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

Customer Health and Safety

Our uncompromising commitment in providing world-class products and services to satisfy customers on a consistent basis is rooted in respect for our customers/ consumers. Given ITC's presence in the FMCG and Hospitality sectors, its products and services reach out to a large number of consumers. The Company has stringent processes and systems to ensure that all products and services are in compliance with relevant regulatory requirements. In addition, product and service attributes are constantly evaluated against international standards and best practices. This is an integral part of the Company's approach and all efforts are made to ensure that there is no deviation on this account.

ITC's commitment towards ensuring compliance with relevant standards of health and safety commences at the design stage. Appropriate health and safety elements across procurement, manufacturing and delivery are identified and evaluated, based on which control measures are implemented as necessary. Global developments in health and safety are also reviewed constantly to provide appropriate insights. This is supported by comprehensive research and testing facilities at the ITC Life Sciences & Technology Centre, whose laboratories conform to ISO/IEC 17025 and are certified by National Accreditation Board for Testing and Calibration (NABL). Manufacturing units and hotels have state-of-the-art facilities and technology as well as internationally benchmarked quality management systems. These are constantly reviewed to keep them contemporary and relevant. The quality performance of third party manufacturing facilities is also monitored on a daily basis.

The summary of systems and initiatives across some of ITC's businesses is presented below:

Business

Agri Business

Measures undertaken

The Business primarily engages in sourcing of agri-commodities like Wheat, Coffee, Potato, Shrimps, Soya, Pulses, Rice, Maida and Processed Fruits. These commodities are sourced and supplied based on customer requirements of quality, quantity and packaging. Stringent process control and quality inspection norms have been established to ensure compliance with customer requirements. Systems and processes are in place to ensure the hygiene of the stored stocks. Products are shipped after meticulous testing either in-house, or at accredited labs or agencies, if required by the customers. For organic and sustainable farm practices in the processed fruits business catering to specific customer segments, the Business has received the following international certifications:

• Fairtrade certification endorsing that its products meet certain environmental, labour, and developmental standards.
• Demeter Certification for Biodynamic Farming, a holistic method of agriculture.
• USDA Organic and India Organic Certifications for Organic Farming.
• Bio-Suisse Certification for Organic Farming.

Branded Packaged Foods

Measures undertaken

63 out of 72 manufacturing locations, including third party manufacturing units, which accounted for 93.3% of total production volume in 2015-16, are Hazard Analysis and Critical Control Point (HACCP)/ ISO 22000 certified, ensuring that products use the best quality ingredients and utilise the highest quality processes. The objective is to continuously provide consumers with products that not only "Taste Good" but also "Do Good". Consequently, large investments have been made in R&D to deliver relevant functionalities based upon specific formulations for identified health needs, like reducing salt, sugar and oil across all products. R&D team has already come up with reduced fat biscuits and low sodium potato chips that have undergone successful consumer research feedback and are ready for launch. None of the Snacks products have added Trans Fat. Sucrose free products, wherein no sucrose is added, to offer healthier alternatives have also been launched. Initiative has been taken to replace refined wheat flour by whole wheat flour to make the products healthier and new products are being developed incorporating healthier multi grain cereals, wheat bran, wheat fibre, etc. Some of these developments are in advanced stage and will be launched in near future.

Cigarettes

Measures undertaken

The Business uses proprietary software to regularly monitor and review product specifications of all raw materials. With consistent focus on product innovation, new product development in the Business involves consideration of Indian and global developments and is supported by comprehensive research and testing facilities at the ITC Life Sciences & Technology Centre.

Leaf Tobacco

Measures undertaken

Product integrity, quality and hygiene standards in tobacco cultivation are accorded the highest importance. Accordingly, awareness among tobacco farmers on the importance of sustainably producing residue-free quality tobacco is constantly reinforced during field-level trainings and seminars in ITC's operating regions. For frequent assessment on product integrity, farm-level and packed-level toxicant audit studies are undertaken wherein all leaf samples from farmlands and packed cases of finished products are closely monitored for toxic residues. Several additional measures were implemented across the value chain during the year towards minimisation of Non Tobacco Related Matter.

Personal Care Products

Measures undertaken

The Business follows a comprehensive approach for improving the health and safety impacts of its products in each of the lifecycle stages including R&D, certification as well as manufacturing and production. All safety tests from prototype development to final product are conducted in accordance with standard international guidelines. Ingredients used in products undergo rigorous analysis, based on existing scientific literature, for their toxicity and skin sensitisation prior to clearance for use in product development. Product safety and efficacy is certified through external accredited laboratories. Products are manufactured in a highly automated environment under strict hygienic conditions. Documented Quality Management System, including procured material checks, in-process checks and finished goods quality checks, ensures that the manufactured products are consistent and of high quality.

Hotels

Measures undertaken

ITC Hotels have established food safety management systems certified as per HACCP/ISO 22000. In addition, ITC Hotels R&D endeavours to adhere to GHP & GMP (Good Hygiene Practices & Good Manufacturing Practices). The Hotels Business also conforms to relevant applications of PAS 220 (Prerequisite programmes on food safety for food manufacturing). ITC has elaborate fire safety guidelines which all hotels comply with. These guidelines are based on National Fire Protection Association (NFPA) Codes and other international best practices. They supplement the general EHS Guidelines applicable to all ITC Businesses, the compliance of which is audited by the Corporate EHS Department on a regular basis.

Education and Stationery Products

Measures undertaken

The business employs multiple process control measures through third party certifications, inline and final quality checks across the entire chain of manufacturing to ensure that their safety is not compromised. The business uses only approved non-hazardous materials like Elemental Chlorine Free (ECF) paper, ink, dyes, etc. in the note books. Since the primary consumers of these products are children, stringent processes and quality control measures are in place to ensure their safety. Pencils and art stationery items are in compliance with the European Standard EN 71.

Lifestyle Retailing

Measures undertaken

All raw materials and garments are tested at the NABL accredited in-house laboratory for post usage experience and conformance to quality standards. The standards and product specifications are periodically validated by international testing agencies. Quality is monitored through an internal Product Quality Rating System (PQRS) together with the external Acceptable Quality Level (AQL) norm that is followed internationally by apparel businesses. The Wills Lifestyle range (excluding the Wills Signature garments) has received the "Oeko-Tex" certification (w.e.f. January 2012), becoming the first brand in the domestic apparel retail segment in India to obtain such a recognition. The certification has been conferred by Hohenstein Textile Testing Institute GmbH & Co. KG, Germany. It guarantees that the products are free from more than 100 harmful substances and ensures that Wills Lifestyle garments are completely safe for consumers, without compromising on relevant style quotient of its products.

Packaging and Printing

Measures undertaken

Various initiatives have been undertaken in developing packaging solutions that use environment friendly raw materials such as water-based varnishes and reduced material usage in terms of mass and thickness of products. The Business engages with customers on a continuous basis to provide solutions that help protect functional needs like product integrity and visual imagery, whilst providing scope for use of alternate materials. While the paperboard packaging is already being done with non-toluene based inks, the business encourages its customers for use of toluene-free and ketone-free inks in flexible packaging. The business has also been filing patents related to operational excellence in packaging every year arising from high skill in packaging design backed with state of the art converting technology. In order to strengthen the health & safety requirement of products (Quality and Hygiene), all key operations at Haridwar and Tiruvottiyur factories have been certified as per British Retail Consortium (BRC) Global Standard for Packaging and Packaging Material.

Paperboards and Specialty Papers

Measures undertaken

ITC has been the pioneer in manufacturing Elemental Chlorine Free (ECF) pulp in India. This ensures that the levels of dioxins and furans in the pulp are less than 1 PPT (Parts Per Trillion). The global migration test is conducted periodically on all food-grade paper and paperboards for compliance with the US FDA standards and to adhere to prescribed limits for presence of heavy metals. All manufacturing ingredients for applications involving direct/ indirect food contact are procured from reputed suppliers and conform to US FDA and equivalent standards.

The Business ensures that the components of food allergens listed in the EC directive 2003/89/EC and the US FDA Act are not used in any virgin grade boards and papers. All food-grade papers and paperboards are periodically tested for compliance with European Regulation on Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH) and Restriction of Hazardous Substances (RoHS). The Bollaram Unit and relevant production lines in Bhadrachalam Unit that manufacture food grade board for direct/ indirect food contact, are 'third party' certified in accordance with BRC/IoP (British Retail Consortium/ Institute of Packaging) standards.

Matches and Agarbatti

Measures undertaken

Chemicals approved by IFRA (International Fragrance Resource Association, Geneva) are used to prepare fragrances, which are required in the manufacture of dipped Mangaldeep Agarbattis. The manufacturing processes of the Matches and Agarbatti Business are designed to ensure product safety and consistency.

Technico Agri Sciences Limited

Measures undertaken

Technico Agri Sciences Limited, is in the Agricultural Bio-Technology business of growing and selling TECHNITUBER^® seed potatoes and field generated seed potatoes. TECHNITUBER^® seed potato technology is a scientifically advanced process of producing large volumes of miniature seed potatoes from virus and pathogen-free nucleus materials. Company's facility to maintain germplasm of seed potatoes has been accredited by the Department of Biotechnology, Ministry of Science & Technology, Government of India and is regularly inspected by Central Potato Research Institute (CPRI) Shimla. The Company follows Potato Tissue Culture Raised Mini Tubers (PTCMT) standards for certification for TECHNITUBER^® Seed as well as early generation seed potatoes as laid down by Ministry of Agriculture, Government of India.

ITC's business operations are committed to comply with relevant laws of the Nation and systems are in place to ensure compliance before the launch of any new category or product.

A regular customer feedback system forms an integral part of ITC's Businesses where there is direct interface with customers. The process followed by ITC's Hotels Business with respect to consumer feedback is illustrated on the next page.

In the case of FMCG products, consumers are provided several communication channels like email, telephone number, website address and feedback forms to enable them to contact the relevant Business. Processes are laid down to ensure that consumers are provided with responses on their feedback in a timely manner. For food products, all information about ingredients and nutrition of products is published on the product packaging as per relevant statutory requirements.

In the Information Technology Business, formal mechanisms are in place to measure customer experience. The Customer Service Satisfaction Survey is an annual check on the robustness of the engagement, culminating in a Customer Experience Index. The survey is conducted amongst Chief Executives and Senior Management, and is based on a structured questionnaire customised for the stakeholder. Multiple parameters and business outcomes are measured including satisfaction, loyalty, advocacy and value for money. The outcomes and insights from the survey drive customer engagement and service delivery improvement initiatives at the organisation, geography, business unit and account level.

Customer feedback for B2B businesses like Agri Business and Packaging and Printing, is obtained through different activities. For example, Agri Business has pre-season engagement with customers, client visits and engagement of the Divisional Management Committees with major customers. Given the nature of the Business, claims due to rejections on account of quality are a valuable indicator of customer dissatisfaction. During the year under review, no such claims were made to the Business. Products sold by the Agri Business division on a B2B basis are labelled as per the customer requirements on quality, shipping marks or importing country labelling requirements. Business also provides phytosanitary certificates, surveyor quality and quantity reports, Chamber of Commerce certificates, etc., as necessary.

Traceability in the Foods Supply Chain

Board approved policies of ITC supplemented by a 'Code of Conduct for Vendors and Service providers' provide the structure for addressing traceability within the supply chain and also the sustainability aspects therein, which are detailed in the "Supply Chain" section of this Report. In Foods Business, over 90% of the vendors for processed raw materials like flavours, seasoning, colour, emulsifier and other special ingredients have already provided acceptance of ITC's Code of Conduct for Vendors and Service providers demonstrating their commitment to comply with applicable laws and contribute to sustainable development. In Foods Business, wheat constitutes around 49% of the total raw material procurement value and is sourced through the e-Choupal platform of ITC's Agri Business thereby ensuring 100% traceability to the origin.

All Businesses/Divisions of ITC have established rigorous systems, procedures and review mechanisms to identify and comply with the laws and regulations concerning marketing communications. In addition, ITC has put in place a dedicated consumer response cell in order to answer any queries on products.

ITC follows standard operating procedures to ensure that its marketing communications are in accordance with voluntary codes adopted by each business as well as applicable statutes. These are vetted by the internal legal team and compliance is ensured by the internal audit department.

Marketing and Advertising Communications of all ITC's Businesses are subjected to stringent internal checks by the Legal Department. The Company's consumer goods Businesses adhere to voluntary and legal codes of conduct and follow the ASCI (Advertising Standards Council of India) Code for all marketing communications. Marketing communications for ITC's Hotels Business is governed by self-regulation and guided by the Indian Society of Advertisers (ISA) rules and guidelines.

Maintenance of customer privacy is relevant primarily for ITC's Information Technology and Hotels Businesses, both of which have well established systems and procedures for ensuring zero non-compliance.

Network Architecture and Information security controls of the Company's Information Technology Business under ITC Infotech Limited are driven by industry best practices. The Business has drafted a privacy policy in line with the IT Act, 2000, that covers all aspects of data privacy with respect to sensitive information. The Business has also formulated an Information Management policy, which caters to the IT security aspects of the ISO 27001 ISMS framework. The IT operations arm of ITC Infotech Limited is ISO 27001 certified for its business processes to deliver IT services and projects. Documented procedures are available and practised to grant physical access to information, e.g. the defined and restricted access rights to IT Room/ Server Room and User Access Management based on ISO 27001 and as agreed with customers. The Business has also put in place measures at various control areas in order to meet customers' requirements for data security. These include desktop access, server access, network access, operating system, application security, data transfer, penetration testing, etc. Clear guidelines are provided for data backup, retention periods, the media on which backups have to be maintained and storage at remote location.

In addition, stringent risk assessments are carried out to identify vulnerabilities and threats to assets and the controls that need to be put in place.

ITC's Hotels and Information Technology Businesses received no complaints regarding breach of customer privacy or loss of customer data in 2015-16. For the year the average WoW Ratio (Guest Satisfaction Index) for the Hotels Business was 90.34%.

All Businesses/Divisions of ITC have well established systems, procedures and review mechanisms to identify and comply with the laws and regulations concerning its products and services. Particular care is accorded to tobacco products, taking into account the regulatory framework.

ITC has established systems wherein every Business and Corporate Department has to submit a periodic statutory compliance report to the CMC/Board on all business regulatory, product specific, finance/revenue related, personnel related, technical/process related and environment related statutes and other applicable laws and regulations. This is done on the basis of updated checklists that have to be mandatorily maintained by each reporting Unit/Business/function as well as monitoring and control systems that the Business/Corporate function must have in place.

As per this system, no incidents of non-compliance were reported during 2015-16.

Recognising the unique construct of ITC in terms of its strong presence in agriculture, Branded Packaged Foods and Personal Care Products Businesses, a convergence of R&D capabilities is being leveraged to deliver future products aimed at nutrition, health and well-being. In this context, Life Sciences & Technology Centre (LSTC) has created a Biosciences R&D team to design and develop several long-term research platforms evolving multi-generation product concepts and associated claims that are fully backed by scientific evidence for the Branded Packaged Foods and Personal Care Products Businesses. Multiple value propositions have been identified in the area of functional foods, which are being progressed to products of the future with strong scientifically validated claims via clinical trials. Similar advances have been made in the area of personal care products. In addition, LSTC has evolved a strategy in building a new value chain called, 'Nutrition' with a special focus on 'Indianness' and 'health and well-being' founded on the basis of Value Added Agriculture (VAA) and Medicinal and Aromatic Plants. The initial activities related to VAA have already commenced with a focus on soya.