than 4 billion people in the world who earn less than $8 (PPP) per day. To extend the benefits of global capitalism to this massive segment of the population will require that economic growth expand 5-fold (or more) over what it is today. It appears highly unlikely that this growth can be achieved with anything remotely resembling the current technologies, strategies or business models used by incumbents in today’s industries.
The Tata group’s leadership believes that they are embarking on the greatest period of entrepreneurial opportunity–and creative destruction– in the history of commerce. Across renewable energy, on-site water purification, low-cost mobility, affordable housing for the poor, nutrition preserved food produce and digital healthcare, the Tata group has set its sights on creating the industries—and markets—of tomorrow at a time when most incumbent global corporations are still focused almost exclusively on growing their positions in today’s industries. Simply creating economic activity without regard for the local environment, community, or cultural impact is not an option. The quest is also the question: How can we design environmentally sustainable products and services that help the poor escape the cycle of poverty?
In line with the group’s focus on sustainability in business, the Tata Sustainability Group (TSG) was formed in 2014 to guide, support and provide thought leadership to all Tata group companies in embedding sustainability in their business strategies and demonstrating responsibility towards society and the environment. To ensure that key sustainability messages cascade across the group, a Global Sustainability Council with the chief executives of various Tata companies was constituted. In June 2015, the group adopted the Tata Sustainability Policy, which commits Tata companies to integrate environmental, social and ethical principles into their businesses.
Taking the Green Leap
The Green Leap Review is dedicated to advancing the theory and practice of business that is socially inclusive, environmentally sustainable, and profitable. In the past, the environmental and social agendas in companies have often been treated as separate silos, to everyone’s disadvantage. The Tata group is bringing these two worlds together to enable a global “Green Leap.”[ii] Emerging clean technologies, including distributed generation of renewable energy, biofuels, point-of-use water purification, nanotechnology, biomaterials, wireless information technology, and sustainable agriculture hold the keys to solving many of India’s and the world’s environmental and social challenges. Because many of these small-scale, green technologies are “disruptive” in character, the base of the pyramid is an ideal place to focus initial commercialization attention. China’s towns, Brazil’s favelas, and India’s small cities and rural villages present such opportunities. Once established, such technologies can then “trickle up” to the established markets at the top of the pyramid—but not until they have become proven, reliable, affordable, and competitive against the incumbent infrastructure.
The Tata Way to Transformational Sustainability
Despite the opportunity for “leapfrog” innovations—initiatives that radically transform industries and the way we live– most corporate strategies are still transactional in character, with a focus on the continuous improvement of current core businesses. As we move toward the third decade of the 21st century, however, the importance of truly transformational strategies will become increasingly apparent.
The Tata group believes that true corporate social responsibility means creating novel solutions to real problems. Over the years, the company has evolved a set of straightforward guidelines which make up their framework for transformational sustainability. This framework is embedded in the business DNA, and is used as a key part of the decision-making process.
Five specific strategies comprise the “Tata Way” to Transformational Sustainability (see below):
- Motivate With Purpose;
- Change the Rules of the Game;
- Incubate Distributed Solutions;
- Embed Business Back into Society; and
- Shatter Trade-Offs Among Stakeholders.
The Tata Framework for Transformational Sustainability
Motivate With Purpose
The problem with industrial capitalism is not the profit motive; the problem is how the profit motive is framed. There is a persistent myth that the ultimate purpose of business is to maximize profit for the investors. However, the maximization of profit is not a purpose; instead, it is an outcome. Indeed, it is now becoming clear that the best way to maximize profits over the long term is to not make them the primary goal. [ii]
Profits are like happiness: a by-product of other things like having a strong sense of purpose, meaningful work, and deep relationships. Those who focus obsessively on their own happiness are usually narcissists–and end up miserable. Strategies for transformational sustainability are founded on the belief that you make money by doing good things rather than the other way around.
Purpose is not about corporate strategy or tactics; these are both means to ends. Purpose is also not about social responsibility, which is simply one of the channels of directly discharging a business’s responsibility to society. Purpose is not even about corporate mission, which might be nothing more than an aspiration to dominate in a particular marketplace. Rather, purpose is a spiritual and moral call to action; it is what a person or company stands for and would (perhaps) be willing to die for.[iii]
Industrial corporations were constructed around extrinsic motivations like financial reward, recognition, or fear of reprimand or losing one’s job. It has long been known that extrinsic motivation can only take you so far: weaving intrinsic motivation into the fabric of the culture is therefore a crucial element for transformational sustainability. There is mounting evidence that employees throughout the world are hungering to find and bring their spiritual values to work. But they have not felt comfortable in doing so, as it may not appear “business-like.”
The Tata group had been conscious of its spiritual purpose from the start. Sir J N Tata believed that the “acquisition of wealth was only a secondary object of life”; he considered Tata Sons’ mission was to “serve and help” the communities in which it operated. Even today, despite the growing wealth of the Tata group, company leaders are not featured in the listings of the richest people in India or the world. This is because two-thirds of the shares of Tata Sons, the holding company of the group, belong to the Tata Trusts, including the Sir Ratan Tata Trust, the Sir Dorabji Tata Trust, and the JRD and Thelma J Tata Trust. As one of the largest and oldest Indian philanthropic foundations, the Tata Trusts have long supported causes and institutions aimed at the greater good of India and mankind, including the Indian Institute of Science, the Tata Institute of Social Sciences, and the Tata Memorial Hospital. The employees of the Tata group are also connected to its tradition of giving back to society through active encouragement of volunteering as a way of life – Tata Engage, the group-level volunteering programme, is listed as one among the top 10 corporate volunteering programmes in the world having achieved a million volunteering hours annually.
The Tata Sustainability Assessment Framework
The Tata group is committed to ensuring that its core beliefs about sustainability are not lost in the pursuit of growth and profits. The Sustainability Assessment Framework (“SAF”) was developed by the Tata Sustainability Group to map the maturity of individual Tata companies with respect to their sustainability practices, processes and initiatives. The SAF is designed as a diagnostic tool to help Tata companies recognize and understand key elements of sustainability, monitor their sustainability progress over time, communicate and share information on best practices and get ideas for improvement to achieve leadership positions on sustainability. The SAF assesses the maturity of sustainability practice on 8 key organization dimensions through simple and practical questions mapped across 5 stages of an organizational maturity continuum.
5 Stages of Maturity
|a) Governance, Oversight and Communication||Stage 1: The organisation is focused entirely on profits, cuts corners to reduce cost wherever possible and actively resists regulation and other pressures for sustainable behaviour.|
|b) Strategy||Stage 2: The business manages its liabilities by obeying the law and applicable regulations, but Sustainability is treated as a cost.|
|c) Operations||Stage 3: The organisation realizes it can pro-actively reduce costs and risks by minimizing waste, pollution, energy use and harmful social impacts.|
|d) Supply Chain||Stage 4: The firm re-brands itself as an organisation committed to Sustainability and integrates Sustainability with key business strategies, capturing added value from breakthrough Sustainability initiatives that benefit all stakeholders.|
|e) Human Resources||Stage 5: The organisation is driven by a passionate commitment to improve the organisation, society, and the environment because it is the right thing to do.|
|f) Product and Service Responsibility|
The philosophy driving sustainability policy and practice in the Tata group is a commitment to integrate environmental, social and ethical principles into its business which is central to improving the quality of life of the communities it serves globally and enhancing long-term stakeholder value. With this context, the SAF aims to help each Tata company carry out a self-evaluation of its sustainability practices in consonance with business performance through a structure based on the Tata Business Excellence Model as well as an abridged module embedded within the TBEM. The consolidated outcomes from applying the SAF allow the group to reflect upon and monitor performance vis-à-vis its sustainability vision and policy.
Change the Rules of the Game
Strategies based solely on the continuous improvement of existing products and businesses will increasingly fall short of the mark. Incremental “eco-efficiency” improvements to current unsustainable technologies will no longer be sufficient: in the coming years, transformational sustainability strategies drawing on the emerging fields of bioscience; nanotechnology; wireless IT; and renewable energy will dramatically reduce the size of the human footprint on the planet, and make obsolete many of today’s energy- and material-intensive incumbents. Biomimicry and other nature-based strategies also offer the prospect of regeneration, not just reduced impact.
Given that many emerging clean technologies are “disruptive” to existing corporate strategies, transformational sustainability demands learning to think—and act—like a disrupter.[i] It requires launching commercial experiments with next-generation technology and growing them from the ground-up, rather than continued dependence on large-scale solutions imposed from the top-down. Transactional strategies concentrate on limiting competition and protecting established positions. In contrast, transformational strategies focus energies on creating the future rather than consolidating control over what already exists.
The Tata group has long been focused on changing the rules of the game. Under the leadership of Sir Dorabji Tata, who succeeded Jamsetji Tata, for example, the Tata group revolutionized human resource practices in the Indian corporate sector. Tata Steel introduced a range of employee empowerment schemes, including free medical aid, workers’ provident fund, accident compensation schemes, and an eight hour working day for its employees several decades before they were mandated by law. Those schemes were later adopted by the Indian government as statutory requirements for organizations operating in India.
The Tata group has also transformed entire industries. Historically, the jewelry industry was a highly unorganized sector in India. Companies were mostly owned and operated by family jewelers, who were notorious for exploitative and unethical business practices. Craftsmen were not fairly paid, and were made to work under very dismal conditions. Customers also did not have the assurance that they were buying a high quality gold or diamond product. The jewelers, by and large, were also not paying appropriate taxes to the government.
When the Tata group entered the gold and diamond jewelry business under the banner of Titan Industries, it transformed the jewelry trade in India. Titan Industries created the “formal jewelry industry” in India. Craftsmen were hired from marginalized communities across India and given opportunities to work under safe and healthy conditions in its Karigar Parks. Its brands Tanishq and Gold Plus were certified for their quality and price. The government also gained because it started receiving taxes from the jewelry industry. By introducing responsible and clean practices, the Tata group not only empowered customers and craftsmen but also pressured competitors to raise their game.
More recently, the introduction of the Tata Nano reflects the group’s bent on changing the rules of the game. Tata Motors was concerned about the wellbeing of millions of Indians who depended on two or three wheeled modes of transport to meet their individual and family mobility needs. The company sought to offer a safer and affordable mode of transportation to millions of Indians, who could not possibly afford a traditional car in their lifetime. The solution was Nano—a low cost, five-door car, whose basic model could be purchased for only Rs. 100, 000 (about $2000). Nano is far safer than any two wheeled vehicle—with an all-sheet metal body, spacious interiors, and has passed several frontal and side crash tests required by the international car industry.
With the introduction of an innovative two-cylinder engine, Nano also offers high fuel efficiency (of the order of 70 mpg) and conforms to both the Indian (BS-IV) as well as European (Euro IV) emission standards. And while the Nano has had its challenges in India, Tata Motors is also attempting to “trickle up” Nano to North American and European markets, which would create an entirely new category of vehicle—a “green”, fuel efficient vehicle for less than the cost of a used car. Research and development is also underway to make an all-electric Nano available to consumers. Such an affordable electric vehicle would truly be a game changer.
In the renewable energy space, Tata Power set up its first solar power plant of 110 kW way back in 1996 at Walwhan in Lonavla, Maharashtra, alongside developing incremental capacities in hydro power, wind energy, waste gas generation and geothermal energy. The company also continues to invest in innovative solutions like a 13.5kW pilot concentrated photovoltaic assembly where sunrays are concentrated on PV cells and the assembly floats on Walwhan lake (Maharashtra) in order to cool the cells. It has set up a separate subsidiary, Tata Power Renewable Energy Limited (“TPREL”), which already has more than 1,000 MW of renewables based generation capacity and is expected to become the largest renewable energy company in India within this financial year. These initiatives contribute towards the overall vision of Tata Power generating 40% of the company’s total generation capacity from non-fossil fuel sources by 2025.
The Tata group is seriously exploring the case for circularity across its businesses, both designing goods that require minimal natural resources in their manufacture and use, eliminating non-recyclable material as well as ensuring that no waste goes into landfills, thus making its offerings sustainable – for instance, the aluminium that Jaguar Land Rover uses for its vehicle bodies is currently about 75% recycled. As a member of the Natural Capital Coalition, the group is helping build the Natural Capital Protocol to value natural capital use. It is also working to develop a global Social Capital Protocol. Earlier this year, Bombay House, the group’s headquarters, became the first and only heritage building in India to be awarded the ‘Platinum Rating’ of the Indian Green Building Council (IGBC). Proof, if any were required, that the group will continue to build on its rich heritage of commitment to sustainable development.
Incubate Distributed Solutions
The industrial model was based on a high fixed cost, capital intensive business model, centered around large-scale centralized production. Achieving “economies of scale” was the lingua franca of the industrial era. Think of Henry Ford’s Rouge complex that took in raw materials on one end of the factory and spewed massive numbers of inexpensive model T’s out the other. Massive oil refineries, dams, power plants, water systems, steel works, and paper mills follow the same logic. Transactional strategies seek to incrementally reduce the negative socio-economic and environmental impacts associated with these centralized solutions.
Recently, however, the conventional wisdom that “bigger is better” has begun to come under fire. Mini-mill steel producers now compete with Big Steel. Smaller co-generation power facilities have also proven competitive against large, central-station power generating facilities. Even Wal-Mart is now moving away from the “big box” retail model in emerging markets in favor of smaller, “bodega-style” stores. And today, a whole new suite of clean technologies has literally reversed the logic of scale economies: Distributed generation of energy, point-of-use water treatment, 3-D printing, and point-of-care health technologies actually display diseconomies of scale—the smaller, the more cost-effective.
Given their small-scale and distributed nature, such next-generation technologies can be implemented using community-scaled business models, averting the need to build massive facilities remote from the actual point of use. Scaling then occurs through modular expansion with infinite ability to adapt to local conditions. As a result, strategies for transformational sustainability hold the potential to usher in an entirely new age of capitalism that brings widely distributed benefits to the entire human community. If Industrial Expositions and World Fairs were the symbols of industrial capitalism, then internet kiosks in rural villages may prove to be the symbol of the emerging transformational model.
The Tata group, for example, is pioneering small scale, distributed energy solutions for the underserved. Tata Power Solar, India’s largest integrated solar company is working with Grameenphone to fulfill its mission of providing teleconnectivity to the remotest villages in Bangladesh. Tata Power Solar has successfully designed, engineered, and installed an 8.2 kWp Solar-DG Hybrid System that provides uninterrupted power supply to the Shylet base station of Grameenphone. Shylet, a remote village in Bangladesh which can be accessed only by a four hour boat ride, is now connected to rest of the world with the help of Tata Power Solar and Grameenphone. Tata Power Solar also designed, engineered and installed a standalone 110kWp solar power plant in the remote Indrapur village of West Bengal which transformed the villagers’ lives. With access to both electricity and telecommunication, villagers are empowered with multiple opportunities for trade, education, and a better quality of life. This initiative is on the verge of scale up.
Swach also illustrates the Tata group’s commitment to small-scale and distributed solutions. In 2009, Tata Chemicals, in collaboration with the Tata Consultancy Services (TCS), launched a nanotechnology-based water purifier. Named Swach, meaning clean in Hindi, this purifier confronts some of the grim realities of India and is geared towards overcoming them. Hundreds of millions of Indians lack electricity and running water. And every year, millions of Indians suffer from water-borne diseases. Accordingly, Swach requires no centralized infrastructure– electricity or running water– to operate. It is also very affordable; the basic version of Swach can be purchased for around $20.
The heart of the purifier is a replaceable bulb-like cartridge made out of natural ingredients like rice husk ash that kill microorganisms in the water. Swach is also very easy to operate: The bulb automatically shuts down the water supply once it has purified 3,000 liters of water. And a replacement bulb costs around $6. With 15, 18 and 27 liters capacity versions of Swach available, it can also be used to store water as well. This storage feature is attractive for most Indians who do not live in big houses and who face severe space constraints. A smaller 650 ml portable version of Swach has also been introduced. Using Swach, a family of five in India can now afford to drink pure water for around less than a $1 a month. The company is also exploring models to enhance their rural distribution network through local entrepreneurs – young men and women in rural India who will be trained on basic entrepreneurship and then encouraged to set up their own businesses including selling Swach purifiers and bulbs in the vicinity of their villages. Pilot projects with individual entrepreneurs as well as self help groups set up by partner organizations are currently underway in 4 states of India.
By targeting the millions of Indians who dream of drinking pure water, but could never afford this “luxury,” the Tata group has not only created a promising new “point of use” business for itself, but has also made a contribution to solving one of India’s biggest health problems. The rural distribution models for Swach also serves to create rural livelihoods while enhancing the reach of the business.
In a similar vein, Tata Steel has pioneered many new initiatives to benefit its consumers through various product and service innovations. In keeping with the same spirit of innovation and to reach out to the rural population, the company has recently come up with an affordable and high quality construction solution called Nest-in. This is a light gauge prefabricated steel frame structure which offers high seismic resistance, is thermally insulated, can be constructed in short turnaround times and comes with installation services through company trained fabricators. Moreover, the steel used is 100% recyclable while the construction process is almost dry and does not waste resources or pollute the environment to the extent conventional building methods do. Nest-in offers a great instance of a solution borne of research in the European operations of Tata Steel, customized for application in the Indian context and rolled out effectively to find wide application in affordable housing, government schools, health centres, shops and toilets across India.
Embed Business Back into Society
For the past twenty plus years, globalization strategies have sought to transfer technologies and products from corporate labs and apply them in unfamiliar cultural and environmental settings; unmet needs in new markets have been identified through market research and the analysis of demographic data. The result has often been still-born products and alien business models that violate existing socio-cultural traditions or fail to fulfill real needs.
To overcome this shortcoming, transformational strategies seek to develop more fully contextualized solutions to real problems in ways that respect local culture and natural diversity. Transformational sustainability means coming to view communities and customers as partners and colleagues, rather than merely as “consumers.” This mindset shift requires the development of a new, “native capability” to complement competencies in global efficiency, local responsiveness, and learning-transfer that most corporations already possess.[ii]
Building this new capability means engaging in “deep dialogue” with local communities to co-create businesses that are truly “embedded” in the local context. This means suspending traditional assumptions regarding business development. It requires putting down the corporate “hammer,” and actually experiencing life in communities (particularly those that are poor or underserved) in a spirit of humility and mutual learning. It requires forging relationships built on trust, understanding, and respect—from which new possibilities for locally embedded businesses can emerge that create value for all partners involved. Numerous examples reveal the Tata group’s sincere efforts to embed its businesses into society.
Tata Global Beverages, the world’s 2nd largest tea company with significant brand presence in over 40 countries, recognized the potential presented by the Indian rural market and the need for a sustainable yet cost effective model to leverage this. The ‘Gaon Chalo’ (“go to the village”) was conceived as a unique distribution model with three levels of channel partners (rural distributors, mobile rural distributors and rural dealers) helping the company travel the last mile effectively in rural markets. Today, Gaon Chalo is present in 18 states of India with a direct reach in 70,000 villages and enables a strong platform for generating rural employment for rural youth, women, the underprivileged, the differently-abled and self help groups. Besides enabling social change, the Gaon Chalo model has several business advantages which include limited fluctuations in sales due to direct access to the rural retailers, creating a cost effective brand building platform and the flexibility to address the complexities of local markets.
m-Krishi is another example of how the Tata group is exercising inclusive capitalism and creating avenues for other businesses to survive, flourish and contribute to local economic development. mKrishi is a multi-lingual, mobile-based, integrated and personalized agro advisory service that the Tata Consultancy Service (TCS) launched for Indian farmers in 2009. By subscribing to mKrishi, even via a low-end mobile phone, Indian farmers can get vital agricultural information, including weather conditions, current and future costs, and selling prices for grains in local and global markets.
Drawing on mKrishi’s recommendations on amount of pesticide and fertilizer usage for a particular soil condition, and when to harvest and how to maximize their agricultural productivity, farmers have been able to more smartly operate their agricultural businesses. If the farmers are facing any agricultural problems, they can also send their queries directly to experts or policy makers in their local languages, both through written or voice activated SMS and images, and receive personal advice and information on those issues. TCS initially deployed this technology on a pilot basis in four villages in India and assessed its impact over a period of two years. Based upon this experience, TCS is now offering this service to over 200,000 under-served farmers in scores of villages across 9 states of India including Punjab, Uttar Pradesh, Tamil Nadu, West Bengal and Maharashtra. Impact assessment studies reveal that the service has increased farmers’ knowledge levels as well as their emotional and financial security. m-Krishi is on the verge of a massive scale up.
Another example is Tata AIA Life Insurance Company, a joint venture between the Tata group and AIA, which set up a micro insurance department in 2001. The mission of this department is to provide insurance services to rural, low income and landless Indians. This segment of India’s population mostly works on daily wages and within the non-organized and farming sectors. And because of the irregular income of those impoverished stakeholders, incumbent insurance providers barred them from becoming their customers. But now, those weak and impoverished customers can earn life insurance benefits for their family with the help of various Tata-AIA micro insurance policies.
Initially, the company experienced difficulties in effectively reaching the deep rural markets with this service. However, a participatory ‘process-innovation’ was deployed and Tata-AIA co-created its micro insurance business with the rural communities it serves. The micro insurance department has adopted a community partnership model that involves training local communities to build a rural distribution channel. The department selects NGO partners in the rural communities, who then select residents, preferably women of that community who have significant influence and credibility among the villagers, as “micro agents”. Those micro agents are trained and granted the license to operate their business of selling Tata-AIA micro insurance policies.
The company launched this initiative with a pilot project in the three Indian states of Andhra Pradesh, Karnataka and Tamil Nadu. The project created tens of thousands of Self Help Groups (SHGs) comprising over a half million members. The Company currently covers over 1,200 villages across 13 states of India and plans to scale up its micro-insurance program to protect hundreds of thousands of additional rural lives each year.
The Taj group of Hotels has committed itself to preserving and promoting India’s indigenous arts, crafts and culture. Some of India’s arts are dying because of rising production costs, changing fashion needs and demands, and availability of imported fashions and artificial versions of artifacts at lower cost. To prevent this cultural decline, the Taj group has taken action in Varanasi—a land of exquisite hand woven silks—to help the traditional weavers. The group has been guiding under-employed and unemployed weavers in Sarai Mohana village, near Varanasi, with design and material inputs to produce wraps, wefts and sarees that are in popular demand. The Taj group Hotel staff uniforms are also purchased from those weavers. The Taj group provides local artisans and craftsmen opportunities to showcase their products and hold art shows in its various exotic hotel properties.
Tata Chemicals has soda ash and salt manufacturing plants in Mithapur, a small isolated town in the Okhamandal region of Gujarat on the north-western coast of India. While the company generates livelihoods, directly and indirectly, for more than 100,000 people in Mithapur and surrounding villages through its core operations, it also noted the absence of any other significant income earning opportunity for the rural women of Okhamandal. This was the genesis of Okhai, a self help group based enterprise supported by the Tata Chemicals Rural Development Society, which recognized the rich tribal design heritage of the region and enabled the local women to leverage their design and embroidery skills for earning a livelihood. Okhai gave the women an opportunity to earn for themselves and their families, and enabled economic empowerment as a precursor to their social empowerment as evidenced in impact assessments. The Okhai model has been replicated in other locations of Tata Chemicals and is now being primed as an independent enterprise under the leadership of the women of Okhai.
Tata STRIVE, the first Group CSR programme of the Tatas, aligns with the national agenda of addressing the pressing need of skilling India’s youth for employment, entrepreneurship and community enterprise. It reaches to communities, develops skills of people from financially challenged backgrounds and acclimatizes them with the changing work environment. The core philosophy is to create courses that would help in creating and supplying trained manpower across the entire industrial spectrum as well as develop entrepreneurial talent. Tata STRIVE was set up less than an year ago but has already reached out to more than 40,000 young men and women across 13 states of India through its skill development centres and partnerships.
Shatter Trade-Offs Among Stakeholders
Since the time of the industrial revolution, corporations have operated on what might be described as a “zero-sum” organizing paradigm: Natural resources have been extracted as cheap raw materials; displaced farmers and communities have been exploited for their cheap labor; and local environments have been degraded into cheap waste sinks. All of this was done to extract as much wealth as possible for shareholders.
Regulation seemed like a necessary and appropriate counter to this prevailing mindset, especially when the negative impacts on workers, communities, and the environment reached extremes. Corporations should be made to “pay” for the negative consequences associated with their operations. Paradoxically, this approach has resulted in the belief that firms must sacrifice financial performance to meet social and environmental expectations.
Truth be told, there is no inherent conflict between financial and societal performance. Realizing this opportunity, however, means consciously seeking to overthrow the tyranny of the “trade-off” mentality. The key is learning to jointly optimize the needs and desires of all stakeholders, rather than elevating one stakeholder above all others.[iii]
Paradoxically, then, by focusing on “shattering the trade-offs” among seemingly competing stakeholder interests (like investors, employees, communities, and the environment), businesses can evolve superior strategies that produce competitive financial returns–the definition of a truly sustainable enterprise. The lesson: “hit and run” players like predatory lenders and Ponzi scheme artists can make lots of money in the short term by ignoring or even damaging some of their stakeholders. But eventually their negative Karmas catch up to them. Transformational sustainability means flourishing for the long term–by including the needs of, and delighting all the stakeholders. Shattering trade-offs means learning to revel in contradiction, reconcile opposites, and dissolve conflict.
The Tata group, right from its inception, has rejected the zero-sum game. For the group, development of its stakeholders, as opposed to maximizing profits at the cost of stakeholders, has been the prime goal. One can experience this commitment, for example, by visiting various townships that the Tata group has developed for its employees, around its industrial facilities. Visit Jamshedpur—India’s first planned industrial city; it houses the majority of Tata Steel’s as well as some of Tata Motor’s industrial operations; and is the largest urban and most populous city in the Indian state of Jharkhand.
Jamshedpur is the vision of J N Tata who envisioned it as a sustainable city for the workers of the then proposed Tata Steel plant. J N Tata guided Sir Dorabji Tata to his vision of creating an environmentally rich, culturally diverse and economically prosperous city: “Be sure to lay wide streets planted with shady trees, every other of a quick-growing variety. Be sure that there is plenty of space for lawns and gardens. Reserve large areas for football, hockey and parks. Earmark areas for Hindu temples, Mohammedan mosques and Christian churches.” Today, Jamshedpur has been selected as a UN Global Compact City because of the quality of life the city offers to its residents.
The group is also firmly committed to the protection of the environment and ecology. The approach of Tata Chemicals in evaluating a potential investment in a soda ash extraction and processing plant near Lake Natron in Tanzania provides an effective illustration. The company had established the preliminary business case for setting up this 0.5 mtpa facility, partnered with the Tanzanian Government in 2007 and initiated appropriate environmental assessments recognizing that the proposed site was an ecologically sensitive wetland region. However, these assessments as well as feedback from a structured stakeholder engagement process indicated potential threats to the lake’s chemical composition and the ‘sensitive’ ecosystem, especially the lesser flamingo, from operations of the proposed soda ash facility. Tata Chemicals, recognizing this potential threat to the fragile ecosystem of the region, exited the project.
The group has also made conscious attempts to break the vicious cycle of oppression, exclusion, and poverty associated with India’s age-old caste system. It adopted a group Affirmative Action Policy in 2007 with an aim to integrate Affirmative Action in its organizational framework. Focused on the four Es of Employment, Employability, Entrepreneurship and Education, the policy is encouraging Tata companies to provide equal opportunities to India’s socially and economically oppressed Scheduled Caste and Scheduled Tribe (SC/ST) communities. Now the group actively exercises positive discrimination in its hiring and business practices— if everything else is equal, group companies prefer to employ more SC/ST candidates and engage more business associates from SC/ST communities, as compared to those from socially and economically “advantaged” communities of India. In doing so, the group is also helping Indian national and state governments meet their goals of providing SC/ST communities greater social and economic assimilation opportunities.
Launching the Corporate Lifeboats
Twenty years ago, when the movement for corporate sustainability first gained momentum, people spoke in terms of the need for fundamental change over the next decade or two. Now, two decades later, there is some good news and some bad news. First the good news: A few corporations and entrepreneurs have begun to experiment with transformational strategies. Indeed, “clean technology” has become a fashionable investment category and “base of the pyramid” business models have become de rigeur.
Now for the bad news: We have not yet begun to fundamentally change the trajectory of the global economy. Indeed, over the past two decades, we have added over two billion people to the global population and further intensified our ecological footprint on the planet. The science is clear: we have overshot the carrying capacity of the planet and serious repercussions are now inevitable.
There is no more time to waste. For companies, the time has come to launch the proverbial “corporate lifeboats”—new business experiments and initiatives in next-generation clean technologies and serious business initiatives in the underserved space at the base of the pyramid. The Next Great Transformation is coming. Many incumbent firms in resource- and waste-intensive industries will simply not survive the next decade. Now is the time for business to take the Green Leap— strategically design, incubate and commercialize socially inclusive businesses and environmentally beneficial technologies in new markets, starting at the base of the pyramid. We are in urgent need of sustainable business practices and technologies that are profitable for companies and simultaneously deliver economic, social and environmental benefits for the developing as well as the developed worlds.
A few corporations and entrepreneurs have begun to heed this call. So far, most have come from the emerging markets of Asia, India, and Latin America. And while the Tata group is on the path toward transformational sustainability (see Exhibit 2 for examples), we fear for many of the big incumbents from the US, Western Europe, and Japan who have yet to embark on this journey. If we think the Great Recession has been ugly, just wait for the Great Extinction! Fortunately, there is still time to batten down the hatches and launch the lifeboats. The Next Great Transformation is coming, and the opportunity could not be greater.
Tata Group Initiatives in Transformational Sustainability
[i] In his landmark book, The Great Transformation, economic historian Karl Polanyi observed that the birth of industrial capitalism was premised on a radical shift in how people perceived the relationship between economy and society. It will require an equally great leap in corporate growth and innovation strategy to bring forth the “Next Great Transformation”—a new, more inclusive form of capitalism that extends the benefits of enterprise to everyone while at the same time preserving the ecological foundation upon which we all depend.
[ii] For more detail on “Green Leap,” see Stuart Hart, Capitalism at the Crossroads (Upper Saddle River, NJ: Wharton School Publishing, 2010). The Sustainable Entrepreneurship MBA (SEMBA) Program at the University of Vermont’s Grossman School of Business has also been recently created to accelerate the rate of Green Leap innovation.
[iii]A version of this section was published as Ratan Tata, Stuart L. Hart, Aarti Sharma, and Christian Sarkar, “Why making money is not enough,” Sloan Management Review, Summer (2013): 95-96.
[iv] See Chapter 4 by John Mackey in Michael Strong (ed.), Be the Solution: How Entrepreneurs and Conscious Capitalists Can Solve All the World’s Problems (Hoboken, NJ: John Wiley & Sons, 2009).
[v] Nikos Mourkogiannis, Purpose: The Starting Point of Great Companies (New York: Palgrave-Macmillan, 2006).
[vi] Clayton Christensen, The Innovator’s Dilemma (Boston, MA: Harvard Business School Publishing, 1997).
[vii] Erik Simanis and Stuart Hart, “Innovation from the inside-out,” Sloan Management Review, Summer (2009): 77-86.
[viii] This idea can be traced to the original work on stakeholder theory: Ed Freeman, Strategic Management: A Stakeholder Approach (Marchfield, MA: Pittman Publishing,1984. Michael Porter and his colleagues have recently relabeled this idea as “shared value.”