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

ITC operates in a diversified, ever-changing, highly competitive global landscape. This necessitates the development of a strong, customer responsive world-class enterprise premised on a commitment to employee well-being that goes beyond just conforming with relevant local laws to incorporating the best of global standards.

ITC is committed to conducting business in accordance with the highest ethical standards. It expects its employees and business partners to subscribe and adhere to this philosophy, which honours all pertinent laws and upholds the spirit of human rights as enshrined in existing international standards.

The Company's primary objectives in this area for the next five years are to ensure that:

• All ITC's operational units are and will continue to remain fully compliant with the Company's Policies, premised on a zero tolerance guiding principle towards violations in this regard.
• All investment decisions will integrate Human Rights and Decent Labour Practices considerations into the decision-making process.
• All ITC's business partners and supply chain members will follow and adhere to the Human Rights Policies that the Company upholds.

Accordingly, the Company has put in place Board approved Policies covering crucial aspects of employee engagement and human rights.

All ITC Units have instituted appropriate systems and processes to ensure compliance with these Policies and with statutory provisions, including processes to redress grievances. The implementation of these Policies is ensured by Divisional/Strategic Business Unit Chief Executives, through members of the respective Management Committees. Compliance is regularly monitored and evaluated by the Sustainability Compliance Review Committee (SCRC). The report of the SCRC is reviewed by the Corporate Management Committee every quarter.

ITC's commitment to its employees and their well-being is reflected in its compliance with all its stated Policies, as demonstrated by the performance data presented in this section.

In order to sustain its position as one of India's most valuable corporations, ITC remains relentlessly customer-focused, competition-differentiated, performance-driven and future-capable. A vital element in preparing ITC for the future is to build today's capabilities to enable the best response to tomorrow's market opportunities. Five capability platforms relevant to making businesses future ready have been identified - Strategic, Value Chain, Leadership, Innovation and Human Resources Development. These platforms are also designed to strengthen organisational systems to facilitate speedy and competitively superior responses to market opportunities.

ITC follows two approaches to build critical capabilities in these identified areas. The first is to energise the organisation for change by building capability in its people through information, knowledge and skills. The second is to guide continuous learning and performance improvement in all functions and businesses.

The Company's talent management programme strives to deliver its promise of 'Building Winning Businesses. Building Business Leaders. Creating Value for India.' ITC is guided by a holistic approach centred on multiple elements rather than on individual elements that impact talent. These include talent sourcing, work design, performance management and remuneration, individual growth and development, as they relate to talent management.

Leadership development is considered integral to talent management. ITC's 'strategy of organisation' - creating multiple drivers of growth through a diverse portfolio of businesses each with its own independent leadership team - serves as an excellent platform to build distributed business leadership.. An equally important dimension of building leadership is ITC's strategic learning and development agenda.

ITC has made significant investments in enhancing the organisation's recruitment and selection skills and performance management processes, which will positively impact its talent management programme.

Awareness & Sensitisation

Specific actions were undertaken during the year to ensure compliance with Policies on human rights and labour practices. These include:

• Sensitisation training on ITC's approach to Human Rights and on Prevention of Sexual Harassment at the Workplace was undertaken and covered 183 employees across businesses as well as 77 members of Internal Complaints Committees that have been constituted in line with The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.
• Roll-out of the Grievance Redressal Procedure for all managers and office associates in ITC's businesses and Corporate Head Office.
• Awareness building among vendors and service providers through the introduction of ITC's Code of Conduct on this aspect, which has been accepted by identified vendors / service providers.

During the year under report, the number of full-time direct employees was 32138 of which 1581 employees in the Leaf Tobacco business were engaged on a seasonal basis due to the nature of the business. Of the total number of employees, 3490 were women. The number of new appointees for the reporting period was 5884 of which 21% were women.

In addition, 20135 employees of service providers were engaged during the same period.

11592 direct employees are members of various unions. The Company continues to invest in its time-tested approach to progressive employee relations characterised by the core principles of trusteeship, fairness and equity, industrial democracy and partnership with enlightened trade unions. ITC was able to sustain its excellent record of industrial harmony, highlighted not merely by the absence of strife, but by the more positive outcome of effective performance in terms of high productivity and superior quality.

During the year, employee relations were handled well and there was no stoppage of work for any reason whatsoever in any of ITC's units.

Nurturing quality talent and caring for the well-being of its employees are integral to ITC's work culture. The organisation's approach focuses on creating a conducive work environment that combines the need to focus on performance and results with a caring and compassionate work ethos to deliver winning performance. The health of its employees is a vital area of concern for ITC and periodic preventive health checkups/medical camps, awareness programmes on a healthy lifestyle and the development of wellness plans are organised across units. Permanent employees of ITC receive benefits such as periodic preventive health check-ups, medical assistance (including hospitalisation), group accident insurance, annual leave along with leave encashment and retirement benefits, among others. In addition, most units have a wellness centre and a resident doctor.

In 2015-16, 100 employees availed maternity leave. In FY 2014-15, 135 employees had availed maternity leave of which 85 have continued working after a year, resulting in a return-to-work rate of 63%.

ITC Hotels offers its employees a confidential counselling service so that they can seek professional help in a safe and secure environment in dealing with issues such as developing coping skills to meet life challenges, making important decisions or exploring new avenues for change and growth.

To drive employee engagement and well-being, ITC's businesses have promoted diverse interventions ranging from employee contests to generate innovative ideas to communication and "connect" processes, like town-hall meetings, local intranets and fun@work events as well as business specific rewards and recognition programmes. Sports programmes and recreational events that encourage the creative talents of both employees and their families are organised periodically, and in some units participation is extended to employees of service providers. To capture 'employee voice', most units conduct periodic employee engagement surveys wherein employees share their views on the workplace. To promote mental and spiritual well-being, employees also have the opportunity to volunteer for a variety of social programmes.

ITC has ensured attraction and retention of quality employees as a result of its talent management strategy of offering diverse experiences and challenges across varied business contexts, investments in the development and growth of employees, as well as a market-driven and competitive remuneration policy. The overall attrition (comprising voluntary separation, retirement, termination and abandonment of services) in the Company, including ITC Infotech, for 2015-16 was 19%, across management and non-management employees. The attrition for management level employees was 17%.The attrition for non-management employees was 20%, 81% of which happened in ITC Hotels and ITC Infotech Limited. Gender-wise attrition was at 17% and 33% for male and female employees respectively. The attrition of female employees in ITC Infotech and ITC Hotels is an area of focus for the Company, and efforts are on to identify and resolve the key dissonance factors.

ITC believes that diversity at the workplace positively impacts work performance and the work environment through superior consumer-centricity, innovative ideas and better employee engagement. Employees with diverse cultural backgrounds bring their own unique experiences, perceptions, knowledge and skills, which when harnessed, strengthen the organisation's productivity and ability to proactively respond to changing conditions. Equally, exposure to new ideas, cultures and perspectives encourages the personal growth of employees.

ITC's Policy on Diversity and Equal Opportunity (please refer to Policies on ITC's Corporate website, www.itcportal.com) and its implementation is focused on fostering meritocracy in the organisation, which promotes diversity and offers equal opportunity to all employees. The intent is to ensure that there is no discrimination in compensation, training and employee benefits, based on caste, religion, disability, gender, sexual orientation, race, colour, ancestry, marital status or affiliation with a political, religious or union organisation or majority/minority group. Given the socio-cultural diversity of our country, ITC's recruitment and selection processes are geared towards enabling representation from across regions, ethnicities, religions and different social strata.

ITC's Company culture ensures that aspects of work-life balance for employees, especially for women, are suitably addressed. ITC demands, demonstrates and promotes professional behaviour and treats all employees with equal respect. In this regard, ITC has put in place suitable processes and mechanisms to ensure that issues relating to sexual harassment are effectively addressed. In line with The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, Internal Complaints Committees have been constituted in all units. These Committees are intended to facilitate open and structured discussions on sexual harassment complaints and to ensure their resolution in a fair and just manner. During the year, 8 complaints of sexual harassment were received, 6 of which have since been resolved and 2 are in the process of reaching a resolution.

ITC's Hotels Division has been proactively creating awareness on the opportunities for employing people with disabilities among potential employers. It has prepared two handbooks to guide industry action in this endeavour -'ITC Hotels Disability Handbook for Industry' and 'A Guide to Universal Design in Built Environments: A Guide for Creating Accessible Building Infrastructure for Persons with Disability'. Presently there are 71 differently abled employees working in ITC, the majority of whom are employed by the Hotels Business.

ITC encourages local employment in its manufacturing units and hotels, depending on the availability of requisite skills. Some ITC Units partner with local Industrial Training Institutes to provide vital inputs to the management of these institutions. ITC has also partnered with National Skill Development Corporation (NSDC) empanelled agencies to impart market linked vocational training on skills including sales & distribution, hospitality, electrical maintenance, automobile repairs, beautician and garment manufacturing with the objective of enhancing the employability of youth from disadvantaged sections of society. During 2015-16, over 12,667 students were enrolled in Company promoted vocational training programmes of which 34% were women and 40% were Scheduled Caste/Scheduled Tribe candidates. ITC units also provide apprenticeship training opportunities to a large number of youth.

Committed to employing youth from disadvantaged communities, ITC has enlarged its impact by increasing the talent pool of youth from these communities by equipping them with the necessary skills or qualifications to make them more employable in the formal sectors of the economy. ITC places equal emphasis on strengthening the economic portfolio of poor households belonging to marginalised groups through initiatives aimed at natural resource management and creation of off-farm opportunities to create sustainable livelihoods.

During the year, the Company's affirmative action initiatives have had a direct and tangible impact on the lives of 23,749 Scheduled Caste/Scheduled Tribe beneficiaries.

ITC's Capability Development Agenda flows from its Vision, Mission, Strategic Agenda and its 3-Horizon Growth strategy (sharpening/expanding capabilities and leadership in its current portfolio of businesses, blending competencies residing in these businesses to create new engines of growth, creating capabilities for new future businesses). All Learning and Development initiatives offered during 2015-16 were aligned to this agenda.

ITC has a multi-pronged approach to learning, with focused interventions in core and functional areas, customised business specific and organisation-wide strategic interventions, as well as three-tiered leadership development programmes. Based on the premise that action learning will lead to better skill development, the programmes emphasise workplace projects and demonstrated leadership behaviours on the job rather than classroom learning, making them more in the nature of long term journeys rather than short term events.

Multiple forums for learning include classroom training, on-the-job training, inclusion in taskforces and projects, mentoring and deploying organisation-wide portals to enable sharing of best practices.

Employee training at the factory level focuses on continuous skill upgradation on the basis of skill-gap assessment and planned technology induction. In 2015-16, 149264 person-days of formal training were organised for employees at various levels. In addition, on-the-job learning opportunities were provided to a cross section of employees supported by inputs from peers and superiors.

ITC's Performance Management System also plays a pivotal role in charting out the development agenda of employees in the management cadre. In 2015-16, all eligible managers underwent performance reviews.

The 'Gurukul' - ITC's state-of-the-art technical training facility located in Ranjangaon - is a significant milestone in its skilling journey. The first integrated facility catering to all the Company's FMCG businesses, Gurukul offers both short term (1 to 2 weeks) and integrated long term (1 year) programmes to enhance shop floor skills.

Human Rights: Significant Investments

During 2015-16, nearly 899 crores out of total capex cash flow of 2167 crores was incurred on machinery and technology, sourced from reputed global suppliers/vendors. Approximately 760 crores were invested on new factories, hotels and modernisations.

All large contracts in ITC, for the construction of hotels, factories, and significant upgrades, have incorporated environment, health, safety and human rights clauses covering decent place of work, and beyond compliance labour practices.

All large projects were managed and supervised by ITC managers, who also ensured compliance to relevant laws.

Systems have been established to ensure compliance of our Policies and Standards, through rigorous audits by Corporate Internal Audit.

Human Rights: Supply Chain

As a large multi-business enterprise with products that are benchmarked nationally and internationally, ITC recognises its responsibility to proactively encourage high standards of human rights across its supply chain. The Company's approach to managing human rights in the following distinct categories is described below:

• ITC's businesses are vertically integrated across several Divisions, all of which ensure adherence to ITC's Human Rights Policies.
• ITC procures inputs for the Company's agri-based businesses entirely from state controlled trading platforms and the open market. The process is designed to ensure transparency and best prices even for small and marginal farmers.
• ITC ensures that all its employees and all service providers operating within Company establishments adhere to its Policy on Human Rights, Labour Practices and Decent Work Environment. ITC has zero tolerance for non-compliance in this area.
• As a first step in ensuring a high degree of awareness and emphasising ITC's focus on Human Rights and EHS in its extended supply chain, the ITC Code of Conduct for Vendors and Service Providers has been shared with supply chain partners and accepted by identified vendors/service providers.

During 2015-16, there were 1790 service providers of which 1454 operated within the Company's premises and 336 worked off-site. 99% of service contracts with these service providers include clauses in line with ITC Human Rights Policies and EHS guidelines.

No contracts were cancelled during the year as a result of non-compliance with ITC's Human Rights Policy.

Freedom of Association

During 2015-16, no incidents of violation of Freedom of Association were reported either at the concerned units or to statutory authorities. Within ITC's operations, there are no areas that present risks to the right to exercise Freedom of Association and Collective Bargaining.

Prohibiting Child Labour and Preventing Forced Labour at the Workplace

During 2015-16, there were no incidents of child labour or forced labour within ITC establishments. The process of strengthening systems to educate, mandate and thereafter track adherence to ITC's Policy on Human Rights in the Supply Chain has started with the sharing of the ITC Code of Conduct for Vendors and Service Providers. This process should be well established over the next four years, beginning with capacity building of vendors and service providers on Human Rights to be followed up with encouraging the supply chain partners to undertake social audits.

Grievance Redressal Process

A Grievance Redressal Procedure for non-unionised employees has been implemented to address concerns of internal stakeholders pertaining to Labour Practices and Human Rights violations. Aspects of employment including compensation, working hours, disciplinary practices, maternity protection, occupational health & safety, training & education, diversity & equal opportunity, equal remuneration for men and women as well as concerns in the area of Human Rights, if any, will be addressed through this mechanism.

During the year, 309 grievances were received from workmen on matters pertaining to welfare, facilities and administration and 227 of them have since been resolved.