‘Tata Group’s Companies That Fall Short Of Our High Standards Can Have The Tata Brand Withdrawn From Them’
Dr. Rajan’s most comprehensive discussion with BW Businessworld on how The Tata Group has built an effective global work culture and on being recognised as Asia’s Sustainability Leader
Today, India is one of the world’s fastest growing economies. With fast-paced economic progress, there is also an underlying need to have corporate leaders consciously implement best work practices and business ethics as a core part of a company’s growth strategy. Only this will result in creating ‘highly effective global leaders’ for the future generations.
The Tata Group has always been a brand name that is synonymous with ‘trust.’ Even today, each employee of the Tata Group is humbly proud to be part of a company that is truly ‘global’ and yet ‘humble and socially responsible.’
Munnish Puri meets with Dr. Rajan to discuss his role as the Tata Group’s Chief Sustainability and Chief Ethics Officer.
MP: Reflecting back, post Tata Steel’s acquisition of Anglo-Dutch major Corus and the Tata Motors’ buyout of Jaguar Land Rover of the U.K., there were equity analysts who questioned both the transactions and specifically alluded to how would the Tata Group integrate its best working practices amongst the management and employees of Corus and JLR. In your opinion, how successful has the Tata Group been in managing such challenges?
Dr. Rajan: I think that we have had very good success in integrating the companies that the Tata group has acquired. There are at least three key factors that have contributed to this - first, the cultural sensitivity with which we approached our acquisitions, second, our willingness to give the management of the acquired companies the requisite autonomy to run their operations, and third, the alignment of the companies and their people with the core pillars of the Tata brand, our Code of Conduct and our Business Excellence Model.
To illustrate, when Tata Motors bid for Korea’s Daewoo commercial vehicle operations in 2004, our then Chairman Ratan Tata asserted that in Korea, we must be seen as a Korean company, and not as an Indian company. This philosophy meant that Tata Motors in Korea would essentially retain Korean management and connect itself to the Korean society and serve Korean consumers. When you bid for a company with this attitude, you send out a signal that you care for the long-term success of the company, and its integration with the local community.
Similarly, when we bought Jaguar Land Rover, we not only decided to retain the brand name and senior executives but we also immediately pumped in over a billion dollars towards the working capital requirements of the company. This reassured the workforce, that they had an owner who was sensitive to the goodwill that the brand enjoys, with a willingness to fund the new product pipeline. The company was acquired for $2.3 billion and has generated cumulative profits in excess of $15 Bn since then.
In the case of Tata Steel’s acquisition of Corus, however, we came to the conclusion that the Corus brand really did not enjoy significant equity; Corus itself was an aggregation of different steel companies, with different names and legacies. Stakeholders in the steel industry, including lenders, suppliers, and customers, had a positive understanding about Tata Steel India, a rock solid and very efficient and profitable organisation. It made sense to align their understanding with the understanding of the aspirations we had to make Corus Steel a similarly successful organisation. Consequently, we renamed Corus as Tata Steel (Europe).
A question we are sometimes asked is whether, in our house of brands, we regret the fact that some brands do not carry the Tata name. The answer is no, we do not. Each brand that has been created enjoys a unique relationship with its consumer base. We do not want to interfere in that relationship unless it becomes essential to defend the larger values for which our group stands. This approach has helped us retain the equity that the consumer has with the brand and preserve the bond that the employees have with the company.
MP: On the subject of good business ethics, how does the Tata Group effectively manage to maintain this culture across a diverse group of companies globally? Is Continuing Education, either external or even internal an effective way to illustrate how business ethics is the key pillar of the Tata Group’s ongoing legacy?
Dr Rajan: One of the principle tools that we use to guide our colleagues towards ethical conduct and our businesses to conduct themselves in a values-driven manner is the Tata Code of Conduct. First crafted in 1998 under the visionary leadership of Ratan Tata, the Tata Code of Conduct reinforces the value system which has endured since the group was founded. The Code lays down the ethical standards that Tata colleagues need to observe in their professional lives.
Yet, a Code is only as good as its implementation. Hence, we also invest significantly in cascading the code across all levels of the organisation and reinforcing the key tenets of the Code through actions which include celebrating an ethics week every year, translating the Code in local and foreign languages to make it accessible to our colleagues across all levels and around the world, providing an online e-learning module, conducting masterclasses for ethics counsellors of Tata companies, and various other such programmes.
To ensure that the right governance mechanisms are in place, we have frameworks and tools that measure and monitor the adoption of the Code and provide feedback to our companies on areas of improvement. The intention is to assess and benchmark group companies against each other, and against global standards. Companies that fall short of our high standards can have the Tata brand withdrawn from them, and some companies, as in the past, may even be divested.
Some of the areas we are focusing on are the companies’ policies, processes and procedures for both coverage and completeness of the Code, and making sure that these remain contemporary and effective in implementation, including importantly on Anti-corruption and anti-bribery frameworks. We are also attempting to bring more rigour to the management of ethics-related activities – e.g. – capturing and reporting accurate case-data, monitoring data trends, defining reliable processes for investigations or sexual harassment inquiries, and conducting external assurance surveys regularly.
So, as you rightly pointed out, promoting and sustaining this culture of a values-driven approach to business requires constant and continuous education and communication. We are on a journey, and with every milestone we reach, our bar will only be set higher.
MP: On a broader and on a more futuristic perspective, the new generation, which is referred to, as the Generation Z or the iGeneration is big on individuality and yet effective in multi-tasking. They also seem to be global in their outlook and also very entrepreneurial. Looking into the future, how will the Tata Group look at managing this generation, especially since Generation Z will have leaders of the future?
Dr. Rajan: Since many members of GenZ are yet to even enter high school, it will be difficult to draw definitive conclusions on what inspires or motivates them.
However, our experience with millennials has shown that the younger generations are more and more inclined to be driven by a sense of purpose rather than pure monetary rewards. We have seen this with our young employee base, with the average age of our employees being 31 years, who demonstrate huge enthusiasm in areas like volunteering with non-profits.
It is to speak to this audience that last year, we formally adopted the value of ‘pioneering’ as one of our core values. It was also a way to celebrate and recommit to the innovative and entrepreneurial legacy of our Founder and the subsequent Tata leaders.
We also have several programmes in the Tata group to drive a culture of innovation and nurture the entrepreneurial spirit of our colleagues. One of the signature programs we have is Tata InnoVista, an annual rewards and recognition programme for Tata companies that celebrate the successes and struggles of innovation. Recognising that it entails effort, risk, and frequent disappointment before success is achieved, one of the important award categories of this programme is the one, which showcases risk-taking and perseverance. The award is called Dare To Try, and is, in a manner of speaking, an award for failure. We believe this is critical to encourage so that a culture of innovation is sustained across the organisation.
From a leadership development perspective, Tata companies drive company specific management development programmes. At the group centre, we run a programme called the TAS, which was conceived by JRD Tata in 1956. With TAS, he aimed to create a talent pipeline of leaders for group companies to draw from. As part of their training, TAS recruits are exposed to the Tata group’s various sectors, businesses, financials and development strategies, and are mentored by some of the best senior level executives. Such a programme not only provides a wide range of exposure to the recruits, but it also helps them explore their personal passions and chart their own paths within the group.
In all this, we are cognizant that while such programmes and initiatives help in attracting talent, the next generation needs a strong sense of purpose and ‘meaning’ in their jobs to stay motivated and sustain their interest. I think this is where our unique ownership structure plays a substantial role. Two-thirds of the equity of Tata Sons, the investment holding company of Tata group companies, is held by charitable trusts, which are dedicated to doing good. Our colleagues across the group know that the profits they generate are paid back as dividends to the Trusts and that for every day they work here, they are changing the lives of those less fortunate, somewhere around the world. And that is a powerful motivation.
MP: Moving from the subject of business ethics to sustainability; today, the world is truly facing critical challenges as a result of climate change. Each year the climatic temperatures are rising and it’s also reaching unprecedented levels. The Tata Group has been consciously promoting various initiatives on sustainability. Could you discuss some of these key initiatives?
Dr Rajan: at the group centre, we are working with our companies on many initiatives with a view to mainstream sustainability thinking and integrate the principles of sustainability into all our businesses. This is now being firmly embedded in our Tata Business Excellence Model. Let me elaborate on some of the additional initiatives we have taken.
First, we are investing significantly in capacity building and training at all levels across the organisation. Over 150 C-Suite executives have experienced the Cambridge Sustainability Leadership program, and over 500 Carbon and Energy Champions, 180 Water Champions, 50 Disaster Management Project Managers, and 30 Natural Capital Champions have been trained so far.
Second, in order to help build a culture of sustainability in the organisation and sensitise our colleagues to the challenges we face, we have initiatives like the group level volunteering program and the Tata Sustainability Month. Tata Engage, our volunteering program, is now India’s largest corporate volunteering program, with Tata colleagues contributing 1.2 million hours of volunteering support last year to non-profits around the world. Through the Tata Sustainability Month, celebrated in June every year, numerous campaigns are conducted on subjects like Climate Change and Sustainable Development. This year, the campaign is focusing on how sustainability can be integrated into every business function of the organisation.
Third, recognising the importance of disclosure and transparency, over three dozen Tata companies have undertaken sustainability reporting in line with global reporting frameworks such as the United Nations Global Compact, and the Global Reporting Initiative (GRI), while Tata Steel has gone further and reported under the new International Integrated Reporting Council (IIRC) framework.
Fourth, Tata companies are investing in cutting-edge technologies to future-proof their businesses in an environment of increasingly tighter environmental rules and regulations, and in order to leverage new business opportunities. Examples of our companies range from Tata Power’s investments in renewables to Tata Steel’s HISarna project to reduce carbon emissions in steelmaking.
And finally, Tata companies are piloting new practices and protocols in areas like natural capital valuation, sustainable supply chains, and the circular economy. Our group has also commissioned what is probably corporate India’s first climate change adaptation study, in the state of Gujarat, to understand and pro-actively mitigate climate risks to the operations of our companies in the region. We are also engaging with several international organisations and consortia including the Energy Transitions Commission, the World Business Council for Sustainable Development (WBCSD) and the We Mean Business Coalition to contribute to global policy on sustainability.
The impact of all these initiatives was realised in our recognition by peers as Asia’s Sustainability Leader by Globescan last year. We are on a journey, though, and there is no real end point.
MP: In your opinion, is the Indian Government poised to effectively tackle Climate Change? Also, how could the Indian Government further support key initiatives around Sustainability?
Dr Rajan: I think that there has been a growing consciousness around the sustainability challenges India faces, in the last two decades. The Indian environmental movement has become more organised and professional, including in its use of data and technology.
The spate of new legislations around environmental protection, the growing powers over the decades for the central Ministry of Environment and Forests, India’s intention of developing 100 GW of solar capacity by 2022, India’s INDC (Intended Nationally Determined Contribution, under the Paris Climate Accord) commitment to reduce the emissions intensity of its GDP by 33 to 35% by 2030 from 2005 levels, and more recently, its reinforcement of its commitment to the Paris Accord, all indicate the government’s commitment on the issue of sustainability.
At the same time, the magnitude of challenges ahead of us calls for collective action to drive excellent execution and build scale through partnerships and collaborations. The government can help catalyse the transition to a more sustainable future by supporting and collaborating with Corporate India. Some areas of collaboration could include R&D and innovation, for instance in the electric vehicle and renewable energy space; encouraging corporates to pool their CSR funds to run joint programmes in the CSR space, especially those that require scale to achieve meaningful impact, like skills development; and recognising probono volunteering as a legitimate CSR activity under the Companies Act, which will help drive sharing of best practices, and create a professional talent pool that can support non-profits.
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