Sustainability Strategy 2020 The Tata Group’s Vision for a Sustainable Future

1. Sustainability Strategy 2020The Tata Group’s Vision for a Sustainable Future

2. Executive Summary • The dynamic global environment challenges companies to reassess balance between business and social priorities • A sustainability strategy creates an opportunity to generate and capture economic value • A strategic approach strengthens social impact and maximizes return on social investments through: • Targeted interventions • Innovation • Thought leadership • Public policy • Effective implementation enables Tata to achieve its strategy, by making changes to: • Structure • Culture • Measurement • Communication • The value generation potential is 2-3 % of net value 2

3. A concerted sustainability strategy gives Tata a competitive advantage by generating social impact • FOCUS Targeted Interventions Innovation Public Policy Thought Leadership • Create an opportunity for shared value • Leverage unique capabilities • Enable a measurable ROI • Yield magnified returns with small investments • Create opportunities in uncontested markets • Reinforce Tata culture • Increase social impact and return • Influence the debate and minimize tensions • Improve ability to conduct business • ` • Set the standard and raise the bar • Compel followers • Reinforce brand with strengthened reputation 3

4. An effective implementation is necessary to achieve sustainability goals • Coordination and integration • Engrain sustainability mindset in the organization • Appoint a Chief Sustainability Officer • Form a permanent Sustainability Task Force • Cultivate stakeholder relationships • Exploit common initiatives • Empower and align employees to new vision • Incentivize and reward sustainability efforts • Foster long-term talent recruitment and development Structure Culture • Improve social impact • measurement • Publicize Tata’s • sustainability leadership Measurement Communication • Create brand equity and goodwill • Motivate employees and community • Enhance investor relationships • Communicate quantifiable impact • Quantify social impact and translated to financial value creation • Understand financial and non-financial costs of initiatives • Prioritize and align strategies 4

5. Tata can implement its sustainability plan to achieve its 10-year vision 1 2 3 4 5 6 7 Identify partners to create greatest impact Adjust investments based on impact Create Sustainability Task Force Define & Convey Strategic Sustainability Vision Set strategic priorities Define metrics for evaluating impact Demonstrate financial and social impact Appoint sustainability leader who sits on corporate executive board, establish sustainability task force Reinforce linkage between sustainability initiatives, employee value and innovation Define annual social, economic & environmental initiatives in each region; Consider opportunities for shaping political agenda Devise ways to measure and quantify impact and to translate this impact into financial return Announce quick wins that align with new strategy Strategy group becomes responsible for innovation Distribute report annually to shareholders and employees, beginning in Year Five Develop relationships with relevant NGOs, industry associations, businesses, and lobbyists Month 1 Month 2 Month 3 Month 4-6 Month 7 Quarterly Annually Demonstrates global commitment to sustainability Reinforces message that sustainability is key component of the business Able to assess strategic investments with greatest impact on ongoing basis Instills standardized measurement and reporting to define social impact Allows group to make strategic investments regionally Builds relationships in the community while delivering impact Signals value to shareholders and stockholders 5

6. The valuation framework incorporates analytical tools to surmount the traditional challenges faced in valuing sustainability Valuation Challenges How does sustainability translate into value for a company? To what extent do these value generating opportunities apply? What should be a reasonable impact target for Tata Group? Phase 1: Identify Sustainability Impact Levers Phase 2: Determine Relevance for Tata Phase 3: Quantify and Validate Impact Estimation Valuation Framework Stakeholder Mapping Business Model Relevance Grid “Sanity Check” 1 4 7 3 6 8 Theoretical Potential Impact Impact Potential for Tata Group Impact Estimation Elements of Value Geography Focus 2 5 6

7. High impact Low impact The Theoretical Potential Impact Matrix summarizes how sustainability initiatives affect stakeholders and move the levers of a company’s value Theoretical Potential Impact Matrix Source: Team Analysis 7

8. The consolidated estimated impact for the Tata Group is $3.6 Billion Impact Per Value Lever1 Net Impact on Tata Group Value1 US$ Billions US$ Millions Note (1): Based on detailed value estimation for 4 largest companies and extrapolation for other 92 companies based on revenues Source: Tata Case; Tata Group Companies Reports, Team Analysis 8

9. Sustainability is a key component to Tata’s success “A visionary company doesn't simply balance between idealism and profitability: it seeks to be highly idealistic and highly profitable.” -Jim Collins, Built to Last: Successful Habits of Visionary Companies 9

10. APPENDIX 10

11. The Integrated Sustainability Plan & Implementation is a detailed approach to value creation and capture Vision: To be recognized as the undeniable global leader in corporate sustainability by reinforcing core business operations while creating and capturing value for its shareholders • Context: • Post financial crisis environment • Increasing social & environmental awareness • Growing Consumer base in emerging economies • Public demands corporate responsibility • Sustainability Strategy Goals: • Address stakeholder demands in each market • Generate new demand in uncontested market space • Translate stakeholder value into shareholder value • Collaborate with & leverage company innovations • Invest in human capital for long term change • Advocate core values in global business practice • Expand philanthropic efforts in markets where impact is greatest • Strategic Focus: • Revolutionize industry by raising corporate citizenship standards • Prioritize key social & economic investments to augment innovation • Foster innovation in business • Shape public policy • Measurement: • Standardize reporting framework to measure impact of ROI • Harness stakeholder insights to identify opportunities • Adjust and refine initiatives • Structure: • Be sustainability leader • Create sustainability taskforce to foster integrated approach towards sustainability initiatives • Exploit common initiatives between company holdings • Culture: • Engrain mindset of sustainability in leadership • Incentivize leaders & employees • Attract top talent with core values • Recruit & train future leadership class • Corporate Strategy: • Conglomerate strategy • Market leader & expand into global markets • Acquisitions in key sectors • Strong social impact • Companies represent the Tata brand • Communication: • Disseminate brand • Address stockholders – ROI& EVA • Promote stakeholder dialogue to get feedback on current initiatives 11

12. FOCUS: Tata must target interventions to maximize social impact and capture maximum value Community Schools Technology College Social Value Created Economic Value Captured Social Value Created Economic Value Captured • Creates an opportunity for shared value; strengthens Tata’s competitiveness while adding social value • Impact can be isolated and measured • Value is difficult to capture- High social impact, but does not directly increase Tata’s competitiveness • Impact is difficult to measure and translate into financial returns 12

13. Tata Must Innovate to find opportunities for maximum impact Economic Value Captured Social Value Created Minimum Contribution to Tata’s Net Income Maximum Social Impact 13

14. Phase 3: The impact per company is derived by conservatively affecting the value levers to the extent that a sustainability strategy is relevant Example: Tata Consulting Estimated Impact Source: Tata Case; Tata Group Companies Reports, Team Analysis 14

15. Phase 2: Tata Group’s ability to capture the potential for value generation depends on industry & geography focus for each company Potential for Value Generation per Company - Tata Group’s Largest Market Cap. Companies - Higher Potential + Breadth of Relevant Stakeholder Groups - - + Geographic Expansion Source: Tata Group Companies Annual Reports; Team Analysis

16. Elements of Value n Vc= Σ Vi i = 1 x Vi = Σ Ct (1+gs) / (1+ki)t + Cx(1+gl)/((k-gl)(1+ki)(t+1)) t = 1 Short Term Component Long Term Component Where: Vc = Value of the conglomerate Vi = Value of one of the organization t = Period x = End year of short term period affected by short term growth rate Ct = Operating after tax cash flow of the company in year t Cx = Operating after tax cash flow of the company in year x gs = Short term growth rate of the cash flows gl = Long term growth rate of the cash flows ki = Cost of capital for organization i 16

17. Tata Group’s ability to capture the potential for value generation depends on industry & geography focus for each company Business Model Relevance Grid Geography Focus 17