TATA: Leading India’s Path To Sustainability
As India strives to balance rapid economic growth with sustainability, the TATA Group leads by example
India is the world’s fourth largest emitter of CO2 and other greenhouse gases (GHG)[i]. Historically, the Indian government argued that caps on GHG emissions would stunt economic growth and that global warming was a problem of the industrialized world. However, over the last few years the government has pledged to reduce GHG emissions as the economic damages from climate change are estimated at 1.8% of India’s GDP annually by 2050.[ii] India now faces an energy dilemma as the first country trying to build an industrialized economy without substantially increasing carbon emissions. While most Indian companies struggle to understand climate change implications, one leads the discourse globally: the TATA Group of Companies (TATA).
TATA, one of India’s largest conglomerates (2015 revenues: $104bn[iii]), has businesses across power, automobiles, steel, and chemicals, making it highly susceptible to GHG emissions and climate change regulations. TATA’s businesses in the EU were required to comply with international treaties such as the Kyoto protocol, and on realizing the benefits of long-term mitigation strategies TATA expanded its climate change initiatives to its Indian operations. The move was also driven by a growing incidence of extreme weather events with inevitable emotional and business implications for the workforce and operations; and public pressure leading to tightened regulations and stronger action by the government.[iv]
TATA measures lifecycle emissions by extending the carbon footprint mapping across the entire value chain from vendors to equipment disposal. Its approach involves: 1) behavior change among its companies by incorporating climate change into their code of conduct; and 2) policies and initiatives designed by a steering committee to institutionalize climate change across TATA companies. TATA trains ‘Climate Change Champions’ within its companies on societal, environmental and economic implications of climate change. TATA policies require companies to 1) measure and project their carbon footprints and benchmark within their industries 2) adopt aggressive abatement actions to reduce lifecycle footprint and drive growth through innovation, and 3) engage in climate advocacy, and build a low-carbon culture through processes and systems.
Select Performance Indicators (to-date)[v]
- 51 TATA companies estimated their carbon foot print and developed carbon strategies that involve constant monitoring, and adoption of energy-efficient systems such as variable frequency drives for motors, waste heat recovery systems, and green data centers
- 400 Climate Change Champions trained
- Tata Capital Cleantech established to fund green initiatives
- Tata Power, one of India’s largest renewable energy producers, committed to generating 40% of its electricity from non-fossil fuel sources by 2025
TATA’s Climate Change Competencies
TATA leverages its global network to bring best practices to India. For instance: Tata Motors was the first Indian company to introduce vehicles with Euro-norms. It formed a joint venture with Cummins Engine, USA, to introduce emission-control technology in India.[vi]
TATA acutely recognizes the need for localized solutions. TATA aims to tackle India’s energy challenge through a combination of distributed solar power, local microgrids, and renewable-power plants (since just grids cannot reach every village, and a modern manufacturing base cannot be built using unpredictable distributed solar power). TATA is designing state-level solutions and is already experimenting with MIT in the state of Bihar. [vii]
TATA represents India globally and demonstrates India’s willingness to adopt global sustainability standards .Ratan Tata, TATA’s Chairman, was the only Indian among several leaders who called on governments and businesses to commit to net-zero GHG emission by 2050 at the 2015 UN climate negotiations.[viii] Several Tata companies undertake sustainability reporting consistent with the global reporting framework, UN Global Compact.[ix]
Balance mitigation with adaptation
Most TATA resources are currently directed towards reducing emissions, which inhibits adaptation initiatives. TATA must identify synergies between mitigation and adaptation and incorporate both into its policies.
Evaluate the needs and standards for individual businesses
As a conglomerate, TATA faces the challenge of designing climate change policies for its diverse businesses. A TATA manager described the challenge of internal carbon pricing: “You could base it on the cost of mitigation, but that cost varies significantly by industry: for a software business, it could be $7-$8/ton, whereas for a steam plant, it would be much higher.”[x]
Collaborate with and advise the government on engaging more private sector players
Aspects of adaptation can be delivered by the private sector, but government’s support is critical in areas of climate forecasting systems, research on climate change impacts, and making renewable energy affordable and accessible through financing and credits.
Promote a business case for climate change
Drivers of energy efficiency initiatives, including cost savings, carbon footprint reduction, and energy security, make attributing decisions to climate change difficult. Adaptation activities are often labelled as ‘business continuity, risk management and resilience’. To encourage action on climate change, TATA must frame climate impacts in terms of cost, risk and resilience, to appeal to the business community, while also widely sharing its best practices.[xi]
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[i] Olivier JGJ et al. (2015), Trends in global CO2 emissions; 2015 Report, The Hague: PBL Netherlands Environmental Assessment Agency; Ispra: European Commission, Joint Research Centre.
[ii] World Resource Institute http://wri-india.org/our-work/topics/climate
[iii] TATA Group Financials: http://www.tata.com/htm/Group_Investor_GroupFinancials.htm
[iv] Tata.com. (2016). Addressing climate change. http://www.tata.com/sustainability/articlesinside/Addressing-climate-chang.
[v] Power Insight (2016), Indian Power Sector Review, 2015-2016. Tata Power bags 100MW solar project in Karnataka. https://issuu.com/visionmediagroup/docs/e_copy_pi_7th_annual_2016; Livemint, (2016). The Tatas’ sustainability journey. http://www.livemint.com/Companies/cFyGLrBfG39BNx0jBolZAO/The-Tatas-sustainability-journey.html.
[vi] BusinessLine, (2012). How Tata Motors is going green. http://www.thehindubusinessline.com/companies/how-tata-motors-is-going-green/article4019538.ece.
[vii] MIT Technology Review, (2015). India’s Energy Crisis. MIT. https://www.technologyreview.com/s/542091/indias-energy-crisis/.
[viii] KPMG, (2015). COP21/PARIS 2015 UN CLIMATE CHANGE CONFERENCE: What does it mean for business?. https://www.kpmg.com/IN/en/Documents/KPMG-COP21-Briefing-WEB.pdf.
[ix] Livemint, (2016). The Tatas’ sustainability journey. http://www.livemint.com/Companies/cFyGLrBfG39BNx0jBolZAO/The-Tatas-sustainability-journey.html.
[x] Bloomberg, (2016). Putting a Price on Carbon Brings Extra Challenges for Conglomerates, Tata Says. Sustainable Finance. http://www.tatasustainability.com/images/feature-stories/Q&A_Shankar%20Venkateswaran_Bloomberg.pdf.
[xi] Center for Climate Change Economics and Policy, Grantham Research Institute on Climate Change and the Environment, (2014). Taking an organisational approach to private sector adaptation – the case of Tata Teleservices in India. http://www.lse.ac.uk/GranthamInstitute/wp-content/uploads/2014/11/Working-Paper-171-Steeves-and-Surminski-2014.pdf.
Student comments on TATA: Leading India’s Path To Sustainability
Rashi, you brought an interesting point – TATA focusses more on mitigation than adaption. This sounds like a low-risk short-term approach towards Climate change. When I think about TATA, the Multi-billion dollar Salt-to-Steel conglomerate, I think of pioneering initiatives in adapting new methodologies across their 70+ businesses. Being industry leaders across most of their businesses, can we think of adoption strategies from the west which they can bring to India? I was thinking of a company like Nestle which has deeply embedded its Adoption initiatives across the entire value-chain. What do you think could be TATA’s incentive to introduce high-cost adoption strategies when no such incentives to adopt exist in a market like India at present?
Great post, I think you made a strong case for how TATA has been leading the way in India. I would argue, however, that the most important focus for TATA going forward should be “making the business case” for the rest of the companies in India, since the government is not doing enough. As a country, India is taking a much more conservative approach than other major polluting countries such as the US, China, and Brazil — last year they agreed in advance of the Paris Accord to slow but not reduce its absolute rate of carbon emissions (see http://www.nytimes.com/2015/10/02/world/asia/india-announces-plan-to-lower-rate-of-greenhouse-gas-emissions.html?_r=0). Other countries agreed to reduce the absolute rate of carbon emissions. Therefore, TATA must make the business case for other companies in India, many of whom have an increasingly important role in the globalized economy.
Thank you for the well written and informative post! TATA is certainly making steps in the right direction. As you (and our classmates above) have identified- it is crucial for TATA to get behind adaption and not just focus on mitigation.
Interesting, in the EU, TATA has benefited with over EUR 700mn from carbon free allowances (prior to the Paris Accord, the EU was subsidizing companies to reduce their carbon emissions). TATA of course argued that the environmental controls had made their steel business unsustainable in the face of cheaper imports from China. However, the Chinese competitive advantage is probably driven more by the cost of labor than the lack of regulation. From a policy perspective, I think there’s an interesting debate to be had here regarding subsidies versus grants as incentives to promote sustainable practices within businesses. How do you think the Indian government should tackle this issue?
Awesome post! Bringing industry to a developing country under the current climate regulations is certainly a challenge! Hopefully TATA can use the learnings of developed countries to build industry that is sustainable and meets modern emission standards. While it is certainly a challenge, India and TATA specifically faces an opportunity to develop industries that are sustainable and export that technology abroad. Most developed nations are working within the constraints of their developed infrastructure – including the recently developed China. India has the opportunity to build a model sustainable society that could export its ingenuity abroad. TATA could play a leading role in India’s sustainable offering.