Tata Chemicals Limited is a global company that says its businesses focus on “LIFE” – Living, Industrial and Farm Essentials, a “story…about harnessing the fruits of science for goals that go beyond business.” But in public perception, chemicals carry a negative connotation.
TCL Managing Director R Mukundan sat down with Business Editor Jagdish Rattanani to discuss how the company is engaged in evolving a strategy for long term sustainability. The company Wednesday announced it was ranked in the list of Carbon Disclosure Leadership Index (CDLI) scores of the Carbon Disclosure Project 2012 India 200 Report. Its score of 73 indicates “senior management understand the business issues related to climate change and are building climate related risks and opportunities into core business,” the report said.
Q. In common perception, chemicals don’t lend themselves to sustainability. So how do you at Tata Chemicals approach the subject?
ANS: This is only because public perception has been created around chemicals but if you look at everything you do in life…you are a bunch of chemicals anyway. The fact is what even other industries do is attributed to chemicals. Everything that comes out of industry is chemicals.
Starting with the first World War, when various gases were used for killing people in massive numbers, it has added a fear perception and that has got compounded with incidents like Bhopal. So it is no wonder that in public perception, chemicals equals bad. But we have to change that to chemicals equals good because everything you take is a bunch of chemicals.
Pharmaceuticals is nothing but a specialised form of chemicals. So many human lives have been saved and human lives have been enriched. I think there is a need for balance.
Yes, you can’t have an industry where even loss of even one life can be justified on any pretext. So we have to take responsibility for what we do.
And we have to do a lot more, saying that you get clean water not because of some fancy stuff but because there is a process of making water clean, which is chemical treatment.
The simple fact that health levels have improved massively is all because of chemicals. We have to make chemicals less toxic. We can use more and more benign chemicals that we see even in pesticides. At the board level at Rallis, we took a decision to get out of “red triangles”. Any product which has “red triangles” — we are out of it. We are mostly in “green” and “blue”, not even “yellow”. “Green” and “blue” are almost like natural materials — they are non-toxic.
Q. As a corporate body, when might it have occurred to the organisation that sustainability is a path to walk on?
ANS: Right from the founder. The tagline even 30 years ago was “A Company that Cares”. And the definition of care was around making the process safe for employees, for communities around and issues of safety in transit. This company is one of the newer companies which came under the fold of the Tata group under JRD Tata and it was he who coined “The Company that Cares” and MDs and CEOs have since followed that through. We have had variations of that same theme — whether you look at the current tagline — “Science in the Service of Society” — and the whole issue was chemicals actually is a science. Chemistry has no negative connotations; chemicals may have negative connotations. In many ways, we are trying to emphasise the science piece of it. At every point in time, this has been the focus.
Q: The company was cited and awarded by CII recently for sustainability…so what specifically led to this?
ANS: It’s actually every piece. We have now pinned this down to various elements including what is good for employees within the plant, what is good for what kind of products we would like to be in. So we have a 360 degree view. We can’t impact 100 things so we need to focus. So there are many things we do — like Tata Salt contributing to the ‘Desh Ko Aarpan’ scheme, our support for the girl child or the urea, soda ash team working for a ‘Dharti ko Aarpan’ programme for conservation of the environment with activities like mangrove and watershed development or species conservation or our rural BPO in Mithapur.
Q: You’ve outlined sharing created value but the notion of creating shared value where the business process itself is intertwined with sustainability…is that an area the business looks at?
ANS: We are at the beginning stage. I would not say that we have integrated our sustainability into strategy. We know sustainability from the way of the triple bottom line.
So three years ago we started this exercise of having a sustainability strategy. This probably will be the first year we brought together the sustainability and the company strategy together.
It used to run as two parallel streams — the company strategy and sustainability strategy. And at some time there would be some linkages built. But it has given some tremendous insights. For example, we know for our consumer product business and for our pesticide business, one of the big issues in sustainability is plastic packaging, issues we did not consider as core. We are now working with NGOs on plastic packaging recycling so we meet our obligations of being neutral or positive on the amount of plastics we recycle. We are also working with the Indian Institute of Packaging on new packing materials that are more sustainable.
We also find that now our customers are becoming increasingly sustainability oriented. So if you look at our industrial customers like P&G or Unilever, they are also equally focused on sustainability. They want to work with companies who also have the same set of beliefs.
If you look at the urban consumer and the young generation, we have a Facebook page, a Twitter page and if you look at the chatter, we hear issues around being sustainable. As we move on, it will become more and more critical in a world where information flow is increasingly democratised.
So if your product is not seeming worthy of being bought by consumers, they would vote with their pocket and you would suddenly find market share dwindling. The need now is for companies to be directly in touch with people and that effectively means addressing all the future emerging issues which everyone is going to talk about and clearly sustainability is one of those.
Q. That makes your business case for sustainability?
ANS: The case is already there; it is going to become sharper and sharper. At the end of the day, we all can say climate change is not my problem but who is going to be the agent of change.
If you look at agriculture commodities, about 60% is traded through seven companies, and if only these seven insisted on sustainable sourcing and sustainable distribution, why would the rest not follow. The multiplier effect of business is quite immense. So I think in many ways some of us who believe in it have to play the role of a catalyst.
Even shareholders are increasingly looking at it as investment. Some of the analysts certainly look at this as investment. We have had some Norwegian funds which have invested in our business start their discussion when they meet us on this topic rather than on any other.
Q. But you are still away on integrating the business side and the sustainability side.
ANS: We are just starting. The journey is long. The understanding of most companies is at a nascent stage and I don’t think anyone of us in the corporate world can take a stand and say we know it fully. We don’t. We are learning and this is going to be the learning for the next 50-100 years — how do you build a more sustainable company.
Q. That would make sustainability part of a value system for you?
ANS: Of course it is part of value system. The issue is how do you communicate this to a large number of people in a way that is more contextual.
Q. You are pushing to be a consumer company, selling more to individuals and that brings its own issues in terms of sustainability of consumer products that must be used and discarded by millions of individual users.
ANS: If you look at specific measurement tools, we’ve done carbon footprinting but mostly within the fence, and outside the fence of all our suppliers. Carbon footprint of our supply chain we’ve done a bit but if you say its usage by our consumers, we’ve not done.
The second issue is with respect to water footprinting – we’ve done that within the fence for all our units. water footprinting outside our fence, we’ve not really done that.
Q. On consumer demand…
ANS: As far as consumers are concerned, we see a big shift happening in India. Top 24 cities of India will contribute two trillion dollars to the GDP in the next 10 years, making for 2/3rds of Indian economy and consumption. India is going to get really urbanised. You can see it when you travel even today on the Mumbai Pune highway.
And urbanisation brings with it its own set of issues in terms of consumer behaviour. One of them is people tend to move towards higher conveniences, and this is mainly from loose to packaged consumption of products and within packaged to branded. We see that shift happening and what we are saying is if we can ride that shift as it gathers momentum, if we can give a Tata quality to these customers…they deserve it and we would give it so that’s the journey we are on.
In doing so, if we get a higher share of our revenues which is shifting to consumer, that’s the outcome of a trend which is already under play. We are not going to underinvest in industry but its just that the growth momentum is more here, so that its going to lead to a change in proportion.
Q. You have said elsewhere that consumer products will contribute more than 50% of revenues in a decade from now.
ANS: It’s already 22%, very shortly it will become 35% or so and our aim is it should over a period of time go to go to 50%.
Q. That comes with its own challenges on sustainability.
ANS: Yes, and one of the things we do now…if you look, pulses is a classic example. We are working with farmers in Karnataka, Tamil Nadu and Maharashtra. We are saying Indian productivity of pulses is 1/3rd of the international standard and it’s not for want of inputs. It’s about a basic package of practices. So at the farmer level, we are delivering a basic package of practices with no conditions. If he so chooses, some of these products can come from Tatas but it doesn’t really matter. And that has impacted the output of farmers.We realised one of the needs of farmers was: who will take the output? So we took the output and took it to the mills and we realised that there is value in taking this right upto the consumer. It’s a new business, but its foundation lies in inputs for farmers.
So what started as an idea to deal with the improvement in farm productivity has led to consumer facing opportunities which we are now working on and obviously this effectively means you are working on the complete supply chain right the farmer to the plate of the consumer and has its own complexities. It’s not easy, there are risks involved. We are also dealing with a commodity whose prices fluctuate every day but for the end-consumer you can’t move the price with the same frequency as you move it with the farmer, so if you are present all the way through, how do you manage the amplitude and frequency of the variations.
Someone in the middle has to modulate the whole process. So we are trying to grow at a pace, which is manageable, which is at 100% growth every year from a low base though.
Q: So you don’t have to be necessarily doing more chemicals. You could be doing more foods as the company slowly transforms.
ANS: We will be doing chemicals also. We see that as an opportunity also. If India is going to change, the needs of this country will change. So if the auto sector, the housing sector grows, they will need new materials and we are looking at entry into more speciality chemicals for tomorrow. In addition to that, we believe that the focus on wellness will increase in India and that’s why we got into the nutraceuticals business. The first plant is being set up in Chennai. Also, six years ago, we invested in building skills and capabilities in biotechnology and nanotechnology, which has given us ‘Swach’ water purifier. A whole series of nanotechnology solutions are on their way. It’s only a matter of time. In the next few years, very interesting stuff is happening and these are knowledge chemicals …higher level of specialisation and you have to work far more closely with consumers. They are literally driven by customers and consumers. We only give solutions. That is how ‘Swach’ was built. The definition of the problem was — can you deliver clean water without electricity and flowing water. So we had to have a unique solution, which is ‘Swach’.
Q. Your sustainability dream a few years down the road would be…
ANS: We have committed ourselves that by 2020 we will be 20% less carbon intensive than we are today. So there is a push to make it less intense and in terms of water we will make our commitments going forward. But clearly we see as a company we would be amongst the foremost standing up for sustainability. Our future investments will be around sustainability. We are now not making any investments which will lead us to any path that is non sustainable.
