Harvard Case - Sterlite Copper: Profit Versus Public Health
"Sterlite Copper: Profit Versus Public Health" Harvard business case study is written by Veena Keshav Pailwar. It deals with the challenges in the field of Strategy. The case study is 14 page(s) long and it was first published on : Dec 21, 2020
At Fern Fort University, we recommend that Sterlite Copper prioritize a comprehensive strategic shift towards sustainable development and corporate social responsibility to regain public trust, mitigate reputational damage, and achieve long-term profitability. This shift necessitates a strategic transformation encompassing operational changes, community engagement, and transparent communication to ensure a harmonious relationship between the company's operations and the local community.
2. Background
The case study focuses on Sterlite Copper, a subsidiary of Vedanta Resources, operating a copper smelter in Thoothukudi, Tamil Nadu, India. The smelter, a vital economic driver for the region, faced intense public opposition due to concerns about its environmental impact and alleged health risks. The protests escalated into violent clashes, leading to the closure of the smelter by the Tamil Nadu government.
The case study explores the complex interplay between profitability, public health, and corporate social responsibility. It highlights the challenges faced by companies operating in developing countries with limited environmental regulations and a growing awareness of environmental and social issues.
The main protagonists are:
- Sterlite Copper: A company seeking to maximize profits through efficient copper production.
- Local Community: Residents concerned about the smelter's impact on their health and environment.
- Tamil Nadu Government: Balancing economic development with public health concerns.
3. Analysis of the Case Study
This case study can be analyzed through various frameworks:
a) Porter's Five Forces:
- Threat of New Entrants: High, as the copper industry is capital-intensive but offers potential for growth.
- Bargaining Power of Suppliers: Moderate, as copper prices are influenced by global supply and demand.
- Bargaining Power of Buyers: Moderate, as copper is a commodity with multiple buyers.
- Threat of Substitutes: Moderate, as alternative materials like aluminum can replace copper in some applications.
- Competitive Rivalry: High, with numerous copper producers competing globally.
b) SWOT Analysis:
Strengths:
- Strong financial backing from Vedanta Resources.
- Established infrastructure and production capabilities.
- Experienced workforce.
- Significant economic contribution to the region.
Weaknesses:
- Poor environmental record and public perception.
- Lack of transparency and communication with the community.
- Limited focus on sustainable practices.
- Susceptibility to government regulations and public pressure.
Opportunities:
- Growing demand for copper in emerging markets.
- Potential for technological advancements in copper production.
- Opportunity to enhance environmental performance and social responsibility.
- Building stronger relationships with the community through engagement and transparency.
Threats:
- Increasing environmental regulations and stricter enforcement.
- Growing public awareness and activism regarding environmental issues.
- Potential for future protests and legal challenges.
- Competition from other copper producers with stronger environmental credentials.
c) Value Chain Analysis:
Sterlite Copper's value chain can be analyzed to identify areas for improvement:
- Upstream: Sourcing raw materials, ensuring ethical and sustainable practices.
- Production: Optimizing production processes, minimizing waste, and reducing emissions.
- Distribution: Efficient logistics and transportation, minimizing environmental impact.
- Marketing: Building a positive brand image, emphasizing sustainability and social responsibility.
- Customer Service: Engaging with stakeholders, addressing concerns, and building trust.
d) Stakeholder Analysis:
Identifying key stakeholders and their interests is crucial:
- Local Community: Health, environment, livelihood, and economic development.
- Government: Economic growth, environmental protection, public safety, and political stability.
- Employees: Job security, fair wages, and safe working conditions.
- Investors: Financial returns, responsible business practices, and long-term sustainability.
- Suppliers: Fair contracts, timely payments, and sustainable sourcing practices.
e) Corporate Governance:
Sterlite Copper must strengthen its corporate governance framework to ensure transparency, accountability, and ethical decision-making. This includes:
- Implementing robust environmental and social impact assessments.
- Establishing independent oversight mechanisms for environmental and social performance.
- Engaging with stakeholders in a transparent and participatory manner.
- Adhering to international best practices for corporate social responsibility.
4. Recommendations
a) Strategic Shift Towards Sustainable Development:
- Adopt a 'Zero Harm' policy: Commit to minimizing environmental impact and ensuring worker safety.
- Invest in cleaner technologies: Upgrade production processes to reduce emissions and waste.
- Implement a circular economy model: Explore ways to reuse and recycle materials, minimizing resource consumption.
- Partner with environmental NGOs: Collaborate with experts to develop sustainable solutions.
b) Community Engagement and Transparency:
- Establish a Community Advisory Board: Engage local stakeholders in decision-making processes.
- Conduct regular community dialogues: Provide transparent information about operations and address concerns.
- Invest in local development initiatives: Support education, healthcare, and infrastructure projects.
- Create a dedicated community relations department: Build trust and foster positive relationships.
c) Communication and Brand Management:
- Develop a comprehensive communication strategy: Communicate proactively and transparently with stakeholders.
- Rebrand Sterlite Copper: Emphasize sustainability, social responsibility, and community engagement.
- Leverage social media platforms: Engage with the community and address concerns online.
- Partner with media outlets: Promote positive stories about the company's efforts.
d) Operational Changes:
- Improve environmental monitoring and reporting: Ensure accurate and transparent data collection and reporting.
- Implement strict environmental compliance protocols: Adhere to all relevant regulations and standards.
- Invest in employee training: Promote environmental awareness and responsible practices among workers.
- Develop a robust emergency response plan: Prepare for potential environmental incidents and ensure prompt action.
5. Basis of Recommendations
These recommendations are based on:
- Core competencies and consistency with mission: Sterlite Copper has the financial resources and operational expertise to implement these changes. The recommendations align with the company's mission to be a responsible corporate citizen.
- External customers and internal clients: The recommendations address the concerns of the local community, government, and employees. They aim to build trust and ensure long-term sustainability.
- Competitors: The recommendations position Sterlite Copper as a leader in sustainable copper production, differentiating it from competitors.
- Attractiveness: The recommendations are expected to improve the company's environmental performance, enhance its brand image, and reduce the risk of future protests and legal challenges. This will ultimately contribute to long-term profitability.
6. Conclusion
Sterlite Copper faces a critical juncture. By embracing a strategic shift towards sustainable development and corporate social responsibility, the company can regain public trust, mitigate reputational damage, and achieve long-term profitability. This requires a comprehensive transformation encompassing operational changes, community engagement, and transparent communication. By prioritizing these elements, Sterlite Copper can demonstrate its commitment to being a responsible corporate citizen and contributing to the well-being of the community.
7. Discussion
Alternatives:
- Ignoring the concerns: This would likely lead to continued protests, legal challenges, and reputational damage.
- Focusing solely on profit: This would exacerbate the existing conflict and undermine the company's long-term viability.
Risks and Key Assumptions:
- Implementation challenges: Implementing these changes requires significant investment, commitment, and organizational change.
- Community resistance: Some community members may remain skeptical, requiring continued engagement and dialogue.
- Government regulations: Changes in government regulations could impact the company's operations.
Options Grid:
| Option | Benefits | Risks |
|---|---|---|
| Strategic Shift | Improved environmental performance, enhanced brand image, reduced risk of protests, long-term profitability | Implementation challenges, community resistance, government regulations |
| Ignoring Concerns | Short-term cost savings | Continued protests, legal challenges, reputational damage, long-term viability |
| Focusing on Profit | Short-term profit maximization | Exacerbated conflict, undermined long-term viability |
8. Next Steps
- Form a task force: Assemble a cross-functional team to develop and implement the strategic shift.
- Conduct a feasibility study: Assess the costs and benefits of implementing the recommendations.
- Develop a communication plan: Communicate the company's commitment to sustainability and social responsibility.
- Engage with stakeholders: Establish a dialogue with the community, government, and other stakeholders.
- Monitor progress and adapt: Continuously evaluate the effectiveness of the changes and make adjustments as needed.
By taking these steps, Sterlite Copper can embark on a path towards sustainable development, community engagement, and long-term success.
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Case Description
Sterlite Copper (Sterlite), owned by Vedanta Resources Limited (Vedanta), was one of three major copper plants in India. However, the plant had been the subject of controversy and public protests. The people residing in Tuticorin, where the plant was located, considered Sterlite to be a major contributor to the air and water pollution in the neighbouring area. In light of the latest public protest on May 23, 2018, which was supported by several national and international non-government organizations, human rights activists, and Tamil solidarity groups, the Government of Tamil Nadu ordered a permanent shutdown of the plant. Since the plant contributed around 5 per cent to Vedanta's operating profit, the closure of the plant not only threatened the earnings and profitability of the parent company but also damaged its brand image. The plant was a major source of copper for over 400 small and medium-sized industries in its downstream value chain. The closure of the plant put at risk the jobs of a large number of employees, which Sterlite supported both directly and indirectly through its value chain. What should Vedanta do in such a hostile environment?
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