The Tata Way A Mutually Reinforcing Cycle of Profitability and Sustainability

1. The Tata WayA Mutually Reinforcing Cycle of Profitability and Sustainability Jose Ochoa, Rajiv Rammohan, Ram Sangireddy, Christopher Shields

2. Executive Summary Our strategy will propel Tata to the top of global CSR leadership by: • Maximizing its initiatives by localizing them • Allowing realistic CSR comparisons across all of Tata’s companies • Considering the lifecycle impact of its products and services • Developing a groundbreaking buy-in and incentive tool • Creating measurable value for Tata and for society The strategy relies on our Three Pillars of Sustainability:

3. CSR investments have realized a 32% return to Tata’s brand equity, creating value for each Tata Group company.

4. Tata’s CSR initiatives align the interests of each of its stakeholders and strengthen its overall competitive advantage

5. With global expansion, Tata must adapt its CSR efforts to match the diverse needs of local communities. One-size-fits-all CSR strategy is neither efficient nor sustainable Localize Source: CIA World Fact Book

6. NMMF enables the Tata Group to fairly compare the CSR performance of each of its companies New Markets Multiplier Factor (NMMF) normalizes sustainability initiatives of different Tata Group companies to facilitate comparison of CSR performance Normalize Original Tata Index NMMF New Tata Index Use to compare Tata Group companies’ CSR performance

7. Incorporating PLIM in the Tata Index will put the group at the forefront of CSR Measure Product Lifecycle Impact Metric (PLIM) measures the lifecycle impact of Tata Group companies’ products Profit Synergies Product Impact CSR Synergies PLIM

8. The modified Tata Index will be tied to performance against annual CSR targets. Target Target Index Score Original Index Score PLIM Score Modified Index Score

9. Internal CSR market will align each company’s financial incentives with the double bottom line of responsibility and profitability TATA Group Internal CSR Market Sell CSR credits? Allowed to trade CSR credits • Eligible for incentives • Maximize profitability YES Firm meet profit target? Firm meet CSR target? YES Eligible for incentives YES Firm meet CSR target? NO NO Buy CSR credits? • Not eligible for incentives • Not allowed CSR trading NO Not eligible for incentives

10. Phased in rollout will enable flexible and scalable implementation of a strategy sustainable in the long term Early : Anticipated leadership change Year Three: Group wide rollout Year Six: CSR market is fully operational

11. An annual investment in CSR Trading Market bonus pool will generate an additional profit margin of 0.829%. Intangible resources* Innovation Human Capital Reputation Culture Corporate Social Responsibility Performance PV of Perpetual Investment = $1B PV of Perpetual Profit Generated = $8.29M CSR Profit Margin = 0.829% Corporate Financial Performance Intangible resources* Innovation Human Capital Reputation Culture Figure adapted from Surroca, Jordi, JosepTribo, and Sandra Waddock. "Corporate Responsibility and Financial Performance: The Role of Intangible Resources." Strategic Management Journal, 2010: 463-490.

12. But Economic Value Added is only a portion of the Global Value Added by CSR………. Global Value Added* = Social Value Added + Economic Value Added Where: Social Value Added = Economic Value of Social Saving + Tax Revenues + Non-Economic Benefits Adapted from Hughes, Greg, Sonali Rammohan, and Linda Emanuel. "Corporate Citizenship: Managing Relationships with Professionals and Government." Aids & Public Policy Journal, 2003: 61-76.

13. Local application of Tata Index, PLIM, and CSR Credit Trading Market are key to Tata’s corporate strategy. This CSR Strategy is Key to Corporate Strategy: • Aligns profitability with sustainability • Enhances brand equity • Erects barriers to entry for competitors • Anticipates future regulatory changes • Further enables a smooth leadership transfer • Further institutionalizes Tata’s culture for future generations Next Steps: • Create leadership task force composed of Group Corporate Sustainability VP, Group CFO, Group COF, CMO, and other relevant executives to solidify strategy • Commence the creation of local task forces • Work with governments, NGO’s, the UN, and local residents to identify CSR needs within each target market • Further investigate how to maximize both profits and social performance* • Move forward with this strategy! * Husted, Bryan, and Jose de Jesus Salazar. "Taking Friedman Seriously: Maximizing Profits and Social Performance." Journal of Management Studies, 2006: 75-91. We suggest this merely as a starting point, the Tata group must optimize profits and social performance according to the needs of all Tata stakeholders.

14. Thank You Questions?

15. Appendix A

16. Appendix B

17. Appendix C Obtained from Surroca, Jordi, JosepTribo, and Sandra Waddock. "Corporate Responsibility and Financial Performance: The Role of Intangible Resources." Strategic Management Journal, 2010: 463-490.

18. NMMF enables the Tata Group to fairly compare the CSR performance of each of its companies Compare Tata Group companies’ CSR performance Tata Index NMMF Germany Tata Index NMMF Vietnam

19. Incorporating the Product Lifecycle Impact Metric (PLIM) in the Tata Index will put the group at the forefront of CSR