Dubai GLOBAL CONVENTION 2012

ROLE OF CSR IN CORPORATE GOVERNANCE STRATEGIES FOR SUSTAINABLE BUSINESS

CSR has moved from backburner of cheque book philanthropy or undertaking community projects or making charitable donations for community welfare to running a mainstream business activities that maximises benefits for all stakeholders - employees, customers, suppliers, shareholders, the community and the environment, while minimising the negative impacts resulting from the activities of that business. Governments, activists, and the media have become adept at holding companies to account for the social consequences of their actions. Companies are in the spotlight regarding how they behave. Whether it is the way they win contracts, affect the environment, treat their employees and contractors, sell products to their customers or deal with competitors - companies reputation is at stake. Today customers are becoming more and more discerning and demanding. They want safer products and at lower cost. Thus companies producing goods and services through cleaner and innovative technologies will be rewarded by millions of customers through repeat demand and not just one time purchase. Therefore brand equity of company will get built in the long run. To survive and to be successful, corporate need the trust of stakeholders and without ethics, that trust cannot be built. When we talk about ethics, the underlying principle is that one will not do harm to others. When we talk about sustainability, it is an extension of the same principle to the larger interest of society. It's about not doing wrong, even if you are not mandated by any kind of regulation. If corporate are not ethical, they cannot be sustainable. Ethics form the foundation of how companies function. People are realising that ethics alone aren't good enough. There is also the realisation that being principled is not only about ticking the right boxes but can be a crucial part of business strategy. Principled companies stand to gain from a huge positive spin off on their brand name and reputation. The new buzz word is being a principled business, and that involves being ethical, along with a healthy dose of sustainability thrown in. There can be a big down side in NOT having Sustainability in mainstream of the company. It is a RISK, not only a reputational risk but also a strategic risk, which will percolate into operational risk and eventually become financial risk and seriously affect the bottom line of the company. Thats when management will understand the business implications of Sustainability. Integrating sustainability in business strategy will go beyond feel good factor and actually lead to enhancement of market capitalization, only then can we expect companies to embrace the principles of sustainability wholeheartedly and in true spirit. Many CSR efforts are only a feel good factor or Public Relation exercise designed to promote corporate brands--by creating the appearance of being "good corporate citizens." Result? CSR investments that deepen public cynicism fail to generate real social change. Equally important, they're not enabling companies to profit from their good works. CSR can solve social ills and give company a competitive edge--if approached strategically. The fact is, the prevailing approaches to CSR are so disconnected from strategy as to obscure many great opportunities for companies to benefit society. If corporations were to analyse their opportunities for social responsibility using the same frameworks that guide their core business choices, they would discover that CSR can be much more than a cost, a constraint, or a charitable deed--it can be a potent source of innovation and competitive advantage. In fast globalizing world, there is a noticeable paradigm shift in the business environment. In response, CSR has emerged as an inescapable priority for business leaders in every country. Boards also need to bring a shift in the mind-set of CEOs that is to move away from quarter on quarter to long-term value creation in business, if they do so the wall street and market cap will automatically take care of themselves.

With growing concern among stakeholders and to move CSR to the next level - from "doing what's right", the company recognized that CSR must be fully integrated into the business strategy and dayto-day business operations to achieve sustainability for both the company and society. As a part of business strategy, more corporations will be supporting NGOs and non-profits via employee volunteer programs, rather than just writing cheques. According to Gallup, companies with highest levels of employee engagement saw increases in their bottom line: On average they improved 19.2% in operating income, while companies with lower levels declined 32.7%. Engaged organizations also grew profits as much as three times faster than their competitors. The Corporate Leadership Council reports that highly engaged organizations have the potential to reduce staff turnover by 87% and improve performance by 20%. Finally, only good intent is not enough, companies need to show action and perform well along all the three parameters of environmental, social and corporate governance responsibility aimed towards sustainable development. Sustainability should be integrated within the corporate Strategy of the company and building it into the core of business is the only means to ensure that company - and world - will survive. Evolving sustainable business strategies Few corporate leaders would disagree that "today's companies ought to invest in corporate social responsibility as part of their business strategy to become more competitive". But connecting doing good and doing well poses new challenges in strategy formulation and execution. There are a handful of systematic guidelines that have helped disseminate best practices among future-minded corporations: the ISO 14000 Environmental Management Standard, the Global Reporting Initiative's Sustainability Reporting Guidelines, and more recently, the Social Accountability International's SA8000 code of conduct. As more companies sign on to these agreements, both the internal learning and external credibility stemming from sounder practices have become a source of competitive parity. But can a corporation blaze new competitive advantage at the junction of sustainability and business?

As corporate social responsibility is becoming increasingly important in attaining and sustaining competitive advantage, many Tata companies have signed on to pro-environmental and pro-social initiatives. But can such initiatives promote doing good while strengthening a firm's competitive advantage? Starting with a Tata Workout in 2001, CEOs of the Tata companies have collectively evolved an integrated approach to embedding a sustainability mind-set into their systems, people, and processes. In 2007, their efforts culminated in the launch of a Leadership Protocol that promotes both a systemic legacy and personality footprints for the next generation of Tata leaders. It is heartening to know how this comprehensive approach for the execution of sustainability strategies can strengthen the connection between corporate social responsibility and global competitiveness. Wal-Mart has Sustainability 360. MacDonald's is greening its supply chains to promote fair-trade coffee and sustainable fisheries. Monsanto developed a trans-fat free soybean, helping make KFC's fried chicken a healthier choice and now works with farmers around the world to mitigate agriculture's overall impact on our environment. And Toyota's "Prius for the people" helps climate change mindful people make the right choice on their way to work. Take Tata's recently announced Nano, the world's most affordable car - for some perhaps another four-wheel greenhouse threat, for many a revolutionary new way to reposition the auto industry. But both critics and advocates agree that the $2,500, two-cylinder car offers an affordable transportation solution with a low carbon footprint. For Tata Motors, India's largest automobile company, the Nano is much more than a provocative new transportation choice for India's people. This little safe car stands as another bold embodiment of Tata's century of trust and cooperation with local communities. And the Nano is only one of the fruits of Tata companies' painstaking commitment to surfacing the best of business in the service of people, in India and globally. Tata Consultancy Services Limited (TCS), a world leading provider of information technology consulting services, is winning global accolades from Business in the Community's (BitC) Corporate Responsibility Index (CRI), the leading UK benchmark of responsible business practice. Known internationally for its business success, TCS has a warm spot in the heart of many Indians for the

Computer Based Functional Literacy project. This programme helped illiterate adults learn how to read in their own spoken language in a span of 30 to 45 hours spread over 10 to 12 weeks. The programme is multimedia-driven, and targets 15 to 30 year olds - setting them on the path to acquiring other literacy skills, including writing and arithmetic ability without any interruption in their productive activities. Five years later, the project has spread to more than 1,000 centres in Andhra Pradesh, Tamil Nadu, Madhya Pradesh, Maharashtra, Uttar Pradesh and West Bengal, and it has helped more than 46,000 people learn how to read. It has also inspired TCS employees to closely marry their IT excellence with local initiatives in their global operations, and to embody and share the Tata values wherever they work. There are many differences between Tata Motors and TCS - but also important commonalities. Both companies strive to share the human touch every day and everywhere they go. The social and environmental value their respective operations create helps strengthen and promote the Tata brand as the group becomes a global presence. Their initiatives boil down century-old values of community stewardship in ways that leverage core operational impact to make a lasting impression on the communities in which they operate. This deep awareness of how business can benefit multiple stakeholders by mission and design constantly renews the Tata corporate identity in ways that continuously strengthen its brand and competitive advantage in markets at home and abroad. The Tata way Why do so few corporations do business the Tata way? There is a catch. First, every single employee working for Tata companies, from the CEO to the most recent intern share in the deep values of their leaders, still a guidepost for every new project within the group. Second, Tata companies have evolved a collective commitment to evolving stronger connections between their values and first-inclass business practice - not by putting either one ahead of the other, but by finding mutually beneficial bridges between them. Starting in the early 1990s, the group has invested in structures and processes that would gradually align its pro-social and pro-environmental values with excellence in business endeavours. These efforts culminated in 2003 with the introduction of The Tata Index for Sustainable Human Development, a pioneering effort aimed at directing, measuring and enhancing the community work that assists all Tata companies in their social responsibility efforts. The Index had been developed by the Tata Council for Community Initiatives (TCCI), a council of Tata companies CEOs, in partnership with Tata Quality Management Services (TQMS). Since June 2004, the Tata Index has been deployed annually to assure continuous improvement in the delivery of social responsibility initiatives at the company level. The purpose behind the Index was to seed new benchmarks and motivate for continuous innovation in sustainability across each company's operations. TCCI offered a common platform where each company could share their challenges and achievements with the others and would learn how to nurture stronger internal leadership structures that promoted business excellence "the Tata way". The Group has been eager to leverage its learning by sharing the idea of indexation and the more practical how-to's of the Index with Tata suppliers, collaborators and competitors within India through the Confederation of Indian Industry (CII), and international organisations, such as the Global Reporting Initiative (the Group has been a founding member of GRI) and the Social Accountability Initiative. Although not every company may share the sustainability history or the ethos of Tata companies, the systematic approach of indexation can be easily adapted to work for different corporate identities, much as the GRI can be customised for specific activities and areas of improvement. If your firm has mustered the strategic commitment it takes to make the world a better place, the Index helps you execute by providing a guiding (albeit not forceful) approach to getting your systems, people and programmes better every step of the way. And then? You will soon need a parallel track to develop strong leaders that will continue to push your organisation to the next level. Like every resource, sustainability processes can get stale and need periodic rejuvenation to bring your firm a competitive edge. Spearheaded by collaborations among Tata's strategic leaders on the Index, an even stronger linkage between sustainability and operational

excellence was recently forged. How do you develop leaders for corporate sustainability? At Tata, this is a two-fold approach. On the one hand, the Index encourages a proactive application of the Tata Business Excellence model in ways that promote positive social and environmental contributions. Annual scoring ensures constant process improvement. The assessment triggers company-wide workouts that help strategic leaders work with their internal teams to jointly identify major risks, opportunities and innovations that can meet both sustainability and business excellence objectives. Using this collective understanding, the leaders then formulate a three to five year corporate sustainability strategy for their organisation. This gives their company a more sustainable edge (competitively, socially and environmentally). It also gradually widens their own leadership bandwidth to make a larger difference in their community and competitive context by setting new standards of what businesses can achieve. On the other hand, the Corporate Sustainability Leadership Profile guides their personality footprints to trigger a virtuous cycle of enhanced goodwill and reputation. First, the leaders assume responsibility for themselves and their leadership team, and work personally to tighten convergence between the trained corporate sustainability facilitators and their unit's business excellence goals. They lead for sustainability by example - through involvement in volunteering initiatives and through regular integration of sustainability issues in business meetings. Their performance on corporate sustainability is reviewed periodically (including their ability to promote and recognise such leadership among their subordinates). There is even a flowchart showing how any organisation can systematically implement leadership for sustainability. At Tata, the Leadership Protocol translates the group mission statement into executable leadership for sustainability: "The Tata name is a unique asset representing leadership with trust. Leveraging this asset to enhance Group synergy and becoming globally competitive is the route to sustained growth and long-term success." Projects like the Nano or adult literacy in 40 hours do not happen by chance. But they can happen by design. Tata companies have unleashed a virtuous cycle of evolution and execution of sustainability strategies. The Index assesses and guides sustainability-enhancing processes; the Leadership Profile articulates the steps for strengthening leadership capabilities. By embedding a society-minded logic to value creation, Tata have given back many fold to society. Their learning in turn has strengthened their corporate identity, and encouraged bold steps in rethinking transportation, information technology, or steel manufacturing. Could your company follow their lead and make a difference? The Tata's approach is simple, but it is not easy. You can position your firm for a lasting competitive advantage by deliberately embedding sustainability assessments in both operations and leadership. Taking a comprehensive approach helps you identify and configure the various capabilities needed to create value sustainability - in systems, people and programmes. And if your company is not changing fast enough, you can. Become the change you wish to see, and lead others by example:

Source: Courtesy Ivey Business Journal: March/April 2008 - The Richard Ivey School of Business, University of Western Ontario - Canada