BEYOND THE BOTTOM LINE
Tata's Army of Volunteers
10 March 2006
The Indian industrial empire that is producing social capital as well as profits.As you drive along a dusty road, past parched fields east of the steel city of Jamshedpur in Bihar, a large brick college building comes into view. It dominates the tribal hamlet of Asanboni. The college serves 500 students from some 75 villages, in one of India's poorest regions. It was opened in 1993 by J J Irani, then Managing Director of the huge Tata Iron and Steel Company (Tisco) in Jamshedpur. A local adivasi (tribal) leader, Shailendra Mahato, had persuaded the company to fund the building's construction, as part of its social welfare policy.
The Tata Group, India's largest private sector conglomerate, comprising 91 companies employing some 220,000 people, is renowned worldwide for its commitment to social development. Western businesses may have discovered the virtues of 'corporate social responsibility', but Tata has been practising it for decades in a nation that has virtually no welfare safety net. Housing for employees, company-run hospitals and schools, and rural development projects such as road building, tree planting and well digging, are all part of the Tata package. Tata Steel introduced the world's first eight-hour working day, back in 1912, and today employees are deemed to be at work from the moment they leave their homes and are paid accordingly.
Revolutionary stuff. But in recent years Tata's social ethos has been under threat, due to globalization. Just at the time when Asanboni's village college was opened, India was also opening its doors to global competition through trade liberalization and reduction of import tariffs. This put enormous pressure on companies to cut costs. Tisco, for instance, claims to produce the cheapest steel in the world, but at the cost of cutting jobs dramatically. Some feared that the Tata group would find it increasingly tough to maintain its social welfare commitments. But with an expanding domestic and global market, the Tata Group has seen dramatic increases in its earnings. Revenues were $17.6 billion in 2004-05, the equivalent of nearly three per cent of India's GDP, and over twice its revenues of five years before. In 2005 they were even higher at $24 billion.*1
The biggest challenge facing the Tata empire is 'how to be an international company and, at the same time, maintain its soul,' said R Gopalakrishnan, Executive Director of Tata Sons, Tata's parent company, when I met him in the Tata headquarters in downtown Mumbai in 2003. In his view the company's soul lay in its social involvement.
Anant Nadkarni, who oversees Tata's community initiatives, says the way to maintain Tata's social ethos is through 'a holistic approach'. Tata may have to 'look beyond its current social expenditure of $30 million a year', he says. Throwing money at development 'misses the point. It is not a question of cheque book philanthropy but of personal involvement. We need to innovate. It is like a river confronted by a mountain. The river has to go round.'
So how has Tata innovated? By getting its employees to volunteer for community service. 'Tata companies now treat corporate social responsibility more strategically, using technology to improve peoples' quality of life, especially for the poor,' says Nadkarni, who is Vice-President, Group Corporate Social Responsibility. 'We have 14,000 volunteers registered from 20 companies,' says Nadkarni. Staff typically give 3-4 hours per week.
Nadkarni sees this as being holistic 'because it is very therapeutic'. Serving the less fortunate in the villages 'is a way of understanding yourself', he says. 'Modern systems of management,' he believes, 'are not designed to release the true potential of individuals whilst achieving the company's ends. But community service does that.' He quotes Sir Edmund Hillary: 'It is not the mountain we have to conquer but ourselves.'
Nadkarni talks about the 'push and pull' influences on his own 27-year career in Tata, which have led to his current position. He had received higher education, housing and medical care at Tata Engineering in Pune where he was an internal auditor. 'Tata gives promotions and rewards without leaving a sense of obligation for the receiver,' he says. 'This gradually transforms you into being a giver yourself.' When he was bored by mundane work on production targets, he volunteered to mentor two non-governmental organizations in Pune. He built up some 25 citizens' groups under the National Society for Clean Cities, in liaison with the municipal authority, and became joint coordinator of the Express Citizens' Forum. This community work gave him an opportunity, he says, for 'self-expression, problem solving and creativity'.
Two friends stood by his side at that time, he continues. They were connected with the Initiatives of Change centre in Panchgani, where they invited Nadkarni in 1992. 'This reinforced a lot of what I had earlier believed, but the process there took me further in realizing that change begins with me.' The experience encouraged Nadkarni to make his long-term career shift within Tata, three years later, to pioneer the Tata Council for Community Initiatives as its first operating head.
Nadkarni points to the many initiatives that have emerged. A designer at Tata Automation developed a new type of artificial limb, which could be adopted globally. An officer from Tata Engineering in Jamshedpur set up a care centre that rehabilitates people cured of leprosy. And Tata Consultancy Services (one of Tata's major companies) developed an adult literacy education system that claims to teach 60-year-olds to read a newspaper within three weeks. 'This initiative is greatly impacting the pace at which the nation's Adult Literacy Programme is being implemented,' Nadkarni believes.
Tata's enlightened approach could become part of a wider trend. In 2004, Tata Industries was one of the 30 international companies to submit 'triple bottom line' accounting, measuring not just their financial results but also their social and environmental practice, to the United Nations Global Reporting Initiative.
Tata has also developed an index measuring 'human excellence', similar to the Human Development Index of the United Nations Development Programme. 'This is the first time that any corporation in the world has applied the Human Development Index principles through a business process,' Nadkarni says. The company has also sought the help of the Confederation of Indian Industries in creating a network of companies that maintain community initiatives.
Nadkarni says that there has never been any resistance to Tata's social expenditure from its two million shareholders. Nor, he claims, do Tata executives see community involvement as a means of burnishing the company's reputation. They have even been known to remove 'sponsored by Tata' signs from village initiatives, he says.
So what's in it for Tata? 'I don't see the need for the question at all,' Nadkarni replies briskly. 'Gautam Buddha left his house to seek enlightenment over three questions: how to deal with disease, old age and death. But when enlightenment did happen, in that paradigm shift he almost forgot the initial questions. So, if you ask what is the business sense in this you are not the man I may want to work with.' He agrees with R M Lala, author of a best-selling book on the house of Tata, The Creation of Wealth, that wealth is far more than profit or income generation. It is to do with 'weal, which means well-being or happiness' of the communities that businesses serve. And that, says Nadkarni, is what Tata is determined to maintain.
Updated from article first published in Guardian Weekly, April 10-16 2003, headlined 'Indian industrial empire redefines bottom line'; For A Change magazine June/July 2003; and the Tata Review 2004.
*1 Newsweek, "The New India", 6 March 2006.