Ethical Sourcing Sunil Bhaskaran Vice President, Corporate Services Tata Steel Ltd. May 5th, 2017

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The TATA Group : Foundation of an institution

“The Tata philosophy of management has always been and is today more than ever, that corporate enterprises must be managed not merely in the interests of their owners, but equally in those of their employees, of the consumers of their products, of the local community and finally of the country as a whole”

J R D Tata

“In a free enterprise, the community is not just another stakeholder in the business but in fact the very purpose of its existence”

J N Tata – Founder of the Tata Group

2 2

The Tata Group: 146 years of Sustainable Growth

Cultural diversity: >6,00,000 people employed worldwide in ~100 companies, 80 countries in 6 continents

Unique business model: 2/3rd of Tata Group equity held by philanthropic Trusts

32%

36%

5%

16%

Engineering 39%

Materials 24%

Services 4%

IT & Comm 20%

Chemicals 3%

Consumer Products 4%

Energy 6%

$103.51

bn

Tata Group Turnover FY 16: $104 billion

India 30%

Asia excluding India 9%

Europe 57%

Rest of the World 4%

Turnover: $18.25 bn

Tata Steel Group: Spanning Geographies

11th largest steel company in the world, Fortune 500 company Operations in 26 countries 80,000 employees

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Delhi

Mumbai

I N D I A

C H I N A

M Y A N M A R

Arabian Sea Bay of Bengal

I N D I A N O C E A N

Tata Steel India Operating context : Major part of manufacturing value chain located in eastern India (mines to mills)

Jharkhand

Odisha

Major operating states: Jharkhand and Odisha

Large tribal and under-privileged population

Left Wing Extremism affected

Low social development S R I

L A N K A

Jamshedpur Kalinganagar

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With a Procurement of USD 1.6 billion across products and locations, including from unorganised sector

Scope of buy

Transport

RM

EPA

Services

MRO

Bulk

Locations

Jamshedpur

Mines & Collieries

Kalinganagar

Vendor Spread

1199

489 2155

Ltd CompaniesOverseas VendorsIndian Vendors

228 20

29

924

MSMENGOAA VendorsIndian Vendors

Organized Sector (3843 vendors)

Unorganized Sector (1201 vendors)

MSME- Micro, Small & Medium Enterprises, AA – Affirmative Action, NGO – Non Governmental Organization

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Supported by our “Responsible Procurement Policy”

We also expect our suppliers to contribute to the social, economic and institutional

development of the communities in which they operate.

Affirmative Action

HUMAN RIGHTS

LOCAL COMMUNITY

DEVELOPMENT

FAIR BUSINESS

PRACTICES

ENVIRONMENT

HUMAN RIGHTS

LOCAL COMMUNITY

DEVELOPMENT

Ethics & Values

Safety First !

Go Green !

SA 8000 Compliant

Senior Leadership @ Tribal Conclave

Supporting Livelihoods

6

Vendor Base and local buying of Tata Steel : 1/3rd of our vendors are local to our operating areas, with increasing business

902 960

1376 1434

0400800

12001600

FY'12 FY'13 FY'14 Fy'15

Number of Jharkhand Vendors

214 199 465 495 544

0

1000

FY'12 FY'13 FY'14 Fy'15 FY'16

Business volume of Jharkhand Vendors – USD Million

5000 active vendors of TSL 4400 domestic vendors

1400 Jharkhand vendors

300 Odisha Vendors

2700 other domestic vendors 600 import vendors

61 92

146

299

050

100150200250300350

FY'12 FY'13 FY'14 FY'15

No. of Kalinganagar Vendors

Total Business to Odisha vendors: ~ USD 90 million

LOCAL COMMUNITY

DEVELOPMENT

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Achieved thru structured Vendor Capability Advancement Program

Strengthen the capacity, capability and management practice of Vendor Partners to meet increased requirements

To bring efficiency in the entire value chain and in the way of working to deliver quality goods and services

Impart targeted training for requirements at various levels in vendor ’s organization to promote inclusive development

Purpose of V-CAP

Training for only vendor

workmen through 3rd

party

Level 3

Level 2

Level 1

Tata Steel’s Supplier Development and Engagement Philosophy - through Vendor Skilling

Before FY-15 FY-15 & 16 FY-17

For Owners, Proprietors, Senior Management of Vendor Partners

For Site Managers and Representatives

For local distributors and retailers

Focused Group

Training (FGT) to address

pain points of inbound

supply chain e.g.

Throughput,Delivery, Safety

etc.

Gap-based training to a

mix of Level I & Level II

participants

Skill Assessment for Maintenance Service Providers

Way Forward Deployment at RM locations, KPO

and Profit Centres

8 8

With specific focus on “Affirmative Action” (AA) Vendor Development

Vendor Selection

Team Formation

Base Lining

Development Plan

Review

1.0 1.9 1.9

4.6 4.9 5.2

8.8

0.0

2.0

4.0

6.0

8.0

10.0

FY11 FY12 FY13 FY14 FY15 FY16 FY17

Business Volume of AA Vendor in USD Million

10

23 29 29

44 47

0

10

20

30

40

50

FY12 FY13 FY14 FY15 FY16 FY17

No of AA Vendors

1000 entrepreneurs to be created with the help of Bharatiya Yuva Shakti Trust (BYST) at Kalinganagar

Rural livelihoods project involving 5500 tribal households at Kalinganagar / Bamnipal, in partnership with CINI (Collectives for Integrated livelihood Initiatives) of the Sir Ratan Tata Trust

Federation / producer company of cashew growers at Baharagora / Chakulia with the help of MART

Market yard for tomato growers at Patamda with the help of MART

Entrepreneurship – Future Plans

9

Specific measures to engage local vendor base for Kalinganagar (Odisha) operations

Vendor Connect Day

- Participation by

50+ Odisha based Vendors

- Preliminary evaluation conducted

Engaged with Local Industry Associations

- CII Bhubaneswar,

Balasore, MSME Cuttack, Bhubaneswar, Utkal COC, etc

- List of vendors prepared with their support

Visit to nearby industrial hubs

- Mancheswar, Cuttack, Rourkela

- List of service and drawing items vendors prepared with their support

Local Entrepreneurship

development

- Local entrepreneurs identified for development

- Visit to JSR plant to illustrate scope of jobs and use of equipment

- RFQ for manpower based jobs

Joint Committee with Industry Associations

- To promote

inclusion of Odisha Based entrepreneurs

- CII Odisha, MSME Cuttack, Utkal Chamber of Commerce, OSSIA and OYEA

- To boost further the development of local vendors & entrepreneurs

1 2 3 4 5

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Acceptance to TCOC must for vendor registration Non-compliance may result in black-listing Vendor Whistle Blowing Protection Policy to

prevent unfair practice being adopted against the Whistle Blowers

Tata Code Of Conduct

• Mandatory for new suppliers External Audit by DNV-GL

• Audit protocol, vendor training, assessment & counselling

• Assessment carried out against SA 8000:2008 standard requirements and TCOC

• Partners with high value & long term contract considered for assessment

SA 8000

A foolproof system to prevent child labour

Employees age proof maintained by contractors

Minimum wages paid by all assessed companies

Social benefits e.g., PF, ESI, Bonus etc. paid accurately

No case of forced labour e.g., deposit of money

All the contractors follow Tata Steel Safety norms

No case of Discrimination noted

FAIR

PR

ACTI

CES

H

UM

AN R

IGH

TS

Human Rights and Fair Business Practices

Positive indicators from audit report

FAIR BUSINESS PRACTICES

HUMAN RIGHTS

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ENVIRONMENT

Green Buy Initiatives

5 R’s

Reduce

Consumption Refractories

Lime

Carbon footprint Rail vs. Road Transport Reuse

Recycle Water TCO based contracting

Replace Fuel Use of bio-diesel

Organic material Metal pellets instead of wood

Repair Refurbishment Bearings

Valves

Principle Major Projects

16 projects with an overall buy value of USD 26 mill underway

Projects worth USD 16 mill implemented upto March, 2017

Additional projects being identified and added to the pipeline

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Thank You

TEXTILE INDUSTRY AND TIRUPPUR

An Analysis

India’s Textile Production

Woven 62 Knits 22

Handloom, 12

Mills, 4

Source: NSDC- HR & Reqmt. in Tex Sector

• 4.8 % of woven Textiles • 45 % of Indian Knitwear Textiles • Overall 20.2 % of Country’s clothing

and textile production takes place in Tiruppur District

Contribution by Tiruppur

Employment Share of states in Textile Sector

Current T&C employment ~33 to 35 million Expected ~ 60 to 62 million by 2022.

Source: NSDC- HR & Reqmt. in Tex Sector

Tamilnadu 28% ~ 10 million people

• Tirupur was a small village about three decades ago.

• Emerged as a major player in world apparel Market.

Tirupur – Evolution

1st Knitting Unit set up

in 1937

First Merchant export of knitted garments to US

1972

Became the Knitwear

Capital of India in 2004

Export Turnover Zoomed to Rs.

25000 Cr during 2017

Number of Knitting units increased to 450 in 1960

In 1987, export turnover from

Tirupur increased to Rs. 75 Cr

In 2010, Export Turnover zoomed

to Rs.11,000 Cr

Vision to achieve a turnover of 1 lakh crore by

2020

Tirupur – Cluster Business Tirupur Business Growth Scenario

36,000 Crores 16,000 Crores 19 Crores

1985 2010 2017

$ 15 Mln $ 3.40 Bln $ 5.53 Bln

Tirupur – Cluster Business

US 35%

EU 55%

Middle East, SA, AU

10%

Market Share in %

• Naturally formed cluster; • 7500 Units operating; • Micro, Small and Medium

segments of MSME work in tandem complimenting each other

• Almost all top international brands are sourcing from Tiruppur

Specialty of Tirupur Cluster

“Outperforming But Unrecognized Giant”

Eligible to be declared as ‘Carbon free Cluster”

Sustainable Manufacturing Green Power – Carbon Neutral Cluster

“Zero Liquid Discharge”

First time in the WORLD

Sustainable Manufacturing -ZLD

• More than 85 % of Water recycled and

reused in manufacturing

•100 Million Litres recycled every day

•Minimum Possible Carbon Footprint due to

green energy and water recycling

Sustainable Manufacturing Water Conservation / Recycling

Social Compliance – Role of TEA 1. Bridge between industry and labour unions 2. Operates based on periodical tripartite wage

agreement since 1990 3. No labour unrest for last 27 years 4. Mediplus 365 – ensures complete medical coverage

for labourers’ & dependants - 5. By paying USD 6/- per annum, entitled to a

coverage of USD 1500/- mediclaim 6. Enlightening members on ‘Visaka’ guidelines

against the sexual harassment in the work place 1997 to prevent sexual harassment in any form

Tirupur Stakeholders Forum

1. Established in 2010 2. Comprising of association, Brands, Trade Unions and

NGOs 3. Main objective is to collectively address challenges

pertaining to the workforce & working conditions 4. Released a booklet on “Guidance for Migrant Women

workers in Hostel and the Recruitment process spinning / garmenting factories”

5. Meeting periodically to address the issues then and there

Environmental Audit

1. Only ZLD compliant cluster in the entire globe 2. Appreciated by Swedish parliamentary delegation,

Canadian environmental minister, environmental delegates from Denmark and Netherland

3. 18 Common Effluent Treatment Plants and many Individual ETPs operating

4. No discharge of effluent into the environment 5. Online Monitoring by Pollution Control Board

Challenges

1. Different Standards by different buyers/ countries

2. In addition to inspection by governmental agencies

3. Major cost for MSME units 4. Hostile Media Propaganda – BBC Example 5. Uniform Code – need of the hour 6. DISHA (Driving Industry towards Sustainable

Human Capital Advancement) prepared by our Apparel Export Promotion Council (AEPC), set up by Ministry of Commerce, Government of India

Invisible Factors

1. Today’s labour tomorrow’s entrepreneur 2. No forced / bonded labour like conditions 3. Each individual possess minimum 1 mobile

Phone 4. Evidence of free information flow to all 5. Voluntary flocking of labour force from all across

the country 6. Every south bound train into Tiruppur unloads

thousands of new entrants 7. Demonstrative of their wellbeing

Concluding Thoughts

1. Note of appreciation for accomplishing invisible factors

2. Urgent need to implement universally acceptable common Code

3. To be implemented all manufacturing nations uniformly without discrimination

4. Shift from rule bound to handholding 5. Collective friendly approach to create ‘Win-Win’

for all stakeholders

IHKIB – ISTANBUL READY MADE EXPORTERS’ ASSOCIATON CSR PAPER WORKS IN BRIEF

1. ABOUT IHKIB & CSR APPROACH

billion US $ of export in 2015

largest supplier in the world

largest supplier in EU

largest in socks export

largest in knitwear

argest in denim

PHASE 2. AUDITS

In the beginning an internationally qualified auditor visits every participating companies production facilities

VISIT

The internationally qualified auditor conducts two full day inspections to evaluate whether the trainee has implemented their know-how acquired from the ‘auditor trainings’ to their companies production structure.

EVALUATION

Evaluation is made according to the Workplace Conditions Assessment Program (WCA)

A report is shared with the organizations including a future improvement plan.

SHARING

INSPECTION

TEXTILE EXPORTE

RS CHINA INDIA USA EU-28 TURK

EY

CAMBODIA

APPAREL EXPORTE

RS

79.0

12.1

55.2

15.6

S.KOREA

10.8

173.5

125.7

BANGLADESH 30.8

CHINA EU-28

TAIWAN

VIETNAM

24.9

INDIA

12.1

TURKEY

HONG KONG

10.4

15.2

16.7

9.0

7.6

HONG KONG

7.5

PAKISTAN

JAPAN

7.5

7.5

USA

12.1

INDENOSIA 10.4

TEXTILE EXPORTE

RS CHINA INDIA USA EU-28 TURK

EY

CAMBODIA

APPAREL EXPORTE

RS

79.0

12.1

55.2

15.6

S.KOREA

10.8

173.5

125.7

BANGLADESH 30.8

CHINA EU-28

TAIWAN

VIETNAM

24.9

INDIA

12.1

TURKEY

HONG KONG

10.4

15.2

16.7

9.0

7.6

HONG KONG

7.5

PAKISTAN

JAPAN

7.5

7.5

USA

12.1

INDENOSIA 10.4

BOTH

YARN

9.5 BlLLlON $

FABRICS

12.5 BlLLlON $

GARMENT

22 BlLLlON $

RETAILING/ BRANDING

COTTON CULTIVATION

400

FIBRE

MlLLlON $

FINISHING

4 MlLLlON $

Firstly being a principal company is required to be pioneer and leader in; export, investment, employment, added value, fashion and brand

Sustainability in CSR activities • through international

partnerships, • through developing practicable

projects Supporting the members with awareness and enhancement programmes

2. CIVIL INITIATIVE ACTIVITIES IN APPAREL SECTOR

IHKIB IS ACTIVE

ON;

Engaged with other international CSR Bodies; IndustriALL, FLA (Fair

Labor Association), FWF (Fair Wear Foundation), etc.

OECD Working Group on responsible supply chain

management for apparel and footwear sectors

EURATEX Working Group and organizations on social

responsibility and sustainability

Ethical Trade Platform - Coordinated by ETI and in cooperation of international brands, exporters’ and employers’ associations, Trade Unions and NGOs - Aims to strengthen the Turkish clothing and textile sector’s ability to implement the UNGP (Guiding Principles on Business and Human Rights) through the establishment of a local platform

Association with public authorities for lobbying activities and regulatory requirements

LOBBYING

ETHICAL TRADE PLATFORM

OECD

EURATEX

OTHER INTERNATIONAL CSR BODIES

Turkey hosts the largest refugee population (3,3 million) in the world, including 2,9 million Syrians. According to UNHCR (United Nations Refugee Agency) the total number of Syrian refugees registered has increased significantly from 40,954 in August 2012 to approx. 2,9 million Syrians in March 2017 While 247,437 refugees reside in 20 camps, almost 90 % of the refugees are self-settled and sprawled in urban areas rather than living in a camp. Approx. 10 percent of them are mostly located in 20 camps in 10 cities

1. FACTS & FIGURES ABOUT REFUGEES AND INTEGRATION TO THE SECTOR

Objective was to improve the livelihoods and social security of refugees, in particular the youth and women, by providing them skills for (self) employment in Textile and Apparel sector

2. VOCATIONAL TRAINING FOR SYRIAN YOUTH AND WOMEN REFUGEES

INSTITUTIONS OF THE PROJECT ARE;

AFAD (Disaster and Emergency

Management Agency of Turkey)

MEB (Turkish

Ministry of Education)

İHKİB (Istanbul Ready-Made Garment

Exporters’ Association)

UNIDO (United Nations

Industrial Development Organization)

OUTCOMES OF THE PROJECT

Project Budget: 1 million US $ by

Japanese supplementary

budget

Project Period: 21 Months (31

March – 31 December 2016)

1.000 youth and women have been

vocationally trained.

Sewing and mold training

workshops were established in 3 refugee camps.

Apparel goods (esp. Traditional clothing – galabeya) needed in

Camps are still produced by trainees under the supervision

of MEB

The mapping study in cooperation with ILO, UNDP and UNIDO consisting 3 dimensions: Sustainability on Harnessing Linkages, by IHKIB

Environment and Clean Manufacturing, by ILO Women Workers, ILO CSR Practices Working Models, by IHKIB

The report which includes Politic and Strategic CSR recommendations on micro, meso and macro levels for Textile and Apparel Strategy, was distributed to all members and also shared with policy makers.

3. MAPPING FOR CSR ISSUES IN TURKISH TEXTILE AND APPAREL INDUSTRY

• High level awareness about the necessity of

CSR practices • Stress between purchasing practices and the

cost of CSR. • Standard of CSR practices is lower in

subcontractors • Companies are relatively good at complying

with national regulations but they are not taking “proactive” measures to adapt to potential regulations

• Companies’ focus is on environmentally-friendly products rather than environmentally friendly production processes.

Report is available in web; https://www.ihkib.org.tr/fp-icerik/ia/d/2017/01/17/mdgf-csr-report-onapparelindustry-2012-201701171639340887-C14EA.pdf

MAPPING STUDY FINDINGS

• Publishing books, booklets etc. o In the cooperation of Ministry of

Labor and Social Security, 7 main labour rights booklets have published and distributed to all our member companies

• Internet; Book, booklets and reports in our web page & Movies about CSR

• Press; Press releases & Press meetings

Booklets are available in web; https://www.ihkib.org.tr/tr/bilgi-bankasi/isci-haklari-kitapciklari/k-333

4. MASS INFORMATIVE PUBLICATIONS ON CSR

Measuring Firms acc. to these basic parameters; Scale of the enterprise (Small, medium or macro scale according to no. of employees and endorsement/turnover) Implementation level of CSR issues in terms of policy and capacity (capabilities with respect to labour, environment and other CSR challenges) Position in supply chain (supplier for international brands or internal market and scale of customer)

5. DEVELOPING CSR MANAGEMENT & IMPROVEMEN TECHNIQUES MODEL

o First link of brands’ supply chain (Especially international brands)

o Tier 1 companies (major/final exporters)

o Orderly audited by brands o Scale: Macro Enterprises

o Suppliers for macro scale companies or the one manufacturing for internal markets

o Aware of CSR principles but insufficient capacity to implement them

o Scale: SME

DEFI

NIT

ION

S O

F LE

VELS

AI

M BETTER

PERFORMANCE IN SELF-ASSESSMENT

CAPACITY & INFRASTRUCTURE BUILDING

o Final apparel-tier in supply chain

o Having difficulty in also obeying national rules and regulations

o Lack of CSR awareness o Scale: Micro Enterprises

RAISING AWARENESS AND CAPABILITIES

ADVANCED INTERMEDIARY BASIC

Implementation of Supplier-Specific CSR Programmes • Social Compliance Improvement and Total Quality

Management through these tools; o Grading&Scoring, Evaluation, CSR

Guides/Manuals, Training Programmes, Certification, Self-Auditing

• Differentiation of scope and methodology of the tools with respect to the level of supplier

5. DEVELOPING CSR MANAGEMENT & IMPROVEMEN TECHNIQUES MODEL

o Conducting internal social compliance audit in companies

o Certification of employees as social compliance auditors

o Grading social compliance grade by companies itself

o Evaluation of companies by professional auditors

o Improvement of quality control processes

o Master monitoring procedures (quality, measures, comformity, packaging)

o Start to use the same standards as their clients

1. CSR IMPROVEMENT PROGRAMMES (internal + secondary supplier)

2. QUALITY CONTROL AND STANDARDIZATION PROGRAMMES

• IHKIB has begun implementing the CSR management model for its ongoing sub-sector clusters

• Lingerie and Homewear BrandsCluster • Socks Manufacturers Cluster • Denim Exporter’s Cluster • Knitwear Exporter’s Cluster

MODEL IMPLEMENTATION IN CLUSTER PROJECTS

• Implementation tools is assigned for each cluster, based on the needs of companies;

CASE STUDY: CSR IMPROVEMENT PROGRAMME WITHIN ISTANBUL

SOCKS CLUSTER PROJECT

o Two representative from each company attend a four-day training on international audit standards and audit processes

o Participants partake in two examinations; successful participants will be rewarded with an international chief auditor certificate.

CSR IMPROVEMENT PROGRAMME

o Social Compliance Management Systems,

o Child & Forced Labour, o Discrimination, o Maltreatment, o Freedom of Association, o Working Hours, o Payment and Related Rights, o Regular Employment, o Environment, etc.

AUDITOR TRAINING

SUBJECT MATTERS

PHASE 1. AUDITOR TRAININGS

o 6 man/days per company

COMPANY COMMENTS

TUGCE IYIKULAH ARIK EXPORT MANAGER – HOBBY

SOCKS

MURAT YAZICI EXPORT MANAGER – ULTRA

SOCKS

THANK YOU