Description
This is a document about corporate goverance reporting at ITC.
Corporate Governance and Sustainability Reporting
Definitions of Corporate Governance
? “Corporate Governance is the system by which companies are directed and controlled.” - Cadbury Report (UK), 1992-1993
? “…to do with Power and Accountability: who exercises power, on behalf of whom, how the exercise of power is controlled.” - Sir Adrian Cadbury, in Reflections on Corporate Governance, Ernest Sykes Memorial Lecture, 1993
? “Corporate governance involves a set of relationships between a company’s management, its board, its shareholders and other stakeholders also. The structure through which objectives of the company are set and the means of attaining those objectives and monitoring performance are determined.” - OECD Principles of Corporate Governance, 2004
? An Indian Definition: “Fundamental objective of corporate governance is the ‘enhancement of the long-term shareholder value while at the same time protecting the interests of other stakeholders.” - SEBI (Kumar Mangalam Birla) Report on Corporate Governance, January, 2000
? A Gandhian Definition: Trusteeship obligations inherent in company operations, where assets and resources are pooled and entrusted to the managers for optimal utilisation in the stakeholders’ interests.
THE THREE ANCHORS OF CORPORATE GOVERNANCE
The three anchors of corporate governance are board of directors, management and shareholders. While each of them has important responsibilities of its own, it is their interaction with each others that is the key to effective governance. The system can become unbalanced if any one of them is not functioning well.
BOARD AND MANAGEMENT
The changes introduced by focusing on board and Audit Committee composition have not succeeded in establishing a healthy distance between the management and Board. The Board should be free to monitor and the management free to manage. If the two functions are combined as under a system of Chief Executive Officer being Chairman, there is no separation of powers and functions. The policy making, strategy formulation and monitoring is done by the same person who is supposed to execute them. The efficiency of all these measures to distance Board from management would be lost if we let a person wear two hats at the same time that of Chairman of the Board and Chief Executive Officer of management. At the outset it should be noted that letting management personnel be members of the Board how so ever senior they member by calling them full time Directors / Executive Directors has confounded the concepts of transparency and Accountability. Good Corporate Governance demands the separation of the Board and Management. Even in the case of promoters whose personal wealth is tied to the company they have to make a choice to be satisfied by being a member of the Board or Management team. This of course goes against the grain of Indian
Corporate Governance, the founding family as “owners” being the Board as well as Management. Management Accountability will be non existent to the shareholders in such circumstances.
BOARD AND SHAREHOLDERS
The regulatory efforts and operation of market force have left out this relationship in the third anchor of corporate governance. By and large shareholders do no know what the directors are doing and directors do not know what the shareholders want. Board members are elected by shareholders to serve as their agents but in practice shareholders have not exerted much influence over directors. The exchange of information between the two anchors is poor and directors are not accountable to shareholders. There is no way for shareholders to know whether the directors have acted in their interests. Although they have the right to elect board, there is no efficient mechanism to nominate or even endorse director candidates. Shareholders on their part are apathetic and mute. Their communication is limited to formal proxy votes which historically ratified board’s wishes. Shareholders have access to no mechanism through which to effect changes, except for calling an extra ordinary general body meeting. The relationship between the two anchors, board and shareholders is not linked together in any manner or by any method except for the provision of annual general meeting. The absence of the link has created an imbalance in the governance mechanism. It has also encouraged a closer relationship and stronger link between board and management who fill the void. Directors can be effective in taking care of shareholders interests if we set up a strong structure of board shareholder relationship through ensuring transparent operation of the board meetings and
enfranchisement of shareholders. Three steps mooted in this connection are record of voting at board meetings, letting shareholders put up as well as elect a director on their behalf and make resolutions passed at shareholders meeting binding.
Definition of Independent Director:
Report of the Committee on Audit and Corporate Governance (2003), has defined Independent Director as a director: ? Not receiving remuneration ? Not related to promoters or management ? Not an executive of the company in the last three years ? Not a partner or executive in the Auditing firm ? Not a significant supplier or vendor or customer ? Not a shareholder owing 2% or more ? Not been a director for more than three terms of three years each. Non executive director is typically a powerful business person in his own right whose wisdom is based on a clear understanding of today’s financial issues and a grasp of how to create shareholders’ value. Directors’ experience and expertise influence for performance more than directors independence. The modern non executive director frequently represents the larger shareholders within the company. Outside directors signal their abilities through the effective monitoring of management. They have greater incentives to make decisions that benefit shareholders than do inside directors. Their decisions are signal to the labor market of their abilities as decision control agents. Since they are major decision makers with other organizations concerned for their reputation in the labor market provides them with incentives to act in the interest of shareholders. Today’s larger shareholders have shown that they wish to
see board decisions taken of which they fully approve. This is the global trend and has found acceptance in India. SEBI also emphasis the importance of non – executive, independent directors by insisting upon committees of directors directly or indirectly to play a major role in controlling the audit committee and remuneration committee, which consists of only independent directors as Chairman and majority forming independent directors. Given the requirement for greater risk management oversight by firms, empirical evidence reveals a significant and positive relation between the quantity of interest rate, derivatives used and the relative influence of outside directors. There is also evidence that the corporate interest rate derivative use, on average, benefits shareholders. Independent directors should be prepared to “whistle blow” or even resign where companies are not willing to address to the concern raised on behalf of the shareholders. Independent directors should be there to help the executives, build success, not police the rest of the board. They are the shareholders’ special watchdog.
Case Study & analysis
SUSTAINABILITY REPORTING AT ITC Ltd.
Apart from embedding into our business models a direct linkage between business objectives & social goals, we are also engaged in implementing various other sustainable development initiatives to make a meaningful contribution towards social empowerment & genderised development. - Y.C. Deveshwar, Chairman of ITC Limited, in 2008
We appreciate that ITC has a vision on environment & could be a role model for other companies, but there is no reason for them to misrepresent facts to show that they are carbon positive, or that they have attained global standerds in energy consumption. - Sunita Narain, ExDirector of CSE
EXECUTIVE SUMMARY ITC is a major India-based conglomerate, with presence in Hotels, Specialty Papers, Apparel, Foods, Tobacco Products, etc. The case discusses the sustainability initiatives of the company. The company believed in the Triple Bottom Line philosophy, according to which the performance of a corporate entity should be judged not just on the basis of its financials; its environmental and social performance should be taken into account as well. The case details some of the environmental and community initiatives undertaken by ITC. The case also mentions some of the criticisms against the company's sustainability initiatives.
INTRODUCTION In February 2008, ITC Limited (ITC), a major Indian conglomerate, received the Annual FICCI Outstanding Vision Corporate Triple Impact Award 2007. In the same month, ITC was placed second in the Environmental, Social and Corporate Governance (ESG) India Index1 launched by Standard and
1
The ESG India Index was launched by Standard and Poor's, CRISIL and KLD Research & Analytics in January, 2008. This is India's first investable index of companies whose business strategies and performance demonstrate a high level of commitment to meeting environmental, social and governance [ESG] standards. (Source: "S&P ESG India Index Launched,"http://www.thehindubusinessline.com, March 11, 2008)
Poor's, CRISIL and KLD Research & Analytics (Refer Exhibit I for the first 10 Indian companies on the ESG India Index). These recognitions were a direct result of ITC's concerted efforts to reduce the impact of its operations on the environmental and society.
On the business front, ITC had transformed itself from a tobacco-only company in early 20th century, to a multi-business conglomerate, with presence in hotels, paperboards, packaging and agri-exports, packaged foods & confectionery, branded apparel and information technology (IT) businesses. On the environmental front, ITC claimed to be the positive and water positive status. Also, its operations released close to zero solid waste. To achieve this status, the company reportedly undertook several initiatives such as forestry programs meant to convert wasteland into high yielding plantations and thereby enabling carbon dioxide sequestration11.
It also used renewable sources of energy, reduced water consumption, recycled waste water and solid waste, and implemented rainwater harvesting programs. On the social front, the company took its 'e-Choupal' initiative to farmers giving them crop-specific information in local languages. It also started rural hypermarkets (called Choupal Sagar), where farmers could sell their produce, buy farm inputs and avail of services like soil testing, banking and insurance.
ITC's Triple Bottom Line
ITC adopted the philosophy of the 'triple bottom line' in early 2000s. Y C Deveshwar (Deveshwar) , who became the CEO of ITC on January 01, 1996, was instrumental in this . In simpler terms, the philosophy of triple bottom line was measuring organisational success in terms of economic, environmental & social performance. According to the philosophy, as corporations used the country’s economic, natural & social resources to pursue their business & create wealth, they should also contribute to the preservation of the environment & to the improvement of the society while being engaged in their business operations.
Corporations were responsible not only to their shareholders, but towards all the people who were impacted, directly or indirectly, by their actions. In 2005 ITC, with its sustainability report for 2003-04, ITC became the first Indian company to publish such a report, in compliance with the global reporting initiatives(GRI)2 guidelines of 2002.
TOP 10 Indian Companies on the ESG Index Rank 1 2 3 4 5 6 7 8 9 10 ITC Ltd. Aditya Birla Group Dr. Reddy’s Laboratories Ltd. WIPRO Ltd. Jubilant Organosys Ltd. Axis Bank GTL Ltd. RIL HUL Company Infosys technologies Ltd.
The Bottom line
ITC gradually expanded its business to become one of India's foremost private sector companies. It had diversified presence in Cigarettes, Paperboards & Specialty Papers, Packaged Foods & Confectionery, Branded Apparel, Personal Care, Stationery, Safety Matches and other FMCG products and also in Hotels, Packaging, Agri-Business and Information Technology. According to the 4th sustainability report from ITC (covering the period between April 1, 2006 & March 31, 2007) prepared by PWC, over the previous three
2
Global reporting initiatives (GRI) is an UN backed, multi stakeholder international initiatives to develop & disseminate globally applicable sustainability reporting guidelines.
years, total shareholder returns in terms of market capitalisation & dividends had increased at compound rate of 32% per annum.
Environmental Initiatives
The company tried to minimize its consumption of water. In 2003-04, it achieved the status of being ‘water positive’. Through its water conservation & rainwater harvesting programmes. In addition to minimizing fresh water use, ITC also tried to recycle treated effluents.
(All figures million kiloliters) 2006 Fresh Water Intake Treated effluents discharged Net Water consumption RWH potential* created through watershed projects (cumulative) Total RWH potential created (cumulative) 25.5 21 4.6 19 19.6 23.6 25.8 2007 25.8 19.6 6.2 23.1 2008 27.5 19 8.5 25.4
(RWH – Rain water harvesting) * Actual amount of rainwater harvested in a year depends on rainfall & the rain pattern
To become ‘carbon positive’, ITC took several energy conservation measures & used climate neutral fuels3. ITC’s Carbon Status
2005-06 07
CO? released in kilotons (manufacturing & Freight) CO? sequestered (In kilotons) CO? sequestered (In %)
3
20061143
2007-08
1352
1202
1244 104
2025 177
2638 195
For fuel to be classified ‘climate neutral’, they should have significant CO2 reduction potential (compared to the conventional alternatives), should have low CO2 reduction costs, should be able to be introduced in existing infrastructure, etc. example include black liquor from solid pulp, hydrogen, synthetic natural gas etc.
As a part of achieving solid waste discharge status, all ITC unites tried to minimize & recycle solid waste like food & kitchen waste, plastic bag etc. ITC multi-business portfolio created an opportunity for the company to use waste of certain unites became natural raw material for some other unites. As ITC had both backward & forward business linkages, waste of certain unites became natural raw material for some other unites. As of 2007-08 more than 98.95% of all solid waste were recycled compared to 53% in 2004-05. In late 2007, the company also started an initiative to recycle dry waste like paper, plastic, metals, etc. ITC’s paperboards & speciality papers division together with Satyam, Infosys, Wipro & GE started an initiatives which included picking up waste from schools, govt. offices & residential areas. Waste paper would be used by ITC, & plastic, metal & other kinds would be sold to recycling companies like Pune based Deluxe Recycling, which would make a range of products including tiles, Door boards, furniture, etc. ITC, with its social & farm forestry (SFFI), which had started in 1996, helped to transform wastelands into green lands. As of march 31, 2008, ITC helped to convert an area of 80,000 hectares of wastelands into high-yielding plantations of eucalyptus, Casuarina etc As compared to 19,500 hectares in 2003-04. This initiatives helped to preserve & increase India’s forest resource base & offset twice the amount of carbon emitted from ITC business operations. Thereby the company addressed the issue of biomass reduction, soil erosion, biodiversity & ecological balance.
Social Initiatives (performance)
ITC claimed to contribute to society with special programs for health care, education, empowerment of women. Through its e-choupal initiative, which started in 2000, ITC empowered farmers by providing them widespread access to crop specific information in local languages. The company create a website which provided information about each agricultural crop, its price trends, expert opinions about farming processes & weather forecasts. The information helped rural farmers to make production decisions efficiently. For farmers, ITC e-choupal network also eliminated the need for intermediaries as they could use the network to buy farm or sell their
produce. As of mid-2008, the initiative covered 40,000 villages in the state of Madhya Pradesh, Utter Pradesh, Haryana, Uttaranchal, Rajasthan, Maharashtra, Karnataka, AP & Kerala & benefited 4 million farmers.
KEY SOCIAL PERFORMANCE • • ITC’s claims to generates livelihood for over 5 million people ITC globally recognized e-choupal initiatives are the world’s largest rural digital infrastructure benefiting over 4 million farming families. • ITC social & farm forestry initiatives has greened over 80000 hectares creating an estimated 35 million persons days of employment among the disadvantaged. • ITC’s watershed development initiatives brings precious water to nearly 35000 hectares of dry lands & moistures-stressed areas
Economic performance
•
The highest tax payer in Eastern India & amongst the top tax payers in the country Contributes to excise duty of Over 5% of the country’s total collection
Turnover over US $ 5 bn Market Capitalization nearly US $ 19 bn The new FMCG businesses of ITC supports the competitiveness, technology upgradation & market reach of over 150 SMEs
•
• • •
•
ITC market capitalization increased & dividends grew at a compound rate of over 26% per annum over the last 13 years.
Criticism
• ITC was also criticized regarding some of its sustainability initiatives. According to some critics, since ITC's main business was the Cigarettes and Leaf Tobacco business which was detrimental to human health, the company's sustainability initiatives were merely a part of its strategy to downplay the reality that it was a company that harmed the health of people • • The Initiatives taken by ITC served only to sustain its own business Company is not serious about e-choupal & Choupal sagars, expansion of these has not taken place since 2006. • Claims about ‘Global’ level of energy efficiency or had become water efficient or carbon positive
doc_176095384.doc
This is a document about corporate goverance reporting at ITC.
Corporate Governance and Sustainability Reporting
Definitions of Corporate Governance
? “Corporate Governance is the system by which companies are directed and controlled.” - Cadbury Report (UK), 1992-1993
? “…to do with Power and Accountability: who exercises power, on behalf of whom, how the exercise of power is controlled.” - Sir Adrian Cadbury, in Reflections on Corporate Governance, Ernest Sykes Memorial Lecture, 1993
? “Corporate governance involves a set of relationships between a company’s management, its board, its shareholders and other stakeholders also. The structure through which objectives of the company are set and the means of attaining those objectives and monitoring performance are determined.” - OECD Principles of Corporate Governance, 2004
? An Indian Definition: “Fundamental objective of corporate governance is the ‘enhancement of the long-term shareholder value while at the same time protecting the interests of other stakeholders.” - SEBI (Kumar Mangalam Birla) Report on Corporate Governance, January, 2000
? A Gandhian Definition: Trusteeship obligations inherent in company operations, where assets and resources are pooled and entrusted to the managers for optimal utilisation in the stakeholders’ interests.
THE THREE ANCHORS OF CORPORATE GOVERNANCE
The three anchors of corporate governance are board of directors, management and shareholders. While each of them has important responsibilities of its own, it is their interaction with each others that is the key to effective governance. The system can become unbalanced if any one of them is not functioning well.
BOARD AND MANAGEMENT
The changes introduced by focusing on board and Audit Committee composition have not succeeded in establishing a healthy distance between the management and Board. The Board should be free to monitor and the management free to manage. If the two functions are combined as under a system of Chief Executive Officer being Chairman, there is no separation of powers and functions. The policy making, strategy formulation and monitoring is done by the same person who is supposed to execute them. The efficiency of all these measures to distance Board from management would be lost if we let a person wear two hats at the same time that of Chairman of the Board and Chief Executive Officer of management. At the outset it should be noted that letting management personnel be members of the Board how so ever senior they member by calling them full time Directors / Executive Directors has confounded the concepts of transparency and Accountability. Good Corporate Governance demands the separation of the Board and Management. Even in the case of promoters whose personal wealth is tied to the company they have to make a choice to be satisfied by being a member of the Board or Management team. This of course goes against the grain of Indian
Corporate Governance, the founding family as “owners” being the Board as well as Management. Management Accountability will be non existent to the shareholders in such circumstances.
BOARD AND SHAREHOLDERS
The regulatory efforts and operation of market force have left out this relationship in the third anchor of corporate governance. By and large shareholders do no know what the directors are doing and directors do not know what the shareholders want. Board members are elected by shareholders to serve as their agents but in practice shareholders have not exerted much influence over directors. The exchange of information between the two anchors is poor and directors are not accountable to shareholders. There is no way for shareholders to know whether the directors have acted in their interests. Although they have the right to elect board, there is no efficient mechanism to nominate or even endorse director candidates. Shareholders on their part are apathetic and mute. Their communication is limited to formal proxy votes which historically ratified board’s wishes. Shareholders have access to no mechanism through which to effect changes, except for calling an extra ordinary general body meeting. The relationship between the two anchors, board and shareholders is not linked together in any manner or by any method except for the provision of annual general meeting. The absence of the link has created an imbalance in the governance mechanism. It has also encouraged a closer relationship and stronger link between board and management who fill the void. Directors can be effective in taking care of shareholders interests if we set up a strong structure of board shareholder relationship through ensuring transparent operation of the board meetings and
enfranchisement of shareholders. Three steps mooted in this connection are record of voting at board meetings, letting shareholders put up as well as elect a director on their behalf and make resolutions passed at shareholders meeting binding.
Definition of Independent Director:
Report of the Committee on Audit and Corporate Governance (2003), has defined Independent Director as a director: ? Not receiving remuneration ? Not related to promoters or management ? Not an executive of the company in the last three years ? Not a partner or executive in the Auditing firm ? Not a significant supplier or vendor or customer ? Not a shareholder owing 2% or more ? Not been a director for more than three terms of three years each. Non executive director is typically a powerful business person in his own right whose wisdom is based on a clear understanding of today’s financial issues and a grasp of how to create shareholders’ value. Directors’ experience and expertise influence for performance more than directors independence. The modern non executive director frequently represents the larger shareholders within the company. Outside directors signal their abilities through the effective monitoring of management. They have greater incentives to make decisions that benefit shareholders than do inside directors. Their decisions are signal to the labor market of their abilities as decision control agents. Since they are major decision makers with other organizations concerned for their reputation in the labor market provides them with incentives to act in the interest of shareholders. Today’s larger shareholders have shown that they wish to
see board decisions taken of which they fully approve. This is the global trend and has found acceptance in India. SEBI also emphasis the importance of non – executive, independent directors by insisting upon committees of directors directly or indirectly to play a major role in controlling the audit committee and remuneration committee, which consists of only independent directors as Chairman and majority forming independent directors. Given the requirement for greater risk management oversight by firms, empirical evidence reveals a significant and positive relation between the quantity of interest rate, derivatives used and the relative influence of outside directors. There is also evidence that the corporate interest rate derivative use, on average, benefits shareholders. Independent directors should be prepared to “whistle blow” or even resign where companies are not willing to address to the concern raised on behalf of the shareholders. Independent directors should be there to help the executives, build success, not police the rest of the board. They are the shareholders’ special watchdog.
Case Study & analysis
SUSTAINABILITY REPORTING AT ITC Ltd.
Apart from embedding into our business models a direct linkage between business objectives & social goals, we are also engaged in implementing various other sustainable development initiatives to make a meaningful contribution towards social empowerment & genderised development. - Y.C. Deveshwar, Chairman of ITC Limited, in 2008
We appreciate that ITC has a vision on environment & could be a role model for other companies, but there is no reason for them to misrepresent facts to show that they are carbon positive, or that they have attained global standerds in energy consumption. - Sunita Narain, ExDirector of CSE
EXECUTIVE SUMMARY ITC is a major India-based conglomerate, with presence in Hotels, Specialty Papers, Apparel, Foods, Tobacco Products, etc. The case discusses the sustainability initiatives of the company. The company believed in the Triple Bottom Line philosophy, according to which the performance of a corporate entity should be judged not just on the basis of its financials; its environmental and social performance should be taken into account as well. The case details some of the environmental and community initiatives undertaken by ITC. The case also mentions some of the criticisms against the company's sustainability initiatives.
INTRODUCTION In February 2008, ITC Limited (ITC), a major Indian conglomerate, received the Annual FICCI Outstanding Vision Corporate Triple Impact Award 2007. In the same month, ITC was placed second in the Environmental, Social and Corporate Governance (ESG) India Index1 launched by Standard and
1
The ESG India Index was launched by Standard and Poor's, CRISIL and KLD Research & Analytics in January, 2008. This is India's first investable index of companies whose business strategies and performance demonstrate a high level of commitment to meeting environmental, social and governance [ESG] standards. (Source: "S&P ESG India Index Launched,"http://www.thehindubusinessline.com, March 11, 2008)
Poor's, CRISIL and KLD Research & Analytics (Refer Exhibit I for the first 10 Indian companies on the ESG India Index). These recognitions were a direct result of ITC's concerted efforts to reduce the impact of its operations on the environmental and society.
On the business front, ITC had transformed itself from a tobacco-only company in early 20th century, to a multi-business conglomerate, with presence in hotels, paperboards, packaging and agri-exports, packaged foods & confectionery, branded apparel and information technology (IT) businesses. On the environmental front, ITC claimed to be the positive and water positive status. Also, its operations released close to zero solid waste. To achieve this status, the company reportedly undertook several initiatives such as forestry programs meant to convert wasteland into high yielding plantations and thereby enabling carbon dioxide sequestration11.
It also used renewable sources of energy, reduced water consumption, recycled waste water and solid waste, and implemented rainwater harvesting programs. On the social front, the company took its 'e-Choupal' initiative to farmers giving them crop-specific information in local languages. It also started rural hypermarkets (called Choupal Sagar), where farmers could sell their produce, buy farm inputs and avail of services like soil testing, banking and insurance.
ITC's Triple Bottom Line
ITC adopted the philosophy of the 'triple bottom line' in early 2000s. Y C Deveshwar (Deveshwar) , who became the CEO of ITC on January 01, 1996, was instrumental in this . In simpler terms, the philosophy of triple bottom line was measuring organisational success in terms of economic, environmental & social performance. According to the philosophy, as corporations used the country’s economic, natural & social resources to pursue their business & create wealth, they should also contribute to the preservation of the environment & to the improvement of the society while being engaged in their business operations.
Corporations were responsible not only to their shareholders, but towards all the people who were impacted, directly or indirectly, by their actions. In 2005 ITC, with its sustainability report for 2003-04, ITC became the first Indian company to publish such a report, in compliance with the global reporting initiatives(GRI)2 guidelines of 2002.
TOP 10 Indian Companies on the ESG Index Rank 1 2 3 4 5 6 7 8 9 10 ITC Ltd. Aditya Birla Group Dr. Reddy’s Laboratories Ltd. WIPRO Ltd. Jubilant Organosys Ltd. Axis Bank GTL Ltd. RIL HUL Company Infosys technologies Ltd.
The Bottom line
ITC gradually expanded its business to become one of India's foremost private sector companies. It had diversified presence in Cigarettes, Paperboards & Specialty Papers, Packaged Foods & Confectionery, Branded Apparel, Personal Care, Stationery, Safety Matches and other FMCG products and also in Hotels, Packaging, Agri-Business and Information Technology. According to the 4th sustainability report from ITC (covering the period between April 1, 2006 & March 31, 2007) prepared by PWC, over the previous three
2
Global reporting initiatives (GRI) is an UN backed, multi stakeholder international initiatives to develop & disseminate globally applicable sustainability reporting guidelines.
years, total shareholder returns in terms of market capitalisation & dividends had increased at compound rate of 32% per annum.
Environmental Initiatives
The company tried to minimize its consumption of water. In 2003-04, it achieved the status of being ‘water positive’. Through its water conservation & rainwater harvesting programmes. In addition to minimizing fresh water use, ITC also tried to recycle treated effluents.
(All figures million kiloliters) 2006 Fresh Water Intake Treated effluents discharged Net Water consumption RWH potential* created through watershed projects (cumulative) Total RWH potential created (cumulative) 25.5 21 4.6 19 19.6 23.6 25.8 2007 25.8 19.6 6.2 23.1 2008 27.5 19 8.5 25.4
(RWH – Rain water harvesting) * Actual amount of rainwater harvested in a year depends on rainfall & the rain pattern
To become ‘carbon positive’, ITC took several energy conservation measures & used climate neutral fuels3. ITC’s Carbon Status
2005-06 07
CO? released in kilotons (manufacturing & Freight) CO? sequestered (In kilotons) CO? sequestered (In %)
3
20061143
2007-08
1352
1202
1244 104
2025 177
2638 195
For fuel to be classified ‘climate neutral’, they should have significant CO2 reduction potential (compared to the conventional alternatives), should have low CO2 reduction costs, should be able to be introduced in existing infrastructure, etc. example include black liquor from solid pulp, hydrogen, synthetic natural gas etc.
As a part of achieving solid waste discharge status, all ITC unites tried to minimize & recycle solid waste like food & kitchen waste, plastic bag etc. ITC multi-business portfolio created an opportunity for the company to use waste of certain unites became natural raw material for some other unites. As ITC had both backward & forward business linkages, waste of certain unites became natural raw material for some other unites. As of 2007-08 more than 98.95% of all solid waste were recycled compared to 53% in 2004-05. In late 2007, the company also started an initiative to recycle dry waste like paper, plastic, metals, etc. ITC’s paperboards & speciality papers division together with Satyam, Infosys, Wipro & GE started an initiatives which included picking up waste from schools, govt. offices & residential areas. Waste paper would be used by ITC, & plastic, metal & other kinds would be sold to recycling companies like Pune based Deluxe Recycling, which would make a range of products including tiles, Door boards, furniture, etc. ITC, with its social & farm forestry (SFFI), which had started in 1996, helped to transform wastelands into green lands. As of march 31, 2008, ITC helped to convert an area of 80,000 hectares of wastelands into high-yielding plantations of eucalyptus, Casuarina etc As compared to 19,500 hectares in 2003-04. This initiatives helped to preserve & increase India’s forest resource base & offset twice the amount of carbon emitted from ITC business operations. Thereby the company addressed the issue of biomass reduction, soil erosion, biodiversity & ecological balance.
Social Initiatives (performance)
ITC claimed to contribute to society with special programs for health care, education, empowerment of women. Through its e-choupal initiative, which started in 2000, ITC empowered farmers by providing them widespread access to crop specific information in local languages. The company create a website which provided information about each agricultural crop, its price trends, expert opinions about farming processes & weather forecasts. The information helped rural farmers to make production decisions efficiently. For farmers, ITC e-choupal network also eliminated the need for intermediaries as they could use the network to buy farm or sell their
produce. As of mid-2008, the initiative covered 40,000 villages in the state of Madhya Pradesh, Utter Pradesh, Haryana, Uttaranchal, Rajasthan, Maharashtra, Karnataka, AP & Kerala & benefited 4 million farmers.
KEY SOCIAL PERFORMANCE • • ITC’s claims to generates livelihood for over 5 million people ITC globally recognized e-choupal initiatives are the world’s largest rural digital infrastructure benefiting over 4 million farming families. • ITC social & farm forestry initiatives has greened over 80000 hectares creating an estimated 35 million persons days of employment among the disadvantaged. • ITC’s watershed development initiatives brings precious water to nearly 35000 hectares of dry lands & moistures-stressed areas
Economic performance
•
The highest tax payer in Eastern India & amongst the top tax payers in the country Contributes to excise duty of Over 5% of the country’s total collection
Turnover over US $ 5 bn Market Capitalization nearly US $ 19 bn The new FMCG businesses of ITC supports the competitiveness, technology upgradation & market reach of over 150 SMEs
•
• • •
•
ITC market capitalization increased & dividends grew at a compound rate of over 26% per annum over the last 13 years.
Criticism
• ITC was also criticized regarding some of its sustainability initiatives. According to some critics, since ITC's main business was the Cigarettes and Leaf Tobacco business which was detrimental to human health, the company's sustainability initiatives were merely a part of its strategy to downplay the reality that it was a company that harmed the health of people • • The Initiatives taken by ITC served only to sustain its own business Company is not serious about e-choupal & Choupal sagars, expansion of these has not taken place since 2006. • Claims about ‘Global’ level of energy efficiency or had become water efficient or carbon positive
doc_176095384.doc