ITC SUSTAINABILITY REPORT 2016 GRI - G4 COMPLIANT, IN ACCORDANCE - COMPREHENSIVE

The adverse impact on the environment due to air emissions is multifaceted and long-term. Evidence of the impacts due to climate change caused by Greenhouse Gas (GHG) emissions is already being witnessed in the changing precipitation patterns across the globe including in India, thereby disrupting yields in primarily rain-fed Indian agriculture. Since most of ITC's businesses depend significantly on agri-inputs, disruption in crop yields and consequent competition for agricultural commodities, can have implications on ITC and its stakeholders. As per India's Intended Nationally Determined Contributions (INDCs) submitted to United Nations Framework Convention on Climate Change (UNFCCC), development programmes in sectors vulnerable to climate change, particularly agriculture, water resources, Himalayan region, coastal regions, health and disaster management have been identified as focus areas in addition to reduction in emissions intensity and increasing renewable energy share and carbon sinks.

Recognising the fact that it is necessary to play an active role in addressing the impacts due to climate change, ITC has focused on progressively improving specific energy consumption, reducing its dependence on fossil fuels by increasing renewable energy share and enhancing sequestration of CO₂.

Another aspect linked with rapid industrialisation and urbanisation is the problem of air pollution in terms of emissions of SO₂, NO_x and particulate matter that has become a very serious health issue across almost the entire urban landscape of India. This not only has huge adverse impacts on health of human beings but also on the biodiversity of a region. ITC has continued to invest in reducing air emission levels through focus on cleaner technologies/ combustion efficiency improvement while simultaneously reducing specific energy consumption and increasing ITC's renewable energy share.

ITC has mapped the various challenges arising from GHG and other air emissions that may impact its own operations or its stakeholders and implementing appropriate strategies that are guided by Board approved policies addressing the various dimensions involved.

ITC has mapped its climate change risks, their impacts & mitigation plans and also organization specific opportunities, as detailed below:

Based on applicability, ITC has accounted for the following gases in its GHG inventory: Carbon Dioxide (CO₂), Methane (CH₄), Nitrous Oxide (N₂O), Hydrofluorocarbons (HFCs), Perfluorocarbons (PFCs) and Sulphur Hexafluoride (SF₆). Provided below is a comparison of ITC's GHG inventory for 2015-16 with that for 2014-15:

ITC has computed its greenhouse gas (GHG) inventory, including GHG emissions, biogenic carbon dioxide (CO₂) emissions and GHG removals, in accordance with ISO 14064:2006, which is the latest international standard specifying principles and requirements at the organisation level for quantification and reporting of GHG emissions and removals. The 2015-16 GHG inventory has been verified by EY at the "Reasonable Assurance" level.

All above figures are rounded off and are in kilotonnes.

Difference in GHG emissions between 2015-16 and 2014-15 are primarily attributable to the following factors:

Decrease in Direct GHG (Scope 1) emissions

• Decrease in fossil fuel utilization due to increased availability of bio-mass as fuel in the Paperboards and Specialty Papers Business. (Please refer to "Energy" Section for further details).

Increase in CO₂ emissions from combustion of biomass

• Increased utilization of biomass as fuel in the Paperboards and Specialty Papers Business Units and purchased steam generated from biomass in Pune Unit of Foods Business and Bengaluru Unit of Cigarettes Business.

Increase in Energy Indirect GHG (Scope 2) emissions

• Inclusion of additional Units / activities into the reporting boundary as detailed in "Energy" section of this Report.

Increase in Other Indirect GHG (Scope 3) emissions

• Inclusion of GHG emissions due to employee business travels by air, in the reporting boundary.
• Procurement of raw materials for Agri Business Division from distant geographies as per the availability of materials with required quality.

ITC's continual efforts in energy reduction and increasing renewable energy shares across various Units have helped control GHG emissions. In 2015-16, 13083 Tonnes of GHG emissions (scope 1 & 2) were avoided by the implementation of energy conservation measures leading to savings in both direct and indirect energy.

In order to continually improve upon GHG emissions performance, some of ITC's Businesses have voluntarily set specific GHG emissions reduction targets at the Business/ Unit levels.

Since the three units (Bhadrachalam, Kovai and Tribeni) of Paperboards and Specialty Papers Business together accounts for around 79% of ITC's total Scope 1 and 2 GHG emissions, main focus has been directed at setting reduction targets for these Units on specific GHG emissions (including Scope 1 and 2 emissions):

As explained in the above table, there has been a significant increase in utilisation of biomass-based fuels in Paperboards and Specialty Papers Business Units based on the market scenario during 2015-16 which had not been cognised for while setting the target for the year.

ITC's accounting of Scope 3 GHG emissions included monitoring and reporting of emissions from sources as depicted below.

ITC's efforts to optimise distribution logistics of finished goods for its FMCG Businesses have helped control GHG emissions in 2015-16. Specific Scope-3 emissions due to transportation of FMCG products (Cigarettes, Personal Care and Foods) in 2015-16 have reduced by around 24% (tonnes of CO₂e emission/ tonne of product transported) as compared to the previous year for the same product categories. This has been achieved by improvement in vehicle utilisation capacity and use of higher capacity vehicles across the supply chain and extensive network de-layering in order to increase direct shipments to destination warehouses, thereby avoiding intermediate movements.

The standards, methodologies, tools and assumptions used for quantification of the GHG emissions and removals by various sources, have been explained at length in the Annexure - Quantification Methodologies: Energy and GHG Emissions.

All ITC Units monitor significant air emission parameters, such as Particulate Matter (PM), Nitrogen Oxides (NOx) and Sulphur Dioxide (SO₂) on a regular basis to ensure compliance with internal norms that are more stringent than regulatory requirements.

The increase in the total emissions over last year was primarily due to the increase in production/service of Paperboards and Specialty Papers Business, Packaging and Printing Business, Foods Business and ITC Hotels, and low grade quality of coal used for generation of direct energy in Paperboards and Specialty Papers unit at Tribeni.

Snapshot of Bhadrachalam Unit's performance

Owing to the energy conservation initiatives undertaken as cited in the energy section in this report, there has been a consistent decrease in specific air emissions in terms of particulate matter, NOx and SO₂ emissions for the Bhadrachalam unit.

Particulate matter emission for Bhadrachalam has remained the same (0.66 kg/BDMT of production) in 2015-16 as compared to the previous year. As per the Centre for Science & Environment (Source : All About Paper - The life cycle of Indian Pulp and Paper Industry, Green Rating Project, 2004), the average particulate emission by large scale Indian Mills is 3.8kg/BDMT.

NOx and SO2 Emissions

Hydrogen Sulphide Emissions

The primary source of hydrogen sulphide emissions in the integrated pulp and paper mill at Bhadrachalam is the soda recovery boilers in which black liquor is used to produce steam and recover chemicals. In 2015-16, hydrogen sulphide emissions for the Unit have decreased by 24% in comparison to 2014-15 primarily due to improved operating parameters and optimization of equipment.

Ozone Depleting Substances (ODS)

In 2015-16, the total consumption of ODS by all our Units was 90.1 kg of CFC-11 equivalent.

Responsible Management of Chemicals, Oils and Fuels

All ITC Units manage chemicals, oils and fuels as per norms defined by the Company, which take into account all statutory requirements and international best practices. These norms are taken into consideration right from the design stage and include measures for leakage/spillage prevention, provisions for containment, impervious flooring, leak detection system as well as all requirements as per Material Safety Data Sheets (MSDS) for hazardous chemicals. To avoid any incidence of uncontrolled spills or leakage, ITC has instituted safe work practices on handling and storage, procedures for leak detection & spill control and preventive maintenance. The effectiveness of these measures is checked on a regular basis.