TATA POWER: CORPORATE SOCIAL RESPONSIBILTY AND SUSTAINABILITY

UNDER THE GUIDANCE OF Dr.SUPRITI MISHRA
ASSOCIATE PROFESSOR IMI BHUBANESWAR

SUBMITTED BY
JAPKIRAT SINGH SHIVA KRISHNA PADHI SUMAN PRADHAN

Supriti Mishra. IMIBhubaneswar. faculty member.DECLARATION We hereby declare that the report titled “TATA POWER: CORPORATE SOCIAL RESPONSIBILTY AND SUSTAINABILITY” submitted to IMI. JAPKIRAT SINGH SHIVA KRISHNA PADHI SUMAN PRADHAN .Bhubaneswar is a work done by us under the esteemed guidance of Dr.

which can help the community to increase the basic standard of living . energy. the employees should always be in contact with the top management as well as key community so that the could convey the exact social activities that need to be done so that it CSR activities can help the company on long term sustainability. but a holistic approach can be a better set of skill development of the key community by activities like vocational training.5. even the initiative to help the key community is either borne by PBO or NGO. Here what we feel is the boundary spanners i. It is well proven from its retention ratio that is less than 0. Company is trying to have good repute and win investors faith by providing good amount as dividend. how should the course of action be for the resource allocation in the short-run as well as in the long run? Answer Interpretation of Financial Statement • Company is doing long term capital investment. We have seen in case TPC have tied up with NGO’s like REACHA and CONNECT to implement CSR activities in the community. health care facilities etc. B)Looking at the financials of the company (Exhibits 8 through 10b). TPC has taken many initiatives like ecological conservation. environment and income generation activities. etc) is decreasing gradually • • . education.e. vocational training. As It is investing a lot of money in fixed assets and expansion that will affect its expenditure pattern in CSR and other activities. and if the CSR activity is borne by PBO then there may be an issue of budget. health awareness etc. infrastructure. but they have not been that successful in helping the “key communities”. Although revenue is increasing year by year but the operating profit and other key profitability measures like (PBDIT. The main question here is whether TPC should go with a separate CSR department? Though there is voluntary participation from the employees but it is still not performed as a thing on a large scale. moreover if we see in the case it is clearly evident that they tried to give tailoring classes to women belonging to key communities. We can see from the exhibits that.1 A) TPC is undertaking CSR activities in 6 thrust areas. but just by giving training has not solved the purpose as the community lacks a market place where they could sell their products. are the processes and people involved well-defined for the 6 thrust areas? How far will these activities help the company with long-term sustainability? Answer As we know the six thrust areas are health.

• Company has a very good book value. Specifically ROCE and RONW etc. Company’s efficiency in term of asset utilisation and other turn over ratios is way below compared to the industry. Infrastructure Rural electrification Drinking water and other schemes . It will affect company’s strategy in terms of investment and also in terms of expenditure in CSR.from 2003-07. So it has very Low P/E and P/B ratios compared to the industry. So that there can be Conversion from stable to growth security. And also the huge investments company has made may be a reason behind that. Company needs to have higher retention. These include short term current investment rather that long term capital investment on fixed assets. • • • • • CSR budget allocation for long term should focus on• • • • Can plan for expansion and long term investment on fixed assets. This may be due to high cost of raw material. It shows its failure in utilisation of fixed asset and capital in the best way. It is a huge concern and deters it to be a growth security. But it is not reflected in its market price. Awareness programmes Sport tournament Vocational training Health care Environment etc. • • CSR budget allocation for short term should focus on• Rather than expansion or creating new set-up focus should be on having new activities in existing setup. It also needs to have more short term current investment rather that long term investment on fixed assets.

21 . Awareness programs. Therefore the CSR budget would have been 2% of Rs. 80. Rural Electrification.23 Vocational Training 7. 174 million. 8700 million.22 Income Generation 2. That amount when compared was too less and under proportionate. sports tournaments 6.22 Environment 8. At that time it was an unwritten rule in the corporate world was the CSR budget should be 2% of the net profit which was afterward mandated in the Companies Act. 50-70 million. 50 to 70 million annually on CSR activities. Are the expenditures sufficient in view of the sustainability? What are the tangible and intangible returns for the company? How would you structure the cost and benefit analysis? Answer The net worth of the company as of 2007-08 was Rs.02 Health Care 7.520 million out of which reported net profit was about Rs. Activities Percentage Infrastructure 15.02 Drinking Water Scheme.2 A) TPC is spending Rs. 8700 million that equals to Rs. But the proposed CSR budget was only about Rs.

agricultural/vocational ) Employable population Intangibles:   Eradication of illiteracy. market driven. mal-nourishment Better connectivity [hence. better adaptive community]   Good-will Better relationship with stake-holders [communities. bargaining power of the NGO’s and lastly losing reliability on impact assessment technique. equipped town-ship Availability of facilities (health.The above table give a brief idea in percentages about the CSR expenditures out of the budget. entertainment. well planned. and internal policies] Cost Benefit Analysis: Right now the costs are on the higher side because the company is at the asset building stage which will take time to reap the benefits from the assets. development of socially aware. . poverty. NGOs. Some of the benefits which are tangible and intangible are as follows: Tangibles:    Development of structured. education. recreational. government. commercial. environmentalists. The factors which are beyond control of the company are growing carbon foot-print which stems from over dependence on coal power. There are negative sentiments in the market about the company with ways of production of power with a huge skill-demand gap.

Varied Nature. but not a global one 3 A) CSR was integrated as part of the HR department at TPC until now. Indices like Dow Jones Sustainability Index 2. Different Input factor-based production strategy 3. different strategies for hydro. Tying-up with field-expert from NGO’s are also good conduit to ground realities.B) Do you think that there should be different parameters for the impact assessment for various locations (see Exhibit 7)? What will be its impact on the overall benchmarking of CSR activities? Answer Different parameters on Impact Assessment: It should be different across borders. Different Ecology. Participation in CSR was voluntary and was treated as one of key result areas for every employee. CSR activities were spread out across the functional departments. . Even within border.if we will have a separate department for CSR than the employees of that particular department will only look at CSR activities of the company. 4. scale of activities and target stake-holder 3. Need for regular ratification of sustainability measures Benchmarking can be done on the following parameters: 1. communities 5. Human Development Index and Factors. What are the arguments in favor and against of having a separate CSR department or integrating CSR with other functional areas? Answer Establishing a new department of CSR:PROS  Dedicating working force:. Region-based institutionalization may be a possibility. because: 1. Culture 2. thermal & wind based energy production has been observed.

B)Do you suggest any changes in the existing structure of CSR activities as far as thrust areas are concerned? What are the Pros and Cons of doing CSR through NGOs and other similar organizations? Answer The Pros and Cons of doing CSR through NGOs and other similar organizations PROS  Base line data:. collecting the base line data etc. too much burden:. CONS  NGO specializes generally in one area  Big NGO’s have high bargaining power .NGOs will decrease the burden of the company.the department will have the holistic approach.  Loss of focus.the employee who are working there are getting salaries for their work so the it is difficult for them to get the feeling of self motivation because there are been paid for that and hence there will be less self motivation.  Centralized NGO data base:. It will take the whole department as a single entity and they would work for CSR activities as single entity. Holistic approach:. If there will be separate department than there will be the centralized data base for the NGO’s CONS  Cost of creating: if there will be a new department the cost creating the whole new department will be huge. in order to look at every project by the department it will create a burden and also the department cannot focus or concentrate on the one project. it is a globalized company so it will be having a number of projects.  No self motivation:.In order to collect the base line data the NGOs can help the company because they are more close to the people or the society who are affected by the projects of the company.as TPC is not the small company.it is difficult for the company to have data base of the number of NGOs now.  Decrease burden:. It will help the company in the need assessment.

A separate and dedicated department for the conduct and supervision of CSR activities will help in cultivating a sense of ownership among the local communities which is a major challenge as their ability to change is slow on the one hand and their expectations are large on the other. Ngo might have different motives Suggestions for changes in the existing structure of CSR activities as far as thrust areas are concerned:There should be CSR governing body o It should look after the CSR activities of the company. This number had increased from 118 to 259 in six months. the organization structure will be designed with regard to the perceived benefits to be derived from CSR activities: economic value. the existing organizational structure is experiencing change. 4 A) With massive expansions in the company. environmental causes and social causes. The concern before the company is to decide whether it is necessary to establish a separate CSR department or continue with the existing pattern of having CSR as an embedded part of the key result areas for the heads of departments. As there was increase in 259 TPC employees who worked as CSR volunteers. We suggest the creation of a separate CSR department so as to achieve the objective of institutionalizing CSR activities and align them for the long-term sustainability of the company. How should CSR department position itself in order to synchronize its activities with the company’s mainstream functions? Answer In order to position the CSR department. o Not solely responsible for CSR implementation only o Tie up with NGO’s o It should do the research work o Should have holistic approach o Need assessment o Employees can come and continue with their voluntary support for the CSR activities. .

raising morale and increasing loyalty.As per the current scenario prevailing in the company pertaining to CSR. not only do employee’s feedback ratings go off the charts. This massive scale of expansion demanded significant acquisitions of some of the existing players. The vast Indian power market offered one of the highest growth opportunities for private players. the amount of hurdles pertaining to the permissions and procedural delays will get reduced thereby enabling effective achievement of the objectives and their desired impacts over the stakeholders involved. They are engaging their employee in CSR activities and using their skills. When companies add a community development component to an incentive component. And if we talk about the TPC they also need to grow with this growing demand of electricity in India. as it was one of the fastest-growing economies. retaining. the functional heads of various departments are catering to the CSR activities and thus categorize under the “Leadership in Functional Excellence” which forms the bottom of the pyramid representing the organizational structure. retains and motivates staff Increases employee loyalty Boosts their CSR-reputation Team building and bonding . This will help in facilitating the smooth flow of operations considering the fact that if CSR gets positioned in the upper band of the power and authority hierarchy. But. but a company’s CSR profile gets a boost. it is vital to place the head or the governing body of CSR department amongst the board members thereby providing recognition to the key elements of CSR “On the Board” which forms the top of the pyramid representing the organizational structure. But as we know the availability of reliable and quality power was a prerequisite for the growth of any country. But TPC at this point of moment maintain volunteer based strategy which is right in short term. or should there be some kind of incentive scheme for the employees who participate in programmes? Answer TATA Power Corporation at this point of moment using volunteer based strategy.000 MW over the next five years. but for long term sustainability they need to give some kind of monetary or nonmonetary incentives. TPC was planning to increase its production up to 10. Beginning in 2006. as we consider the creation of a separate CSR department. a company undertaking an incentive scheme obtains the following benefits:     Rewards. rewarding key staff. as well as the acquisition of land. Incentive or rewards have a strong track record of motivating. So with this expansion their projects are also increasing. The demand for power in India was enormous. To conclude. B)Should TPC maintain its volunteer based strategy.