ITC Sustainability Report 2015 :: Organisational Profile

SUPPLY CHAIN

Management Approach

ITC's vision to serve larger national priorities is realised by the strategic approach of embedding sustainability in its core business models. Innovative strategies have therefore been designed and implemented to create sustainable value chains linked to its businesses. Dependent as the organisation is, on agricultural resources, these value chains encompass small and marginal farmers, who constitute some of the most disadvantaged sections of Indian society. The vitality of ITC's winning brands drive the competitiveness of these value chains. At the same time, these linkages provide unique sources of competitive advantage to the Company's businesses. ITC recognises that with an expanding and diversified portfolio of businesses, the actualisation of its vision of sustainable development has to necessarily take into account the environmental and social impact within the supply chain. It is therefore important to extend ITC's Triple Bottom Line approach along the supply chain. This will ensure long-term competitiveness through a balance between creation of long term social & environmental value and the economic viability of the businesses.

To formalise the sustainable procurement process, ITC has put in place Board approved Policies which address the issues of labour practices, human rights, bribery, corruption, occupational health, safety and environment in the supply chain. These policies, meant for Third Party Manufactures (TPM), service providers including transporters, suppliers of agricultural & non-agricultural materials and capital goods, franchisees, dealers and distributors collectively referred to as supply chain partners, define the structure around which efforts are directed for continually improving the sustainability performance along the supply chain. These policies are actualised through a 'Code of Conduct for Vendors and Service providers' that details out specific requirements related to the aspects addressed in the policies. Through acceptance of this code by the supply chain partners, ITC seeks their commitment to comply with all applicable laws, respect human rights and contribute to environmental conservation.

Each ITC Business has developed road maps for phase-wise implementation of the sustainability policies and inclusion of their supply chain within their sustainability management system in a progressive manner. Progress of implementation of these road maps is reviewed by the Sustainability Compliance Review Committee.

A simplified representation of the material flow in ITC's businesses is given below:

*The above diagram includes material flow only and does not include Lifestyle Retailing Business, Hotels business and ITC Infotech

: Indicates Material flow within ITC

As evident from the above representation of the generic material flow for ITC businesses, the supply chains of most of ITC's businesses are vertically integrated. Farmers are the key suppliers for the majority of our businesses which are dependent on agri-commodities, and therefore constitute an integral part of ITC's supply chain. Accordingly the Company has focussed on enhancing the sustainability of its agri-supply chain, details of which are mentioned below.

Sustainability in the Agri Supply Chain

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Agri Commodities

ITC's Agri-Business operations span the entire spectrum of activities starting from agri-services/ crop development to risk management, including sourcing, processing, supply chain, multi-modal logistics, stock management, and customer service. The solutions offered are a combination of all or some of these interventions. The solutions also offer the customers the flexibility in terms of quantity, timing, as well as packaging solutions for delivery of the agri-commodities. These solutions not only help customers in enhancing their cost and quality benefits, but also create and capture value for other partners, especially farmers.

ITC's Agri Business Division has been continuously investing in strengthening capability through multiple sourcing models, customised and identity preserved supply chain infrastructure and network, processing and warehousing tie-ups, technology enabled systems and processes, and people capabilities. The Division also works closely with farmer groups to develop identified geographies for certified and organic crops. These investments coupled with deep understanding of agriculture, and the reach of the e-Choupal network, provide the opportunity to offer a wide range of reliable and consistent solutions that are efficient and effective along the entire supply chain.

ITC's e-Choupal network ensures traceability, identity preservation of the produce along the entire value chain as well as product integrity by leveraging Information Technology and digital infrastructure that enhances the competitiveness of the agri value chain. This has been achieved by empowering farmers through price discovery, knowledge, information as well as agricultural best practices. A hub and spoke model has been built along with the necessary physical infrastructure that has enabled multi-level aggregation.

Based on the above approach, the Division sourced over 21 lakhs tonnes of agri-commodities covering wheat, soya, coffee, potato, fruits, barley, maize, rice, and shrimps from over 18 states to service a range of customers in India and across several countries, including leading brand owners and bulk processors.

Leaf Tobacco

At ITC's Leaf Tobacco Division, the sustainability framework encapsulates and guides its efforts to create value for the farming community at large and the farm value chain in particular. Working closely with the farming fraternity, ITC has constantly transferred technology from the lab to the land with appropriate crop solutions, apart from pioneering the introduction of High Yielding Varieties. "Model villages" are adopted to drive sustainable community development by empowering Indian farmers through deployment of Good Agricultural Practices (GAPs) to meet customer requirements. The sustainable crop production system enhances crop competitiveness and surplus income generation to the farming community. The sustainable income generation in turn will minimise vulnerability and drive overall village development.

Enabled by a team of agronomists, agriculture experts, engineers and development managers, the sustainability initiative has helped in substantially improving the quality table of the Indian tobacco basket. The key strategy of ITC's farmer empowerment programme is integrated resource deployment. Multiple interventions are grounded in the model villages (i) Crop development for ensuring higher productivity, product quality & integrity (ii) Farm sustainability for ensuring environment sustainability (iii) Research & Development for developing next best practices and (iv) Community development for building rural infrastructure. The integration aims at achieving higher farmer income, improved crop saleability, optimum resource utilisation and complete custody of supplies within the auction system thereby moving from Sustainable Crop Production to Sustainable Livelihoods.

Initiatives pertaining to enhancement of farmer profitability which are essential for the pursuit of a sustainable living for the farm communities are implemented across tobacco growing regions. These include climate resilient seedling production, Integrated Pest Management practices ensuring compliance to regulation with high product integrity and customised crop advisory via mobile phone, disseminated to around 17,000 farmers.

From an environment protection point of view, initiatives pertaining to soil conservation, popularising the use of organic amendments and techniques on soil fertility management towards reducing chemical fertilisation use are propagated. Towards sustainable fuel management, ITC has adopted a three pronged approach in tobacco farm value chain - introduction of fuel efficient technologies, alternate fuel usage and self-sustenance through energy plantations. In 2014-15 around 10,000 hectares of energy plantations have been undertaken around the tobacco growing regions.

For further details about our relationship with the agri-supply chain, please refer to 'Social Investments - Mission Sunehra Kal' section in this Report.

Sustainability in the Value Chain

Since ITC is vertically integrated to a large extent, it provides unique opportunities for establishing synergy and thereby minimising environmental impacts through optimum utilisation of raw materials, reuse/ recycling of wastes and optimum logistics. As explained earlier, agri-commodities being the key raw materials for most of ITC's businesses, they are accorded prime focus for addressing supply chain issues. ITC's interventions in this domain along with community development initiatives have not only supported sustainable agricultural practices but also contributed to sustainable livelihood creation for farmers. Thus, material sustainability issues specific to environment have been taken care of to a large extent. In addition, ITC's sustainability policies, for which each business has developed specific phase-wise implementation plans, and associated code of conduct for vendors and suppliers provide the necessary framework to deal with aspects associated with labour practices, human rights, bribery, corruption, occupational health, safety and environment in the entire value chain.

Further, in line with the overall strategy to embed the principles of sustainability, as far as practicable, into the various stages of product or service life-cycle, ITC initiated life cycle assessments (LCA) of its products & services in 2010 with an objective to evaluate the impacts and identify areas for improvement in the value chain. So far, LCAs have been carried out for selected product categories from Paperboards & Specialty Papers, Packaging & Printing and the Lifestyle Retailing Businesses which have helped in identifying broad areas for improvements within as well as beyond ITC's boundary. These assessments have been followed up with detailed studies which in turn have provided concrete solutions towards more efficient packaging designs, loading efficiencies and consequent reduction in transportation costs / GHG emissions/ energy use. ITC will continue to work in this direction, in line with its Policy on Life-cycle Sustainability, to identify the opportunities for improvement in the value chain and take appropriate measures for optimisation.

In line with its commitment to extend the triple bottom line philosophy along our supply chain, ITC, as a preliminary step in 2013-14, started including the Notebooks manufacturers of ESPB which contributed to around 90% of the total business of ESPB, within the reporting boundary. The material aspects of these exclusive TPMs are included in this Report. During the year, engagements were made with these key supply chain partners to enhance their environmental and social performance. Specific guidelines had been prepared for the Notebook manufacturers and Agarbatti Units, to help them mitigate the various environment and safety risks associated with their operations. Similarly, efforts have been extended to train our Wholesale Distributors' employees on 2-wheeler safety. Going forward, ITC will continue to make efforts and provide support to its supply chain members in these aspects. In 2013-14, ATC Limited, an associate company of ITC group had been brought within the reporting boundary, where support had been extended in implementing systems and process to improve the sustainability performance of its manufacturing operations. Further, as committed in last year's Sustainability Report, 2 TPMs of the Cigarettes Business have been included in this year's reporting boundary and necessary knowledge support was provided in specific areas like energy and water conservation, material utilisation, etc.

The Road Ahead

ITC will continue to work along with the supply chain partners in line with its policies to enhance their understanding and performance on sustainability aspects. Businesses will progressively move towards monitoring the performance of key supply chain partners on identified material aspects and reporting on them.

Organisational Profile