Tata Group Sustainability Strategy

Mathew Ashley
 Bill O’Brien

Rachel Reiter

Kevin Richards

April 12, 2010

EXECUTIVE SUMMARY

Our consultancy recommends that Tata Group (Tata):

• Refine its internal definition of sustainability,
• Create a separate subsidiary to coordinate, manage, communicate, and expand sustainability efforts across every business unit,
and
• Establish a market-specific global strategy tailored to the unique challenges and opportunities of each country and business.

These changes will allow Tata to optimally position its economic, social, and environmental sustainability efforts while addressing the
company’s growing global presence, the evolving definitions of sustainability, and the increasing demand from stakeholders for
measurement and transparency. Internally, the company will develop a concise definition of sustainability and a “Sustainability
Credo” to guide corporate innovation and evaluation efforts. A key element of the ten year sustainability strategy recommendation is
the creation of Tata Sustainable Solutions (TSS), a wholly-owned subsidiary that will allow the company to centralize disparate
initiatives and provide role clarity, financial and measurement transparency for all Tata companies. While the structure of TSS will
allow the company to raise additional capital and expand its sustainability efforts, TSS will be closely integrated with every Tata
company, ensuring that the culture of corporate social responsibility continues and that the unique perspective and innovations from
each company are nurtured and strengthened. This subsidiary will allow Tata to formalize specific initiatives and goals, putting a
formal framework in place for leadership and organizational continuity. The organizational structure and operating processes of TSS
will be outlined in detail in our recommendations.

The sustainability strategy includes a number of voluntary initiatives tailored to the unique circumstances of Tata’s diverse businesses
and its global areas of focus. Our recommendations include a ten year timeline, valuations, and specific implementation strategies for
Tata’s core lines of business. Key elements of the strategy include entry into sustainability software consulting, coordination between
the Chemical, International, and Motor companies to create End of Life Vehicles (ELV) and Cradle to Cradle (C2C) processes, and
expanded and increased measurement of company efficiency efforts.

SITUATION ANALYSIS
Known as progressive and forward thinking in its Corporate Social Responsibility (CSR) initiatives for over 140 years, the Tata
Group’s past CSR initiatives have fallen under four pillars: 1) Philanthropy, 2) Emergency Response, 3) Specific Community
Initiatives, and 4) Quality Management Practices. Supporting these pillars are a variety of programs that have organically developed
over the years to create an internal structure for executing the organization’s sustainability efforts. This situation occasionally creates
challenges in measuring effectiveness and economic benefits of CSR, which obscures the return on investment (ROI) and could
diminish future funding.

The ten year sustainability strategy is designed to complement the business growth of the organization. This global growth will focus
on the following industries: hotels, automobile, steel, software consulting, energy, chemicals, tea, engineering, and communications.
It will target the following markets: Brazil, Canada, China, Gulf Cooperation Council (United Arab Emirates, Saudi Arabia, Oman,
Bahrain, Kuwait, and Qatar), Germany, the Netherlands, South Africa, Sri Lanka, Thailand, the United Kingdom, United States, and
Vietnam. To continue its global growth while maintaining its practiced sustainability, Tata needs to address creating and capturing
value, while addressing uncertainty in its global sustainability strategy.

Defining Sustainability for Tata’s Future

In order for the ten year strategy to be developed, the definition of sustainability itself needs to be refinement. Tata’s current
definition of sustainability was developed as part of a series of group-wide meetings. Although Tata has had a great deal of success in

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preserving a culture of sustainability, the rapid global expansion of the company threatened to dilute the power of this working
definition. Our team proposes a refined definition of sustainability: “Corporate Sustainability is a local, national, and global
endeavor for creating long-term economic, social and financial growth for the enterprise and its stakeholders.” This definition
would be easier for Tata employees to internalize and will allow for interpretational flexibility, as there are continually evolving
worldwide definitions of sustainability.1

Beyond a basic corporate definition, we recommend Tata promote the continuity of sustainability innovation through a set of guiding
principles, a “Sustainability Credo”, that provides employees with a roadmap for evaluating social business practices. The Credo
below provides a concrete, measureable way to define the operation and implementation of sustainability initiatives.

Tata must first seek parity and sustainable best practices across their collective group of companies. Points of parity must be
established to measure the success of sustainability efforts over the next ten years. The Tata Group must leverage its areas of
expertise across all businesses going forward to enable the sustainable development of the entire group. These efforts include
consistent employee equality and management training programs, centralized innovation practices that look at all major businesses,
formalized water and waste conservation policies for companies operating in particular regions, Leadership in Energy and
Environmental Design (LEED) certification for all new construction, and energy efficiency initiatives for all existing buildings.

Figure 1: Tata Group Sustainability Credo

1) Everything we do within Tata can be re-examined through a sustainability 6) All sustainable initiatives should be transparent, measurable, and
lens. auditable to all stakeholders.

2) Sustainable initiatives strive to add value to Tata's enterprise and 7) Our businesses should inspire new sustainable ideas, and our
shareholders over a reasonable time frame. sustainability efforts should inspire new business ideas.

3) Social philanthropy and development initiatives are a core competency 8) Sustainable thinking and implementation is a key skill that every future
and should be treated as an essential output of the organization. Tata manager should possess.

4) Sustainable creativity and knowledge should be shared across all Tata 9) Tata's companies will encourage their business partners and
organizations and outside of our company. stakeholders to achieve sustainable business practices.

5) Tata's sustainability development should be managed with the same 10) Our initiatives should lead environmental, economic, and social
rigor, focus, and precision as other Tata business. development in India and the world. Our efforts go beyond a "compliance"
mindset and accomplish what was once thought impossible.

DECISION ANALYSIS
A thorough consideration of the impacts of the new TSS structure and its initiatives on both internal and external stakeholders was
conducted in the development of the recommended ten year sustainability strategy. The current structure and coordination of
sustainability initiatives was a starting point for our analysis. After reviewing the current structure and discovering a lack of
continuity across business units in sustainability tracking and reporting, our consultancy identified several options for creating a
structure that would allow implementation of the sustainability strategy. These options included: 1) scaling back social initiatives,
while focusing on the environmental efforts, 2) maintaining current structure in India but giving directly to charities in expansion
markets, and 3) creating a subsidiary that houses the communications, tracking, and long-range sustainability efforts while allowing
individual business units to maintain ownership of short-term projects with an Economic Value Added (EVA).

Critical issue consideration included ensuring leadership continuity, appropriateness for global growth, sensitivity to shareholder
reaction, meeting coordination challenges across the entire enterprise, maintaining the corporate culture and commitment to
sustainability from the employee level through leadership, fostering innovation, and leveraging core competencies. External
considerations were also considered including impact on the ability to raise capital, relationships with local governments and
regulating bodies, Non-Governmental Organizations (NGOs), and local community members.

1
University of Reading, http://www.ecifm.rdg.ac.uk/definitions.htm.

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Figure 2: Decision Analysis Matrix
Impact of OptionsKey Critical Issues
Meets Goal  Increases
Mostly Meet Goal ? Clarifies CRS Profile w/o
Ensures Meets Continues Efforts, Measurement, Upsetting
Unknown ?
Leadership Shareholder Coordination Fundingin Uniform Maintains Transparency, NGOs, Enhances Leverages
Mostly Fails to Meet Goal ?X
Continuity& Global ROI short term Across Economic Reporting Corporate External Fosters Government Ability to Raise Core
Fails to Meet Goal X Development Application concerns Enterprise Downturn Standards Values Credibility Innovation Regulators Funds Competencies

Current Strategy ? X ? ? X ?X ? X ? X ? 
Option1: Scale back social,
focus on environmental
X ? ? ?X X ?X X ? X
StrategicOptions

initiatives ? ? 
Option2: Strategic
Philanthropy - Fund
charities in expansion
markets ?  X  X ? ?  X  ? X
Option3: Tata Sustainable
Solutions - New subsidiary,
housingCSR, sustainability
initiatives   ?X ?  ?  ? ? ?  ?

A strategy suggesting elimination of social initiatives would be contrary to Tata’s vision but would address short-term investor ROI
concerns. This option would still address Tata’s need to meet previously set climate change goals by diverting the focus from social
to environmental issues. Our consultancy concluded that one of Tata’s core competencies is its CSR leadership, thus the first option
was eliminated. The second option included philanthropic giving directly to charities and has several advantages; this approach would
raise Tata’s profile with local NGOs and allow for seamless global expansion. However, this option fails to leverage Tata’s leadership
and expertise in CSR. Reporting and measurement metrics would still be an outstanding issue with this approach as individual
charities may or may not have the capabilities to quantify their impact. The recommended option, development of a wholly-owned
TSS subsidiary, addresses the internal business challenges while remaining sensitive to Tata’s external stakeholders.

PROPOSED TEN YEAR STRATEGY

Creation of “Tata Sustainability Solutions” (TSS)

Tata currently has four “pillars” of sustainability within the organization – Tata Trusts, Tata Relief Committee (TRC), Tata Council
for Community Initiatives (TCCI), and Tata Quality Management Services (TQMS). Tata also has individual “think tanks” (such as
the Tata Chemicals Innovation Center) and initiatives each business silo, with annual groupwide meetings devoted to sharing best
practices. The individual responsibilities of TCCI and TQMS overlap, although TCCI’s functions are more organic and less rigid than
the TQMS process. This organizational structure can be rightly credited with maintaining Tata’s cultural core values. However, much
of Tata’s sustainability measurement is ad hoc. An all-encompassing sustainability report is not currently being produced, leaving
uncertainty around the funding and returns of Tata’s sustainable investments. Finally, this loose “four pillar” structure is likely to
become harder difficult to maintain and navigate as the company’s global growth continues.

One solution that would allow Tata to continue sustainability in its rapidly-expanding operations is the creation of a company
subsidiary devoted to social and environmental stewardship. This subsidiary, TSS, would function like any other Tata business unit
(Tata Motors, Tata Chemical), except that it would operate at first as a cost center/support function rather than a profit center. TSS
would centralize a number of company functions, including educational trusts, TRC, and TCCI. The subsidiary would have a number
of key functions (see Exhibit 1 in Appendix), including internal (and eventual external) consultation support for sustainable initiatives,
a division for social projects that do not meet traditional definitions of EVA (as determined by TQMS), intra-company knowledge
sharing and training functions, a cross-functional “innovation center”, a financial reporting & analysis and auditing unit (which would
produce an annual sustainability report), and an internal/external fundraising team. Some advantages of this arrangement would
include:

• Centralized Consulting Support for All Business Units. TSS would have a heavily staffed and funded group ensure that
sustainability opportunities are promoted, monitored, and cross-utilized between Tata businesses. In the medium-to-long term,
this same consulting function could be used externally to provide the same services as consulting firms such as Blu Skye and
Domani, effectively monetizing a Tata core competency and providing funding for future internal sustainable initiatives.
• Increased Transparency. TSS’s reporting function would utilize outside auditors and consultants to validate its numbers. Its
social and environmental metrics would cross all Tata organizations. Capitalization and financial information would be key to
providing outside stakeholders (especially shareholders) with a transparent view of funding and returns for sustainability projects.
• Financial Independence. The new subsidiary would be funded through a “pool of funds” approach. This is analogous to US
bond covenant contracts for dividend payments. Just as bondholders want to control how profits are paid out of the firm,
shareholders who are skeptical of financial returns on sustainability would contract with Tata’s management to ensure that cash is

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 infused into the subsidiary after certain profit and dividend/stock buyback criteria are met. This would continue the movement
towards transparency in finances and satisfy all shareholder groups (those who want the company to focus on sustainability
regardless of profit and those who are concerned about firm use of excess funds) and would ensure funding reserves for
sustainability in recessionary times.
• Management Development. Management development would involve a significant rotation in this subsidiary, and training on
relevant sustainability practices and measurements would be provided. This would not only ensure top managerial talent in the
group but also continue to spread ideas and best practices throughout the organization after employee rotations are complete.
• Fundraising Ease and Scalability. Tata has established itself as a forward-thinking company that has often predated the Indian
government (a major Tata shareholder) in key worker protection policies. With the increased transparency of TSS, Tata could
organize funding from employees, outside investors, and government agencies. This fundraising power could help TSS duplicate
the rapid growth of Tata’s other lines. TSS management ability, knowledge, and continued success help other donors maximize
the social and environmental impact of their contributions.
• Strategic Continuity. Creating a separate business subsidiary and a document with shareholders/stakeholders that details the
funding and reporting processes for TSS would ensure that the company’s sustainability initiatives themselves are clear
throughout the organization and allow for quick implementation in the event of a CEO leadership transition.
• Consistency of Business Practices. Tata will need to maintain clear and consistent treatment of employees, business partners,
and NGOs in all of its worldwide markets. TSS would maintain these standards and modify them with the Group Executive
Office (GEO) and Group Corporate Center (GCC).

Local Sensitivity with Global Reach

Once the new company’s sustainability support structure is in place, business unit management (in collaboration with TSS) can begin
exploring initiatives that reflect each unit’s target market need, their unique business expertise, and the future direction of
sustainability within the community. Although these initiatives will be tracked in aggregate by TSS, the vast majority of the initiatives
(with the exception of certain “Social Works” projects) will reside on the books of each business and must pass the same EVA
analysis as any other project. The determination of what constitutes and EVA-supported initiative versus traditional social
philanthropy will be determined by the TQMS process.

Our group has several project proposals for Tata management to consider when implementing the ten year plan. These projects
resulted from a global opportunity analysis of Tata’s twelve target markets (see Exhibit 2 in Appendix). The unique sustainability
needs of each region were considered in our proposals; for instance, the US and Europe already have numerous social welfare
programs in place, so the focus in those areas was placed on environmental opportunities. The political risks and barriers involved in
certain initiatives were weighed as well (for instance, the Chinese government reaction to a heavily-advertised worker rights program
must be carefully considered).

STRATEGIC PLAN IMPLEMENTATION & TIMELINE

Specific EVA and Net Present Value (NPV) supported initiatives for consideration include:
• Leveraging Tata’s CSR core competency into a sustainability software consulting practice,
• Increase Tata Tea’s competitiveness by formalizing sustainability efforts through Rainforest Alliance Certification,
• Efforts to reduce energy usage through conservation efforts in the hotel chain and through supply chain management, and
• ELV initiatives for Tata Motors.

The framework needed for successful sustainable expansion will include the new Sustainability Credo, the creation and staffing of
TSS, and management of internal sustainability practices in Tata offices and businesses across the Tata Group. Our action plan to
implement the ten year sustainability strategy includes short and long term steps to reach our goals (see Exhibit 3 in Appendix for
assumptions, additional sources, and financial projection).

Present
• Implement the new Tata Sustainability Credo through a multi-faceted corporate communication process including CEO and
business unit communications/ training in town-hall meetings, allowing for employee engagement and input.
• Legally establish TSS as a separately capitalized corporate subsidiary. Draft rules governing the excess profit criteria from each
business unit that will fund TSS expansion in future years. Collaborate closely with key shareholder blocks on these rules.
• Form a cross-company task force, including senior executives, to validate that all internal sustainability opportunities have been
identified and explored.
o In collaboration with senior management, establish rules for equitable employee treatment across all countries of
operations, building on current TCCI initiatives. Standards may not be equal across all countries, but should be
favorable compared to local standards, especially in the case of less developed countries.

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• In partnership with the Taj Hotel chains in the US, Europe, Sri Lanka, Malaysia, and South Africa establish a long-term plan to
move beyond the current goal of EARTH Certification. Immediate conservation steps can and should be implemented in the
targeted hotel locations, with a two year or less payback period. Conservation areas include heating/cooling modification for
vacant rooms, warm wash linen cleaning, florescent lighting, and water and solid waste conservation.
• Expand pilot program to reduce carbon footprint to additional steel plants beyond the Port Talbot plant site. Add five plants per
year in order to achieve 20% carbon reduction goals by the year 2020. Conservation efforts can be rolled out in current and
emerging markets.
o Years 1-5: India and Europe
o Years 5-10: Expand to include Asia, Thailand and others

Year 1
• Upon establishment of TSS, Tata’s social philanthropic efforts should be given continued prominence in the new organization.
Possible areas for expansion include water reclamation projects in new markets, cell phone recycling and donation programs
through initiatives with key consumer facing partners, and driver safety outreach programs to complement car insurance
businesses. These initiatives can be further developed through TCS’s new sustainability software initiative beginning in the
second year.
• Implement the Tata Tea Group’s new global strategy, including the transparent reporting of ethical sourcing through the
Rainforest Alliance Certification for both its Western European and North American tea products over the next five years to
remain competitive with industry leaders. “Nine in ten Americans say that the words conscious consumer describes them well
and are more likely to buy from companies that manufacture energy-efficient products, promote health and safety benefits,
support fair-labor and fair-trade practices and commit to environmentally friendly practices.2
o In the effort to become leaders in the sustainable packaging of tea, Tata Tea must compete with industry leaders, such as
Green Mountain Coffee Roasters’ Life-Cycle Analysis, through their tea product, which is sold in a portion pack made
from renewable materials.
• Tata Power should consider diversifying its energy mix and develop strategies to meet the expanding demand for power over the
next ten years, as coal currently provides 68% of the electricity.3 Unfortunately, the pay-back period for coal alternatives cannot
be addressed in a ten year span due to unpredictable renewable energy technology improvements and government regulatory
barriers.4 Tata Power must begin working with government stakeholders and exploring the possibility of developing alternative
energy technology. Central to this effort are carbon footprint reduction opportunities through the use of nuclear, wind, solar and
hydro.

Year 2
• European Union (EU) standards have expanded to include mandatory ELV processing for vehicles. Anticipating this trend in
other countries, Tata Motors should undertake the development of a complete ELV system in India and Asia. Tata would partner
with Tata Chemical and Tata International to create this process, splitting the proceeds with consumers.
• Expand current supply chain management initiatives to include additional trucks and trailers in growth markets to decrease diesel
fuel consumption and meet carbon footprint, utilizing Tata International expertise.
• The sustainability software consulting market predominantly revolves around Enterprise Carbon Accounting (ECA) software.
Tata Software Consulting should develop a strategy to enter this market, engage its existing customer base, and consider
expanding this market to include social sustainability measurement (a Tata core competency). The ECA market is estimated to be
$7 to $9 billion with the highest concentration in North America and the EU. 5 TCS should determine whether the software should
be developed internally or purchased externally.

Year 3
• The three year old TSS organization should seek to monetize its sustainability implementation best practices by looking for
opportunities to serve as external consultants.
• Pursue longer-term, higher cost sustainability certifications including LEED building standards and Fair Trade certified products
and standards.

Year 4-10
• The goal of this longer timeframe is to get high value sustainability certifications for Tata’s businesses.
o Compared to sustainability reporting leaders Green Mountain Coffee Roasters Tata Tea does not adequately address how
they source their raw materials in an ethical manner. Tata’s competitor, Lipton, has certified all its Yellow Label tea
bags sold in Europe by Rainforest Alliance. Tata Tea’s long-term goal for the last five years of their ten year strategy
2
Makower, Joel. Strategies for the Green Economy. 2009.
3
World Nuclear Association. http://www.world-nuclear.org/info/inf53.html. March 2010.
4
Lusk, Phillip. Nuclear Power Plant Electricity. http://www.nirs.org/neconomics/nuclearpowerplantelectricitycostslusk.pdf. April 2009.
5
http://techcrunch.com/2009/09/08/charts-ibms-software-led-margin-expansion/

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 should be to reassess their supply chain in order to get Fair Trade Certification for their products. The increased use and
reporting of Fair Trade goods will allow Tata to measure, manage and report on the scope of ethical methods in their
sourcing.
o LEED certification for all Taj hotels.
o C2C certification for Tata Motors, enhancing the existing ELV processes discussed earlier.
o After the TSS is established, revenues can be used to support long term development initiatives including water
purification, education, and health projects in developing markets.

VALUATION
All of the costs associated with the creation and staffing of TSS, along with the costs and benefits associated with our specific global
strategy recommendations, have been incorporated into a ten year valuation model. The assumptions in this model were necessarily
broad, as many of these initiatives are new ideas in new markets with uncertain demand. However, empirical research and reports
were used as sources whenever possible, and in all other cases assumptions are documented in relation to financial projections (see
Exhibit 3 in the Appendix). Two key assumptions in the financial modeling should be clarified; given Tata’s conglomerate nature
(both in geography and line of business), Company-wide required rates of return estimates were not feasible and our analysis uses a
range of discount rates in order to gauge the sensitivity of that particular assumption. In addition, the brand enhancement of Tata is a
key assumption. Rather than randomly choosing one of the many brand valuation techniques available (revenue multiples, % of
advertising spend, marketplace share of voice), we estimated the brand valuation needed to achieve break-even financials at key points
in the ten year timeframe. In this way, a management “gut check" of the brand value’s reasonableness can be conducted. (see Figure 3
below and Exhibit 3 in the Appendix)

Figure 3: Strategic Plan Timeline

Present Year1 Year2 Year3 Year4-10

• Sustainability • Ongoing • Tata • TSSexternal • Target high-value

Credo renewablepower sustainability consulting sustainability
• Establish TSS analysis software certifications (Fair
• Intra-company • Tata Tea Strategy • Tata Motors Trade, LEED)
sustainability • New social ELV project
• Worker standards philanthropy • Expansion of
• Taj Hotel efforts Trailer/Truck
conservation program
• Steel energy
efficiency

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Figure 4: Key Risks of Recommendation

Risk
CONCLUSION
The creation of a sub
Our strategic recommendations for Tata are intended to address all of the organizational, cultural, strategic, and operational

of the company’s cor

considerations that a ten year sustainability strategy would necessitate. Specific sustainability initiatives need strategic support to
flourish, and the creation of TSS would be useless without innovation and creativity to fuel its growth. With a new definition of
sustainability, a framework for growth and transparency, and specifically tailored global strategies, Tata will be ideally positioned for
the next ten years to sustain its culture and evolve.

The increased profil

sustainability efforts
partners. 8
APPENDIX

Exhibit 1: Organizational Chart (Current & Proposed)

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Exhibit 2: Timing, Difficulty, Impact, & Market Risk
Medium/ Medium
Steel Plant
Energy
TataTea Efficiency
Medium/ High Certification Low/ Low
$23.6M
ELV $12.5M
Low/ Low
Recycling
Hotel $1.4M Sustainability Low/ Medium
Conservation Software
$3.9M Truck/ Trailer Consulting
Expansion $71.6M
$6.9M

Medium/ High
u
yD
io
fc nIm
p
le
ta

Estimated Break-Even Timing

Size =
Profit
Market Risk
Impact Economic/ Political

Exhibit 3: Valuation Model

Initiative Name/Costs Year Assumptions
(in $M illions) 0 1 2 3 4 5 6 7 8 9 10
End of Life Vehicle Recycling
Initiative (India, Asia)
Upfront/Ongoing Expenses (20.0) (2.0) (2.0) (2.0) (2.0) (2.0) (2.0) (2.0) (2.0) - Broad assumption: $20M up-front cost to partner with waste facilities & develop ELV tech, $2M maintenance/ yr
Net Profits from Revenue 4.5 4.9 5.4 5.9 6.5 7.2 7.9 8.7 - ELV partnership with Tata auto customers - split profits on ELV vehicles
Ongoing Expense Savings - Total credits less cost (216+125+93+108-12-117-146) =$267 per vehicle in US
Net Cash Flows 0.0 0.0 (20.0) 2.5 2.9 3.4 3.9 4.5 5.2 5.9 6.7 - Value split between Tata/ customer: estimated at 1/3 of US per car value * 100,000 cars in 1st year, growing 10%/yr
NPV at 10% discount rate 1.4 0.0 (16.5) 1.8 2.0 2.1 2.2 2.3 2.4 2.5 2.6 - Source: Univerisity of Michigan, http:/ /css.snre.umich.edu/css_doc/CSS01-01.pdf

Taj Hotel Conservation Program

(US, UK, Africa, Australia) - Focus on 8 hotels in US, UK, Australia, S. Africa, Sri Lanka, Malaysia (long term goal - LEED certification)
Upfront/Ongoing Expenses (0.9) - heating/cooling modification $16K upfront, $14K savings annually per hotel
Net Profits from Revenue - $8K per year linen cleaning, $22.5K upfront, $15K per hotel per year on flourescent lighting
Ongoing Expense Savings 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 - Water conservation $40K up front, $20K per year per hotel
Net Cash Flows (0.9) 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 - Solid waste conservation - $10K/yr, Misc. green initiatives - $80K up front, estimated savings of $40K/yr per hotel
NPV at 10% discount rate 3.9 0.7 0.7 0.6 0.5 0.5 0.4 0.4 0.4 0.3 0.3 - Sources: globalsetwards.org/hotl.htm, zerowaste.org

Sustainability Software
Consulting(US, Canada, India)
Upfront/Ongoing Expenses (20.0) (20.0) (20.0) (10.0) (10.0) (10.0) (10.0) (10.0) (10.0) (10.0) - $20M per year for software development yr 1-3, 10M for maintenance per year
Net Profits from Revenue 10.4 20.8 31.2 41.6 52.0 52.0 52.0 52.0 - Market size potential between $40B-$80B
Ongoing Expense Savings - 40% margin on $160M annual revenues =$52M/yr at full build
Net Cash Flows 0.0 (20.0) (20.0) (9.6) 10.8 21.2 31.6 42.0 42.0 42.0 42.0 - Source: Groom Energy Research
NPV at 10% discount rate 71.6 (18.2) (16.5) (7.2) 7.4 13.2 17.8 21.6 19.6 17.8 16.2

Expansionof Truck/Trailer
Program (India, Europe, Asia)
Upfront/Ongoing Expenses (0.5) (0.6) (0.6) (0.7) (0.7) (0.8) (0.9) (1.0) (1.1) - Revenue/ Savings on annual saving of 500,000 liters of diesel per year
Net Profits from Revenue - Expansion plan is by 10% 2020
Ongoing Expense Savings 1.4 1.6 1.7 1.9 2.1 2.3 2.5 2.8 3.1 - Cost of Diesel is $2.85 per gallon, Cost of truck upgrade is $50,000
Net Cash Flows 0.0 0.0 0.9 1.0 1.1 1.2 1.4 1.5 1.6 1.8 2.0 - Pilot project cut 1 million truck miles per year
NPV at 10% discount rate 6.9 0.0 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 - Emission savings was 1,315 tons in pilot, this model doubles emissions savings each year

Steel Plant Energy Efficiency

Initiatives (India, Europe, Asia) - 60R investment in Port Talbot site to reduce carbon footprint/ energy usage by 20% by 2020
Upfront/Ongoing Expenses (1.4) (6.8) (6.8) (6.8) (6.8) (6.8) (6.8) (6.8) (6.8) (6.8) (6.8) - Investment added to 5 plants per year
Net Profits from Revenue - "Revenue/Savings" based on energy usage per plant on 2009 annual report page 128
Ongoing Expense Savings 1.2 6.1 6.1 6.1 6.1 6.1 17.7 17.7 17.7 17.7 17.9 - Roll out strategy is India & Europe years 1-5, NatSteel (Asia), Thialand year 5-9 and "other" in year 10
Net Cash Flows (0.1) (0.7) (0.7) (0.7) (0.7) (0.7) 11.0 11.0 11.0 11.0 11.1 - Broad Assumption: 5% savings years 1-5, 10% years 6-9 20% in year 10. NatSteel, Thialand and Other will be at 10%
NPV at 10% discount rate 23.1 (0.6) (0.6) (0.5) (0.5) (0.4) 6.2 5.6 5.1 4.7 4.3 - Source: 2009 Tata Annual Report

Tata Tea Certification Initiative

(Global)
Upfront/Ongoing Expenses (20.0) (10.0) (10.0) (10.0) (5.0) (5.0) (5.0) (3.0) (3.0) (3.0) - Assuming 10% reduction in water/ waste goods over next 10 years
Net Profits from Revenue - Broad Assumption: Upfront costs of $30M to reveamp supply chain; diminishing expenses over time
Ongoing Expense Savings 0.0 2.3 4.5 6.8 9.0 11.3 13.6 15.8 18.1 20.3 22.6 - Focus on Fair Trade sourcing for years 3-10 at $10M per year
Net Cash Flows 0.0 (17.7) (5.5) (3.2) (1.0) 6.3 8.6 10.8 15.1 17.3 19.6 - Max savings assumed as 1% of Tata Tea Op Costs of $2.3B
NPV at 10% discount rate 12.5 (16.1) (4.5) (2.4) (0.7) 3.9 4.8 5.5 7.0 7.3 7.6 - Sources: Lipton and Tata Tea Sustainability Reports

Tata Sustainability Solutions

Up-Front Costs (50.0) (50.0) (50.0) (50.0) (50.0) (50.0) (50.0) (50.0) (50.0) (50.0) (50.0) - Assuming 500 HC at $100K in salary, benefits, and operating costs
External Consulting Revenue 20.0 40.0 60.0 80.0 100.0 - Revenue ramp-up in yr 6 after external consultancy implementation practice is built

Capital Investment (52.3) (96.8) (107.3) (89.3) (79.4) (74.4) (74.5) (74.6) (72.7) (72.8) (72.8)
Cumulative Return (undiscounted) (51.1) (87.7) (74.5) (61.7) (39.0) (21.2) 23.3 56.1 80.5 102.9 125.5
Improved Brand Valuation 0.0 3.7 7.4 11.1 14.7 18.4 22.1 25.8 29.5 33.2 36.9 4 -Annual brand value creation needed to break even with TSS in-house expenses
Total Initiatives NPV / Brand Value
Gap 0.0 (76.3) (55.5) (38.1) (16.5) (1.7) 25.6 42.0 51.3 57.7 62.6

Discount Rate Sensitivity Analysis

Discount Rate 6% 8% 10% 12% 14% 16%
Annual Brand Value Increase
Needed ($M) 1.7 2.7 3.7 4.8 5.8 6.9

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