Corporate Social Responsibility of Tata Power Company - Case Study Example

Running Head: CSR AT TATA POWER Case Study: CSR at Tata Power BY YOU YOUR SCHOOL INFO HERE HERE CSR at Tata Power Six Thrust Areas Tata Power Company (TPC) began implementing corporate social responsibility in six key thrust areas: education, health, infrastructure, energy, environment and income production strategies affecting various communities in which TPC operates (Deshmukh & Adhikari, 2010). However, the tangible implementation and activities associated with achieving CSR goals in each thrust area is not well-defined. Tata relied heavily on employee volunteerism in order to meet specific CSR goals, such as building new roadways, implementing health training and education, vocational training and drought relief. Top management at Tata Power Company had considered creating a CSR division that would maintain total responsibility for coordinating and controlling corporate social responsibility objectives, which would have created the important well-defined group responsibility for carrying out CSR activities. However, this remained unclear and ill-defined as Tewari, at the end of the case study, was still unsure about whether such a division would be beneficial or whether the company should still operate CSR using employee volunteers. TPC maintained a mission to ensure that employees were “empowered” and would be motivated to achieve high performance expectations (Deshmuk & Adhikari, p.11). Employee volunteerism programs with each of the six thrust areas maintained positive implications for sustainability. Peloza and Hassay (2006) conducted a study involving qualitative interviews with employees who were actively participatory in volunteer-based CSR objectives supported by their respective companies. This study found that increased pride in the organization, job satisfaction and better social networking led to stronger organizational commitment as a result of this volunteering. This has tremendous advantages for a business that requires inter-dependent collaborations with disparate employee groups. When a company is able to enhance organizational commitment, it provides job role outcomes that are more productive and enhances human capital that is critical for achieving strategic goals. Barbain (2001) also found that having a committed culture of CSR volunteerism creates a better brand identity and increases loyalty from important customers of the firm. According to marketing theory, when a business is able to improve customer loyalty, it can justify higher pricing and improves word-of-mouth about the company (Boone & Kurtz, 2007). Hence, sustainability for the firm as a result of employee volunteerism programs in CSR can be measured by, theoretically, improved revenues for the firm and competitive advantages stemming from a culture of commitment and loyalty. Return on Investment for TPC Annual expenditures of 50 to 70 million toward achieving CSR goals are substantial. All CSR activities, especially those that give local communities of sense of personal ownership that build a sense of corporate trust in TPC. For instance, vocational training programs received 7.22 percent of the total budget, amounting to approximately five million dollars of expenditures toward this effort. In developing countries where TPC now maintained a new market presence, this training gave unskilled employees the ability to be independent in sustaining their growing communities. These actions made employees more employable and set up a basic infrastructure for job creation, which not only satisfies the community members, but makes Tata a foremost name in social responsibility that genuinely cares about the long-term welfare of citizens reliant on TPC’s services. Why is this important? There is a phenomenon today in which customers of a business become more loyal to companies that have a strong sense of ethics (Nicholls & Lee, 2006). At the same time, ethically-minded customers chastise organizations that do not promote strong emphasis on corporate social responsibility (Nicholls & Lee). A recent study which recruited 5,000 different customers across the globe found that 33 percent would be more willing to pay higher prices if the business showed powerful ethical positions (Grande, 2007). Corporate ethical behavior is therefore directly correlated with profit growth and gaining customer loyalty and trust. Hence, since the 50 to 70 million is properly allocated between different CSR objectives and programs, it should be sufficient for ensuring long-term sustainability for the business. The tangible returns of these expenditures are improved cooperation with NGOs, thus expanding capabilities of the firm to achieve important CSR targets and objectives. Better brand recognition and awareness of TPC is yet another tangible advantage, which could potentially lead to more international community interest in providing real estate for TPC to expand its services capacity that would lead to higher annual revenues. By having key developing communities sustain a perception of trust, it would theoretically make contract negotiations more financially lucrative and easier to gain second party commitment to allowing TPC to develop service capacity in their developing communities. Intangible returns include building less intention to leave the organization in employee groups that have established a sense of social belonging in the firm. Improved human capital, which can be measured by knowledge and experience in participating in CSR goals make future CSR activities easier to manage and ensure efficient facilitation of these objectives. Such training in health programs, such as HIV awareness, would also have brand-related advantages when communities, as a result of TPCs efforts, have better human health and welfare conditions, hence building a positive sense of trust in the firm. An effective cost benefit model would measure current cash flow as a result of operations and the actual costs of CSR projects expended. These are tangible representations of whether CSR activities are bring the firm a positive return on investment. A variety of qualitative interviews and quantitative surveys could also provide unique insight into whether the brand is being supported better as a result of CSR activities. If such data collection methods target enough customers in disparate international communities, it can give the firm a better insight into whether the company is better respected and maintains a superior competitive identity over that of other power companies that could be taking opportunities of serving developing communities. Should TPC Integrate CSR with other Functions? The first argument supporting integration of CSR with other business functions is the cost savings. TPC employees are not given financial compensation for their contributions to the many different CSR programs in place. If CSR were to be a separate division within the company, it would require labor expenditures for those who were recruited to manage and coordinate the many different CSR activities currently in place in the business model. It could potentially increase the cost of human resources activities to support the employees involved in this new division and require costs related to tangible working space and facilities management. This makes it viable for keeping CSR as a volunteer activity with no creation of a separate yet integrated business division. In opposite accord, building a separate CSR division could improve managerial controls and efficiency. Employees who are dedicated and have ongoing experience in CSR build more competencies and expertise that comes from direct experience in resource allocation, general project management and stakeholder relationship management. Employee volunteers work periodically on CSR projects and do not gain long-run knowledge about coordinating and controlling CSR. By having a separate, yet integrated division, more productivity, efficiency and managerial control systems can be developed competently that makes CSR program outcomes more effective and beneficial. Synchronizing CSR Activities with Main Corporate Functions Because the intangible benefits of CSR is usually related to brand-building in marketing, CSR should be closely aligned with the marketing function. The established CSR department and the marketing division should be working collaboratively to develop better public relations programs and expand promotional knowledge of the benefits and positive outcomes that have been achieved by TPC. Lindgreen, Swaen & Maon (2009) found that when CSR is integrated fully into the marketing function, it creates an opportunity for effective reputational risk management. Each time a new CSR project or program has achieved its goals, those who participated in the program should consult with marketing to develop effective and relevant advertising which informs the global public about the successes of TPC. Marketing also conducts market research on customer and other stakeholder attitudes and beliefs, therefore inter-collaboration between the CSR department and marketing could gain important quotes from those impacted by CSR which gives the firm a positive endorsement. This would tell other global stakeholder that TPC is legitimately making a positive global difference and gain more credibility for TPC as it relates to launch of future CSR activities. CSR can also be integrated into the strategy development activities of the firm. Those employees who have participated in CSR programs can consult with executives and board members to provide unique perspectives on what has been effective, what has failed, and what new key lessons have been learned when working with people and resources. This would give the firm better knowledge when making strategic decisions to ensure that new projects consider factors that might not have been considered prior to these knowledge exchanges between CSR representatives and senior management. Such inter-group consultations can also assist in developing better human resources models to better engage volunteers in the program or build cost savings by having a more efficient procurement model (eliminating waste). Knowledge gained from experience in working with CSR has many advantages when it is disseminated throughout the entire corporate value chain. References Barbain, J. (2001). The Charitable Worker, Training, 38, pp.50-55. Boone, L. & Kurtz, D. (2007). Contemporary Marketing (12th ed.). Boston: Thompson South Western. Deshmukh, R. and Adhikari, A. (2010). Tata Power: Corporate Social Responsibility and Sustainability, Richard Ivey School of Business. Grande, C. (2007). Ethical Consumption makes Mark on Branding, The Financial Times. Retrieved May 30, 2014 from http://www.ft.com/cms/s/2/d54c45ec-c086-11db-995a- 000b5df10621.html#axzz2kT95cwFY Lindgreen, A., Swaen, V. and Maon, F. (2009). Corporate Social Responsibility within the Organization, Corporate Reputation Review, 12, pp.83-86. Nicholls, A. & Lee, N. (2006). Purchase Decision-Making in Fairtrade and the Ethical Purchase Gap, Journal of Strategic Marketing, 14, pp.369-386. Peloza, J., Hudson, S. & Hassay, D.N. (2008). The Marketing of Employee Volunteerism, Journal of Business Ethics, 85, pp.371-386. Read More