1 Environmental Sustainability Assignment Sample
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Introduction
Incorporated in 1910 as the Imperial Tobacco Company of India Limited, the company was formed as the leader in tobacco products. The company remained private and only opened to public ownership in 1954. These period were used by the company to attain the position of becoming one of the biggest cigarette manufacturers. In 1970’s the company changed its name by resolution to the Indian Tobacco Company and diversified into a range of non – tobacco businesses. In 1974 the company finally changed its name to ITC Limited and now trades under this single banner.
The company still rules the tobacco markets in India with around 81 % of all cigarettes sold in India still coming from its stable to many brands totaling close to USD 11 billion. The company’s other business divisions include: Foods, Personal Care, Stationery, Safety Matches and Incense Sticks, Hotels, Paper board and Paper Products, Packaging and Printing and Information Technology.
ITC employs close to 25,000 people and has an annual turnover of USD 9.3 billion and market capitalization of USD 45 billion.
ITC walks with the giants of India’s business world — Tata and Reliance. India’s top cigarette maker, ITC is a conglomerate with four primary interests: fast moving consumer goods (cigarettes and cigars, food, and personal care products); luxury hotels; paperboard, paper, and packaging; and agri business (leaf tobacco, commodities, spices). Its major brands include India Kings, Insignia, Navy Cut, Scissors, and Gold Flake (cigarettes); Wills Sport and John Players (apparel); Kitchens of India and Bingo! (prepackaged food, candy); and Mangaldeep (incense sticks, matches). It’s also parent to one of India’s biggest technology businesses, ITC Infotech. British American Tobacco owns about a 30% stake in ITC.
Cigarettes, personal care products, foods, education and stationery products, incense sticks (agarbattis), lifestyle retailing, and safety matches form the FMCG arm of ITC
ITC’s foods business spans five categories: staples, snack foods, ready to eat foods, spices and bakery and confectionery. Some of the major brands of the group in the foods business include Aashirvaad, Sunfeast, Yippee! Bingo!, Kitchens of India, mint-o, Candyman, Yumitos and GumOn.
The cigarettes business offers various tobacco products as well as roll-your-own solutions under brands such as Insignia, Classic, India Kings, Gold Flake, Players, Navy Cut, Scissors, Bristol, Berkeley, Capstan, Flake, Lucky Strike, Silk Cut and Duke & Royal. The group caters to the Indian as well as international tobacco markets through its production facilities in Bengaluru, Munger, Saharanpur, Kolkata and Pune. ITC also offers handrolled cigars under the Armenteros brand name. In the personal care category, the group offers fragrances, shampoos, after shave lotions, bathing bars, shower gels and medicated powders, among others. ITC markets these products under the brand names Essenza Di Wills, Fiama Di Wills, Vivel, Engage, Superia, Shower to Shower and Savlon.
The group offers education and stationery products such as notebooks, mathematical drawing instruments, precision instruments, and erasers and sharpeners through the Classmate brand; business papers and pens under the Paperkraft brand name; and non-toxic oil pastels, color pencils, wax crayons and sketch pens under the Color Crew brand name. It also offers notebooks in the value segment under the brand, Saathi.
ITC’s lifestyle retailing business encompasses its Wills Lifestyle and John Players retail store chains. At the end of FY2015, the group operated 104 exclusive Wills Lifestyle stores across 44 cities in India and more than 500 shop-in-shops in departmental stores, regional chain stores and multi-brand outlets. ITC also operates over 400 flagship John Players stores and more than 1,400 multibrand outlets and departmental stores. These stores offer clothes ranging from casual wear to formal wear. While the Wills Lifestyle brand targets the premium branded apparel market, the John Players brand caters to the youth apparel market.
ITC also offers a range of safety matches under brands such as Aim and i Kno. The group manufactures and markets incense sticks under the brand name Mangaldeep.
The agri-business segment is engaged in the purchase and export of agricultural commodities such as feed ingredients (including soyameal) and food grains (including wheat, rice, pulses, maize and barley). The group is also involved in the purchase and export of marine products like shrimps and prawns, and processed fruits (fruit purees/concentrates, frozen fruits, and organic fruit products). Besides, ITC trades in coffee and sources leaf tobacco for cigarette business.
The paperboard, paper and packaging segment offers folding box boards, solid bleached boards, poly coated boards, specialty papers, recycled boards and fine papers, among others. The group offers its products in this segment under various brands including Indobev, Cyber XLPac, Eco Blanca, Eco Natura, Alfa Zap, Hi Brite and Alfa Plus, among many others. The paper and paperboards business caters to a wide range of packaging, graphic, communication, writing, printing and specialty paper requirements through its four manufacturing units, eight sales offices and a network of over 60 dealers in India, along with an international trade network of distributors/agents and six finishing operations. ITC’s packaging business supplies packaging to its various FMCG businesses.
The hotels segment operates over 100 hotels across 70 destinations in India. Its properties are classified under four distinct brands: ITC Hotels – Luxury Collection, hotels operated through a tie up between Starwood Hotels & Resorts and ITC Hotels; Fortune Hotels, a chain of budget hotels; WelcomHeritage, a chain of palaces, forts, havelis and resorts; and WelcomHotels, a five-star hotel for business and leisure travelers. The group also operates branded cuisine chains such as WelcomCuisine, Bukhara, Peshawri, Dakshin, Dum Pukht, West View and Pan Asian, which offer Indian cuisines from different regions.
The others segment includes IT services, manufacture of cigarette filter rods, golf resorts operations and real estate operations of ITC, among others. The group provides IT services through ITC Infotech, which caters to industry verticals such as banking, financial services and insurance (BFSI), airline, consumer packaged goods (CPG), retail, manufacturing, Hi-Tech and hospitality.
Environmental Sustainability Issues & ITC
In a conglomerate the size of ITC environmental sustainability has to be taken up not as a standalone project but as a part of everyday production and business processes. This will lead to a culture change as well as have an organization wide impact. ITC realized early on that any environment sustainability issue will have multiple stakeholders which will be impacted by it. Therefore it chalked up plans as Sustainability initiatives to integrate small and marginal stakeholders through a robust and distinct business model. (“ITC – Sustainability in Action | Corporate Sustainability”, 2018)
ITC is one of the respected conglomerates known for its sustainability efforts. The group’s efforts led to the backward integration and transformation of the small suppliers who were suppressed under several layers of supply chain. The integration created value for both ITC as well as the suppliers who are also the end-users of the group’s products. Among these initiatives, e-Choupal has been a supply chain management success story which is recognized world over. It was launched in the year 2000 by ITC as an effort to directly connect with the farmers, the actual supplier of the group’s agribusiness commodities. The initiative leverages IT knowhow to create awareness among the farmers about the local price as well as global price trends, so that they can compare ITC offerings with those of other traders and middlemen. This also facilitates swift transactions lowering inventory cost. Furthermore, 6,500 internet kiosks in more than 40,000 villages across 11 states act as information centers for other agricultural related information such as local weather and advanced agricultural techniques. Additionally, the initiative provides a platform for the group to market its other FMCG and agribusiness products. The discounted price and benefits of kiosks thus help in creating a loyal customer base for the group’s other products. e-Choupal services currently reach out to more than four million farmers growing a range of crops such as soybean, coffee, wheat, rice and pulses.
Furthermore, through Choupal Pradarshan Khet (CPK), which was launched in 2006, the group gives demonstrations to farmers to help enhance farm productivity by adopting agricultural best practices. CPK is aimed at enhancing the quality of agricultural commodities supplied to ITC. The crop portfolio includes soya, paddy, cotton, maize, bajra, wheat, gram, mustard, sunflower and potato. This initiative covers more than 70,000 hectares and reaches out to 1.6 million farmers. In addition to this, the group has outlined a triple bottom line strategy as part of its sustainability efforts. This strategy is centered on developing and regenerating the nation’s economic, social and environmental capital. The group introduced several programs in line with its triple bottom line strategy.
Through its integrated watershed development program, ITC currently covers more than 2,10,000 hectares of land under soil and moisture conservation and has helped over 1,65,000 households across 40 districts in 10 states (Telangana, Karnataka, Tamil Nadu, Andhra Pradesh, Madhya Pradesh, Rajasthan, Maharashtra, Bihar, Odisha, and Gujrat) in India. Further, in June 2015, the group announced plans to double the area of land covered under this program to around one million acres by 2018. Its women’s empowerment initiative created over 45,000 sustainable livelihoods. ITC’s livestock and animal husbandry program has provided services to over 1,100,000 milch animals, increasing milk yields substantially. The group’s efforts to improve the economic condition at the grass root level through its social business initiatives helped it improve its corporate image to beyond that of a traditional tobacco manufacturer.
The group operates the e-Choupal model (launched in 2000) to network directly with rural farmers through the internet for procurement of agricultural and aquaculture products. The initiative provides reliable market information, global price trends, and information about latest farming techniques and local weather to the local community. It eliminates value chain intermediaries thereby reducing the transaction time and shortening the transaction process between the ITC and the farmers. This initiative currently comprises approximately 6,500 installations covering nearly 40,000 villages and serving over four million farmers.
Leadership and its Impact on Environmental Sustainability
The ITC company has had access to visionary leadership and dynamic decision making from the early years. This has helped the group achieve new heights and scale diversified businesses quickly. The role of leadership in any organization is not limited to only management decision making and is instead one of facilitating the orgnisations growth and setting the path or a vision for its future. (“ITC Policies – Corporate Ethics, Transparency, Sustainability”, 2018)
When an organization has access to such leadership the assets of the organization can be counted with management as a resource and asset instead of only as a cost. This management capital when deployed correctly performs to drive the organization to achieve a future of environmental sustainability in a responsible manner.
Y C Deveshwar:
The executive chairman of the board is Shri. Yogesh Chander Deveshwar who now serves as the mentor to the CEO and a member of the corporate committee. He is an alumnus of the Indian Institute of Technology, Delhi and Harvard Business School. Mr Deveshwar joined ITC in 1968 and move on to be appointed a member of the board in 1984. The rapid initiatives taken by Mr Deveshwar saw him being appointed as the Chief Executive and Chairman in 1996. Thereafter in 2017 the duties were split between the Executive Chairman and the CEO.
ITC is not the only organization that recognized the leadership ability and stewardship of Mr Deveshwar was also called upon by the Govt when he led the state owned Air India between 1991 and 1994 as the Chairman and Managing Director.
Mr Deveshwar has always put forth a vision of country before corporation and espoused his vision in terms of serving larger national priorities. These are guiding values which helped him create multiple divisions of growth in ITC and deliver a significant pillar of support and
Contribution to the Indian economy. He was instrumental in building a fundamental strategy of executing the organizational plan that will allow management of multiple segments at ITC and yet maintain focus on each of them.
These fundamental structures so laid out by him led ITC to discover unique competitive and sustainability advantages which helped it shape its environmental sustainability programs.
He is ranked 7th among the world’s best CEO’s for his contribution to making ITC the powerhouse of FMCG marketing beyond its tobacco origins in the country. He also enabled ITC to become India’s most environmentally conscious paperboard and packaging business which is a feat unheard of in this industry. The paperboard industry has always had challenges of its environmental impact and yet ITC emerged as the best in this category as well which earned it accolades across the globe.
ITC under the leadership of Y C Deveshwar also pioneered in empowering the Indian farmers through its agri business and become a trailblazer for the term ‘green hoteliering’ in India through its chain of Hotels.
This is the impact of leadership in shaping organizational commitment and vision towards not only enhancing shareholder value but also galvanize the natural and social capital in the society in which the organization exists. This clarity of vision and commitment created value not only for ITC but also for its partners in the supply chain and the environment that it impacts ; thereby building a ground up model which will be sustainable for business and the environment together.
Impact of Environmental Sustainability Issue on ITC’s Competitiveness
One of the major areas where ITC faces direct environmental sustainability challenge is its tobacco business. The tobacco business has been witnessing a slew of challenges in recent times both economic and social in nature. These are in addition to the internal observation of the company about the natural resources required for the tobacco business.
The cigarette business at ITC has seen searing taxation in terms of increase in excise as well as VAT by almost 131 % and 157 % respectively. The difference in excise duty rates of per kg of tobacco between that used for cigarettes and that used for other tobacco products is at 53 x currently.
Non legal cigarette trade has grown to an extent of making India the fourth largest market in terms of illegal trade of cigarettes in the world. These tax evaded cigarettes impact the economy almost to the tune of INR 90 billion.
ITC realized that this illegal market of tobacco and the lower taxed or tax evaded tobacco products were hurting its ability to compete in the market as well as impacting the livelihoods of the farmers which were farming the tobacco. This is further compounded by the impact of cigarette paper manufacturing on the environment.
How Can ITC Respond to this Issue?
ITC already enjoys a very close connect with the population of India in many spheres of life. The emergence of an environmentally sustainability challenge as the one above required ITC to respond in a manner that all stakeholders are safeguarded as well as the competitive advantages are not lost. This can only be done in an environmentally sustainable manner by ensuring: (“ITC SUSTAINABILITY-REPORT-2016”, 2018)
- Drive higher yields for farmers via sharing technical knowhow with them on multiple crop farming in same field.
- Incentivize farmers to produce crops which are directly of the quality to be absorbed into the ITC manufacturing process; reduce wastage.
- Farming of all tobacco in the country should be absorbed on priority by ITC on long term rates. This is to ensure that lower taxed products which do not allow farmer empowerment are not able to exploit the market.
- Afforestation along railway tracks as that land is captively owned by the railways and is usually no used. Thereby spare railways land will be leveraged to generate paper pulp.
- Identify specific tree varieties which while produced in plenty give maximum return on pulp produced for cigarettes and paper business. This will help derive deeper competitive advantages.
- Explore salvaging waste paper as input raw material for the paperboards manufacturing units. This will enable them to avoid intake of fresh pulp from the environment and bolster sustainability efforts.
- Reduce and Consume internal paper waster. This should be exercised to ensure that while it will get recycled as input for the paper units and cigarette paper pulp; the paper will be salvaged from being dumped in municipal waste plants.
- Identify account for water consumption at all supply chain partners and internal assets and reduce as well as recycle from multiple operations.
What Opportunities & Challenges does ITC Face to Implement the Response?
Opportunities
ITC will generate opportunities to realign its manufacturing process input streams and achieve internal efficiency as well as build an environmentally sustainable business model.
ITC will be able to come close to achieving a circular economy path for itself as each process will be attuned to producing in a manner which is sustainable and is an input for the next process which will bring the resource back in the system.
ITC will be able to create the same level of product quality and experience for its consumers while reducing its impact on the environment. The reduction of water consumption is an opportunity to create water reservoirs for the population and agriculture purposes and achieve water sustainability in the process.
Challenges
Social challenges in the Indian farmer bases continue to exist in the form of control of the farmer’s lands by entrenched players. This is also impacting the farmers’ ability to grow the crops that they know will get them better yields as well as fetch a better price if sold directly to ITC.
Some regulatory challenges in the grain markets have an impact in wasteful farming which does not empower the farmers a well as does not fetch them the correct prices for their livelihoods. The impact of NGOs generating campaigns against Indian tobacco farmers is also being felt by ITC in the current context.
References
ITC – Sustainability in Action | Corporate Sustainability. (2018). Retrieved from http://www.itcportal.com/sustainability/index.aspx
ITC Policies – Corporate Ethics, Transparency, Sustainability. (2018). Retrieved from http://www.itcportal.com/about-itc/policies/index.aspx
ITC SUSTAINABILITY-REPORT-2016. (2018). Retrieved from http://itcportal.mobi/sustainability/sustainability-report-2016/default.aspx
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