l amp t sustainability analysis report
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SUSTAINABILITY ANALYSIS
CORPORATE SOCIAL RESPONSIBILTY
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INTRODUCTION
Larsen and Toubro is a USD 9.8 billion, technology, manufacturing, finance, engineering and
construction conglomerate, with global operations. The company is headed by Mr. A.M Naik,
CEO and M.D.
During times when sustainability as the biggest challenge faced by mankind today, L and T has
always pursued its long term strategic plans, remaining steadfast in its sustainability journey.
1.1 Sustainable DevelopmentUnited Nations in 1983 defined it as Development that meets the needs of the present, without
compromising the ability of the future generations to meet their own needs.
1.2 Corporate sustainability
Strategies and business practices adopted by the company to achieve corporate growth and
profitability as well as to pursue societal goals, specifically those related to sustainable
development-environment protection, social justice and economic development.
In simple words, the well being of the society depends on the economy and the economy
depends on the global ecosystem.
1.2Corporate sustainability reportL& Ts sustainability report is based on Global reporting initiative, i.e. GRI's Reporting
Frameworkthat is developed through a consensus-seeking, multi-stakeholder process.
L and T reports are GRI Checked and graded as A+ reports, which is the highest grade for
GRI reports.
1.3L&Ts Take on SustainabilityL & T views sustainability in terms of three aspects:
1. Sustainability means Adaptability
L&T believes that its big opportunity lies in building capability across nations. It has
interwoven its business interests with the larger interests of India and progressive emerging
economies. They have aligned their growth path to the missions outlined in the National Action
Plan on Climatic Change (NAPCC).It has aimed to pursue sustainabilitybased growth
platforms such as renewable/clean energy, water, mass transit, energy efficient products and
green buildings.
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To propel sustainable growth in the nuclear power sector, the company has formed ajoint venture with Nuclear Power Corporation of India (NPCI) to set up a Heavy Forging
Manufacturing facility at Hazira, Gujarat.
They are also taking up initiatives to explore and develop business opportunities in solarenergy and installing a 2000 MW hydel power plant.
As a part of developing a comprehensive carbon strategy for L & T, they have alsocarried out carbon footprint mapping and energy audits of their operations.2. Sustainability means Developing Human Capital
They believe in continuous development of human capital to make them ready to face challenges. Over
the years, the company has moved from traditional to more strategic training systems and has also tied
up with reputed management institutes and e-learning programs. Their training program called Prayag
is meant for grooming GETs, graduate engineer trainees to train them according to the industrys
requirements.
3. Sustainability means Responsibility
L & T endeavors to impact the lives of underprivileged through intervention in education, health and
skill building. More than 4500 employees volunteer for these initiatives.
L &T Public Charitable trust engages in vocational training and livelihood creation program for the
rural youth.
CORPORATE GOVERNANCE
Larsen & Toubro has a government structure designed to improve decision making and enhance
long term prosperity. It comprises Strategic Business Unit Heads with Executive and Non-Executive Directors on the Board. It ensures:
Greater management accountability and credibility Facilitates increased autonomy of businesses Propagates performance discipline Nurtures development of business leaders Boosts public confidence
2.1Sustainability structure
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A Sustainability Executive Board is a part of the top-down approach followed to:
Ensure effective formulation Implementation of sustainability strategy Increase the resources dedicated to sustainability programme Reviews sustainability performance
2.2L&Ts processes in place
2.3Risk ManagementIdentification, assessment and reporting of risks
LARSEN & TOUBRO has a decentralized governance
mechanism enabling them to benchmark performance
against targets, review impacts, mitigate risks and
challenges, identify and implement corrective and
preventive action plans. In order to strengthen their
foundation, LARSEN & TOUBRO has two ongoing
projects: Project Prithvi and Project Lakshya
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The risk management process is determined in LARSEN & TOUBROs Integrated Management System.
The management of each of the divisions and centralized functions identifies and assesses the most
significant risks for its own area of responsibility, prepares contingency plans and determines
responsibilities for risk management measures within its organization. Risk identification and planning
primarily take place within divisions, areas and units responsible for business operations. Any risks
identified and preparations for them are regularly reported to the President and CEO.
A risk assessment in all divisions, areas, foreign units as well as centralized functions defined as being
critical, is carried out annually to assess strategic, financial, damage-related and operational risk factors.
The significance of risks is assessed using a risk matrix, and contingency plans for significant risks are
prepared on this basis.
STAKEHOLDER ENGAGEMENT
With L&Ts operations extending all across the country, and the sheer scale of its domain, the
manifestation of a vast and diverse set of stakeholders with varied interests is inevitable. One of
the most unique features of India is that the environment and the culture change every few
hundred kilometres, and one of the key challenges is to objectively balance and cater to the
wide-ranging and sometimes conflicting interests of the myriad stakeholder groups. L&T thus
believes in systematically and proactively engaging with its stakeholders, and possesses a fair
understanding of the unique needs of each specific subset across its vast stakeholder universe.
3.1Focus on ongoing stakeholder engagements Educating stakeholder about the Companys efforts on sustainability reporting Soliciting feedback on improvement expectations Quantitative feedback on prioritisation of various sustainability issues and mapping the
same vis--vis the view of the company management
Response on quality, delivery and service aspects of the businesses Customer/ Employee grievances
3.2Engagement frameworkThe Company has refined its journey towards developing a comprehensive framework for
engaging with its stakeholders and identifying the materiality issues. In the third year of
reporting they have gone a step further in order to better understand stakeholder concerns andget a holistic view of its sustainability efforts. It has opted for a two-pronged strategy ofcommunicating with its stakeholders.
The Company commissioned KPMG Advisory Services to conduct a detailed StakeholderEngagement Exercise across Internal and External Stakeholders. One-to-one sessions with all
the Executive Directors as well as each Operating Division (OD) Head ensured that
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management insights and areas that various business heads wanted the organisation to
concentrate on, were captured.
3.3Modes of engagementL&T pursues a fair, constructive, transparent and professional communication strategy. Toextend the reach of its communication initiatives it had set up one of the largest corporatecommunication departments in India and has also stationed communication channels across
stakeholder groups. Over and above continuous dialogue and open communication channels
across stakeholder groups, this structure emphasizes the pace and accuracy of communication.
Partnership, alignment of interests and forging win-win relationships are the core objectives.
The Company publishes one of the largest numbers of in-house magazines, each catering to a
distinct audience segment:
L&T-ite: readership base comprising of all L&T employees and its subsidiary &associate companies.
L&T News & Views: Addresses employees as well as customers and associates. Powai Pageant: a tabloid directed towards all Mumbai employees. Spot News: an online bulletin that carries all events and developments that are topical in
nature.
We R in News: an e-mail banner, presents news clippings related to the Company.CONCERNS EXPECTATIONS COMPANYS RESPONSE
Environment Proceeding towards
carbon
footprint reporting
Commissioned Carbon footprint mappingstudy of its operations as per the ISO
14064 Guidance Standard, to identify
GHG baseline and emission reductionopportunities for its operations.
Started responding to the CarbonDisclosure Project's (CDP) questionnaire.
Demanding
environmental and socialstandards from suppliers
and promoting
sustainability
L&T deters its suppliers from using child,compulsory or bonded labour.
The Company understands the need toarticulate a detailed SustainabilityFramework for its supply chain to address
the Triple Bottom Line' in its entirety. As
a first step, they have undertaken an
awareness drive on sustainability andenvironmental performance across all
levels in the organisation
Providing guidance to
suppliers to manage
their environmentalissues through an audit
and evaluation discipline
Helping suppliers strengthen theirsustainability practices through
implementation of EMS, OHSAS systemsetc.
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Setting up waste
collection centres atproject sites to facilitate
responsible waste
disposal
Provision of 'Debris Chutes' for the collection of
wastes from each floor, during construction ofhigh-rise buildings. This has helped to reduce the
H&S risk and minimise the environmental
impacts. Its significant advantages are as follows:
Reduced risk of workmen throwingmaterial directly to ground level. Waste is directly collected in the
containers which are taken away for
disposal.
Waste is safely transported to ground levelwithout dust generation.
Economic Ensure L&T conducts
life cycle analysis and
persuades customers
about overall benefits
Facilitating best available technologies forits customers to reduce the environmental
impacts throughout the lifecycle as
compared to conventional technologies.
LabourPractices
Need for increasedcollaboration withtechnical institutes for
workforce development
Training and skill development of theCompanys employees has always been a
thrust area. L&T has collaborated withleading technological institutes like IIT to
use their expertise in training.
Employees are encouraged to identify theirtraining interests at the beginning of theyear and accordingly are nominated for the
training programs.
Ensuring adequate
health
and sanitation facilitiesfor
contract site labour
L&T ECCD provides accommodation toworkmen in major sites including some
facilities like administration, sanitation,water, canteen, shops, medical aid,
entertainment, etc.
At its DIAL site, labour colonies have beenconstructed with pucca houses for around20,000 workmen.
Society Liaisoning with thegovernment in
relocating the project
affected communities
Developing the corpus
for social infrastructure
Migrant labour employed at constructionsites in India mostly work on daily-wagebasis and change organisations frequently.
Statutory benefits like PF and Bonus are
provided based on eligibility, restricted to
their working period which can beencashed after the completion of
employment. L&T ECCD has ensured
contractors contribution to the welfarefund for the workmen enrolled at the DIAL
site. A Board has also been constituted for
this and all the workmen working at theDIAL site have been registered. Pass
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books have been distributed to them in
presence of the Labour Commissioner. Thefunds shall be utilised for the social
welfare of workers.
Participation in
providing infrastructurefacilities and providingcare centres
The Company builds basic infrastructurefor rural community such as schools,medical facilities, vocational training
facilities etc. It also augmentsinfrastructure in municipal schools etc.
It maintains public assets like gardens,access roads and undertake roadbeautification projects among other things.
Has set up Community Health Centres nearits campuses.
TRIPLE BOTTOM LINE
The triple bottom line (3BL) is an expanded version of the business concept of the bottom line
that includes social and environmental results as well as financial results. One is the traditionalmeasure of corporate profitthe bottom line of the profit and loss account. The second is the
bottom line of a companys people accounta measure in some shape or form of how
socially responsible an organisation has been throughout its operations. The third is the bottomline of the companys planet accounta measure of how environmentally responsible it has
been.
4.1 PEOPLE
Training and talent acquisition
Launched a Management Development Programme with IIM A. Regular training is conducted for communication skills, presentation skills, finance
skills, etc
Employees are also sponsored for certification on project management by InternationalProject management Association, Switzerland. Till date around 300 employees have got
this certification.
Talent is absorbed from Larsen and Turbo Institute of Technology which conductdiploma courses for children of Larsen and Turbo employees.
Option of e-learning is also given to employees. L&T has an e-learning portal called'Any Time Learning' while HED has 'e-Vidyalaya'. In addition to this, assistance
programmes are offered to employees for skill upgradation. These consist of funding
support for external training, education and retirement planning.
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Health and safety
More than 400 EHS (Environmental, Health and Safety) professional work acrossLarsen and Turbo, highest in any construction company in India.
Eight manufacturing locations had zero reported accidents. Larsen and Turbo efforts in promoting workplace wellness and the sustainability have
received a well spread recognition.CII has honoured Larsen and Turbo with its corporate
wellness award for best health practices.
The safety committee made have equal number of management and labour employee. Larsen and Turbo have occupational health standards with specialist and fully equipped
ambulances.
EHS quiz at Vadodara to increase employee engagement. Four day scaffolding training programme conducted with help of Scaffolding Training
Institute, USA.
Human rights
Induction programme includes Human Rights training. We ensure that human rights clauses are included in our contract document and adhered
to within our premises and project sites. It is ensured that subcontractors and their
workmen undergo screening for age and are given induction training on eligibility of
pay and benefits
Larsen and turbo does not permit child labour and forced labour in its operations .Thisrule also applicable to vendors working in the premise.
4.2 PROFIT
In Larsen and Turbo sustainability is the way of doing business. According to the company this
approach has helped the company to survive global economic slowdown. This approach has
also enabled to infuse confidence in investors. Company growth is very evident as their market
capitalization increased from INR 393 Billion in 2009 to INR 980 billion in 2010.
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This strong financial position of the company will support its long term objectives and boost
shareholder value.
Company investment in Community development has increased from 44Cr to 66Cr.Also
amount of dividend paid has increased from 6.15 Cr to 7.53 Cr.
4.3 PLANET
L&T believes that there exists a symbiotic relationship between the environment and its
operations. It continuously develops technologies, practices and business opportunities are in
consonance with sustainable development. In order to integrate eco-efficiency into the core of
business operations, it has identified five core environment management priorities:
Optimizing energy consumption Following lean manufacturing practices Minimising waste through High-impact design Conserving water resources Propagating green buildings
In order to address these priorities, L&T has taken several initiatives over the past few years:
Energy
L&T remains alert to opportunities for conserving energy. The engineering expertise and
innovative low carbon solutions can balance the energy intensive demands for growth with the
need to protect the environment. Despite a rise in the production and increase in projects
executed, there was a decrease in the consumption of direct and indirect energy per employee.
The share of renewable energy for L&T is 8%. L&T has set up wind power generation plants
and solar plants in order to increase this share.L&T has also taken up initiatives to conserve
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energy by improving practices and processes. Major energy conservation initiatives are fuel
conservation initiatives and improvement of manufacturing processes.
Green Buildings
Green buildings are fast becoming a norm in India. L&T is committed and capable of buildingbuildings for the future. It is constructing green building in its own campuses and also for a
growing eco-sensitive client base.
Emissions
L&T is integrating energy efficiency into its operations, processes, products and services,
discontinuing the use Ozone Depleting Substances and finding alternative means to interact
without travelling. The Greenhouse gas emissions have reduced considerably over the past few
years as shown in the graphs.
Water Consumption
L&T has taken initiatives like wastewater
reuse, rainwater harvesting and monitoring
consumption across locations to conserve
water. Water consumption has shown a
considerable reduction as shown in thegraph.Another important initiative taken was
to convert quarry pits into irrigation ponds.
This was done in a village in Gujarat.
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Material, Waste and Spill Management
L&T has realized that the larger challenges of energy use, climate change and economy are, in
part, a consequence of how materials are used. Hence, sustainable use of materials is a goal for
L&T. It maintains the concept of Reuse, Recycle and Recover throughout all its constituents.
Waste management strategies are integral to the environment management plans of L&T. It has
effective spill control measures to eliminate or contain any spill of chemicals, oils, fuels and
hazardous waste to prevent any adverse impact on the environment. It has entered into
agreements with certified vendors for recycling of PCs, laptops and servers.
SUSTAINABILTY TARGETS
No sustainability effort can be made without sincere and well-defined targets. And L&T leads
the way among Indian companies in term of specific targets and well-structured follow ups and
progress reports. Below is a snapshot of the short term corporate targets set by L&T for the
period of 2009-12 and the progress they have made in this regard till 2010.
Sustainability Area Corporate - Short Term
Targets (2009-12)
Progress
Climate Change
Conducting carbon footprint
mapping of L&T operations
Carbon footprint mapping of L&T
manufacturing locations and project
sites completed
EnergyConservation
To conduct energy audits at
all manufacturing sites
Completed at manufacturing locations
of 4 operating divisions (ODs) and
L&T Infotech. Audit for remainingOD (MIPD) will be completed in
2010-11
Improve energy conservation
metric by 10%
Areas for energy conservation
identified from energy audits
Developing location-wise
road map for increasing useof renewable energy
Wind farm of 8.7 MW commissioned
in South India. Solar energy is used atChennai, Powai, Hazina, Talegaon,Ahmednagar and Mahape campuses
Water Conservation
Adopting zero-discharge
approach
Feasibility assessment completed at
19 locations. 9 locations are zero
water discharge campuses
Reducing per capita water
consumption by 10%
Based on a feasibility assessment
report, detailed water audit of key
campuses is planned in 2010-11
Safety
Achieving zero accident
status at manufacturinglocations
Road map prepared by Corporate
EHS council. Eight manufacturinglocations had zero reportable
accidents
Reducing FR and SR at 30% reduction achieved
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project by 50%
Management
systems
Implementing ISO
14001:2004 and OHSAS
18001:2007 at manufacturinglocations and major design
offices
19 out of 20 locations certified
Implementing ISO
14001:2004 and OHSAS
18001:2007 at project sitesabove INR 7.5 Bn
2 OCs (Infrastructure and MMH&W)
of ECCD have been certified for
EMS during FY 2009-10
Health
Developing organization
wide health index by
implementing WoW
(Working on Wellness)programme
Completed Phase I comprising
awareness programme, diagnostic
camps & workshops
Community
Development
Continuing interventions in
CSI Thrust Areas
Ongoing
Increasing training andemployability of
underprivileged youth
through Construction SkillsTraining Institute and L&T
Charitable Trust activities
Ongoing
Promoting employee
volunteering
Employee volunteers increased to
4,500+ from 400+
Including EHS parameters in
social engagements
EHS awareness module is now a part
of education programme in social
engagement
These targets were defined as corporate level Objectives and the targets were set for areas
applicable across the ODs. In addition, each OD has set targets specific to their operations.
AWARDS AND MEDIA COVERAGE
1. L&T-Komatsu (LTK) bagged the prestigious award for being The Most InnovativeCompany in Energy Efficiency & Conservation from the Bangalore Chamber of
Industry and Commerce (BCIC) in Feb 2010.
2. Businessworld and the Federation of Indian Chambers of Commerce and Industry(FICCI) conferred on L&T the coveted Businessworld-FICCI-SEDF Corporate Social
Responsibility Award in May 2010.
3. L&T won the Good Corporate Citizen Award 2009-10 instituted by the BombayChamber of Commerce & Industry (BCCI) in September 2010.
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4. L&T was ranked Indias Most Respected Company in the Infrastructure category. Inthe overall rankings, L&T emerged second in Businessworlds rankings of Most
Respected Companies in February 2011.
5. L&Tbagged the India Shining Star CSR Award, instituted by the WockhardtFoundation, for Outstanding CSR in the sector for companies engaged in heavy
engineering in Feb 2011.
6. L&Ts sustainability practices and its disclosures were ranked amongst the top in Asiain the Environment, Social & Governance (ESG) 2010-11 ratings of RepuTex, Hong
Kong in June 2011. L&T was also the onlyIndian company listedamong the top 5 in
Asia in the Industrial segment rating.
7. L&Ts Corporate Sustainability Report for 2009 had secured international distinction,emerging as the only entry from an Asia-based company to Win Global Distinction for
its Sustainability Report in 2010.
8. L&Ts CSR initiatives were again in the limelight as it bagged the award for Companywith the Best CSR and Sustainability Practices by the Asian Centre for CorporateGovernance and Sustainability in Feb 2011.
9. L&Ts Corporate Social Initiatives won the Social Development Award from theBombay Chamber of Commerce and Industry (BCCI) in June 2010.
10.L&Ts Corporate Social initiatives (CSI) were yet again acknowledged and applauded this time with the prestigious Golden Peacock Global CSR Award 2011.
L&T is widely regarded as a unique company, with a remarkable lineage, ethos, management
structure and style of operations and the press coverage it gets reaffirms that status. L&T is
constantly lauded for the social impact, innovation and sustainability that characterized its
business and the far-reaching social impact of its initiatives in education, construction skillstraining and mother-&-child care. A citation from the Asian Centre described L&T as an
engineering giant associated with nation building that makes India proud. It also said that the
companys technological and business accomplishments were supported by transparency and
accountability at all levels. TheRepuTex rating also affirms international recognition of L&T as
a company committed to global sustainability practices and disclosures. All these awards and
coverage affirms the respect that L&T enjoys among its peers in India Inc.
OUR ANALYSIS
After studying the Larsen & Toubro Sustainability Reports in detail we, the members of Group I
realize how a Company focusing on heavy engineering activities that can have hazardous effects
on its stakeholders, can actually drastically minimize its negative impact ,if, it honestly triesto
do so. We covered various facets of L&Ts attempt and partial success in correcting all that was
detrimental to its stakeholders, and were quite impressed with the resulting numbers and
achieved targets, which have also cumulated into a variety of awards and accolades for the
Company.
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The fact that L&T could manage a strong growth even during heavy recession, without
compromising on their sustainability targets ,is a proof of the fact that they have taken care to
enhance the stakeholder value in every process that takes place in the company. Their vision
statement itself says a lot about how they aim to create a relationship of mutual trust and
continuous learning with the society. They believe that every employee in the company must be
involved in achieving Sustainable Development. Their sustainable structure speaks volume
about this, since it includes every individual in the company from the top level executive to the
employee at the bottom most of the pyramid.
L&T offers a well-defined Government and Sustainability structure. It demarcates the
responsibilities of various committees to formulate strategies reviewed by Operating company
heads, Executive Management Team and the Board of Directors. It facilitates autonomy and
performance discipline. The decentralized governance structure and the specified Code of
Conduct ensures corporate communication with an Internal Control System for protection of
rights and implementation of responsibilities.
L&T has been very clear about and dedicated towards its Stakeholders since its very first yearof reporting. The Company has also gone to the extent of commissioning professional advisory
services of KPMG to get a better insight about the issues that concern its Stakeholders-thus
reinstating its level of commitment. However, we feel that more details of the KPMG study
should have been shared in the Report to give the Stakeholders a much clearer view and
understanding of the exercise- so that feedbacks regarding the study, if any, could be
communicated to the Company.
Triple bottom line analysis is not a mandatory disclosure to be made by companies but L&T in
all its sustainability report since 2008 has made clear 3PL disclosure. L&T makes efforts to
ensure safety and growth of employee hence it has been voted 8th in Best Company to work forin 2011 survey conducted by Business Today. Although company has taken enough precautions
to prevent accidents like but a number of 29 deaths,66 near misses to accident is still very
high.They should provide more training to their employees and make an effort to make accident
free sites. It not only provides benefits to its employees, like life insurance, health care, ESOPs ,
PF ,gratuity ,etc but it also invests in providing every employee with required training based on
their structured performance and career development review. It has also created many
recreational centers for its employees at various locations. Employee satisfaction is visible from
the fact their employee turnover came down by 26% as compared to last year 2009.
The Company gives extreme importance to its environment practices. It believes that it is in a
symbiotic relationship with the environment which cannot be severed. In order to integrate eco-
efficiency into the core business, it has identified five core environment priorities. It has taken
massive steps pertaining to each of the priorities and has shown considerable results over the
past few years.However, L&T has to increase its share of renewable energy which stands at 8%,
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convert all itsbuildings to green buildings and take up more initiatives involving the
community.
It is easy to just keep talking about sustainability efforts and steps on corporate governance, but
only when you put down concrete milestones in writing do your commit yourselves to them.
And that is exactly what L&T has done. By clearly defining their short term sustainability goals,
they have set themselves a standard to which they must now strive to live up to. An interesting
observation is that most of these goals are designed in a way to integrate sustainability into their
business strategy. And going by their current progress reports, they are well on their way to
achieving these targets in the pre-decided timeframe.
To close, as students we were delighted to have a direct practical experience regarding
everything that was taught to us in class. We would humbly like to thank our Faculty for giving
us this opportunity to acquire new insights and add to the knowledge that will guide us when we
become Managers. After all, in todays age, the business of business is not only business.
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