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.

Documents

L Amp T Sustainability Analysis Report