Balancing Profits and CSR: Tata Steel

Flagship Company of the Tata group and the 5^th largest Steel producer in the world Tata Steel’s strategy of investing huge amounts in CSR has been a topic of discussion among employees and other stakeholders for quite some time. I would like to use their example to understand this tightrope walk between CSR and Profits.

There are very different viewpoints about this high expenditure on CSR strategy; some say it is justified and commendable on ethical grounds. It also builds reputation, long-lasting commitment from talented individuals, very good labour-management relations and decades without strike. The other group argues that ultimately the array of non-core activities negatively impacts the core steel business.

SWOT analysis for this strategy:

Strengths:

•         Better work environment for employees

•         Neutralizes the negative impact of business on society

•         Accountability and transparency in business operation

•         Long-term cost savings

Weakness:

•         Loss in focus on core competencies

•         Higher employee costs

Opportunities:

•         Better image

•         Influence investors’ decision to hold its shares

•         Consumers’ and suppliers’ willingness to buy or sell

•         Potential recruits’ eagerness to join it and existing employees’ motivation to stay

Threats:

•         Loss in business due to cost ineffectiveness

•         Increase in expectations

The best way to succeed in such environment is to strike out a balance between the two approaches and we can use the two approaches:

·        Outward looking , concentrating on expectations of stakeholders

o   Social Contribution

o   Ecological Contribution

·        Inward looking, focusing on internal issues and aligning CSR activities with core competencies

o   Economical Contribution

o   Resource Enhancement

It can be seen that CSR activities result into many long-term and intangible benefits thus a myopic view may see it as unnecessary, but at the same time these investment must be accounted very properly and communicated widely. It is also important to align these with the main corporate strategy rather than keeping it tangential. Then only we will get the desired results.