ITC's vision to serve larger national purposes is intended to be realised by embedding sustainability in its core business models. Innovative strategies have therefore been designed and implemented to create sustainable value chains linked to its Businesses. As the Organisation is dependent on agricultural resources, these value chains encompass small and marginal farmers, who constitute some of the most disadvantaged sections of Indian society. 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. This will ensure 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 and occupational health, safety & environment in the supply chain. These policies, meant for Third Party Manufacturers (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. A 'Code of Conduct for Vendors and Service providers' details out specific requirements related to the aspects addressed in the policies and through acceptance of this code by supply chain partners, ITC seeks their commitment to comply with applicable laws, respect human rights and contribute to environmental conservation. Further, based on their requests, ITC will support in organising training workshops for educating, creating awareness and building capacity on human rights and decent labour practices.

As evident from the representation (next page) 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 as they are dependent on agri commodities, and therefore constitute a vital part of ITC's supply chain. Accordingly the Company has focused on enhancing the sustainability of its agri supply chain, details of which are mentioned in the section that follows.

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, product form, timing, as well as packaging solutions for delivery of the agri commodities. These solutions not only help customers in cost competitiveness and quality whilst ensuring product integrity and on-time fulfilment, but also create and capture value for other partners, especially farmers.

This Business 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. A hub and spoke model has been built along with the necessary physical infrastructure that has enabled multi-level aggregation, and dis-intermediation where necessary. The Business also works closely with farmers to improve farmer economics, develop identified geographies for specific varieties and for certified and organic crops, and promote adoption of sustainable agricultural practices. This unique approach to creating and enhancing value in the agri supply chain has thus empowered millions of farmers.

These investments coupled with deep understanding of agriculture, the reach of the e-Choupal network, and the ecosystem of partners provide the opportunity to offer a wide range of reliable and consistent solutions that are efficient and effective along the entire supply chain.

During the financial year, the business sourced nearly 20 lakh tonnes of agri-commodities (Wheat & Wheat Products, Soya, Rice, Pulses, Coffee, Potato, Fruits, Maize, and Shrimps) from over 20 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 Business the sustainability framework encapsulates and guides its efforts and interventions to create value for the farming community and particularly in the farm value chain. ITC has been engaged in enhancing rural livelihoods through focused efforts by supporting villages to become economically, ecologically and socially sustainable. The objective is to drive sustainable development in villages by empowering Indian farmers through deployment of good agricultural practices and technological interventions. The Business believes that sustainable crop production system enhances the crop competitiveness and ensures surplus income generation to the farming community. With economic stability, it is believed that a village will develop faster in other areas like health, education and environment; thereby reducing the vulnerability of the village.

Working closely with the farming fraternity, ITC constantly transfers technology for appropriate crop solutions, apart from pioneering the introduction of hybrids and high yielding varieties in the country. Enabled by a team of agronomists, agriculture experts, engineers and development managers, the sustainability initiatives have helped in improving the quality of Indian tobacco substantially. The key strategy of ITC's farmer empowerment programme is integrated resource deployment. Multiple interventions are grounded in ITC villages (i) Crop development for ensuring higher productivity, product quality & integrity (ii) Farm sustainability for ensuring environment sustainability (iii) Research & Development for developing 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 thereby moving from Sustainable Crop Production to Sustainable Livelihoods Creation.

Various initiatives pertaining to soil conservation, viz., promoting use of organic amendments and techniques on soil fertility management aimed at reducing chemical fertiliser use and adoption of drip irrigation to improve farm yields are propagated. Towards sustainable fuel management, a three-pronged approach (energy conservation - introduction of fuel efficient technologies, self-sustenance through energy plantations and custody of fuel consumption) has been implemented in tobacco farm value chain. Energy conservation measures such as Barn Roof Insulation, Turbo Ventilators etc. proven to reduce about 30% of energy requirement during curing are being deployed on a largescale covering over 18,255 barns in the states of Andhra Pradesh and Karnataka. Further, with an objective of developing a self-sustaining model for sourcing fuel wood, ITC has developed energy plantations covering over 73,000 acres till date. These plantations are expected to offset the total fuel requirements for tobacco curing in our operating regions. Also, farmers are encouraged to use alternate fuels for curing such as coffee husk, biomass briquettes etc.

While developing rural villages, utmost care is taken in the alignment of the practices with global regulation. ITC's approach to sustainability in the tobacco value chain has recently been acknowledged by the Sustainable Tobacco Programme (STP) review conducted by AB Sustain a third party independent international auditor on behalf of International tobacco manufacturers. In STP, sustainability performance of leaf suppliers operation is measured covering areas such as governance, crop, environment, facility and people. In the first STP audit conducted at the end of 2016, the scores attained by Leaf Tobacco Business are the best achieved by any Indian supplier and are also globally benchmarked across all pillars of STP. The STP scores are a reflection of the self-sustaining ecosystem that ITC has created with farmers over years.

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 impact 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 in the overall supply chain. 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.

Further, in line with the overall strategy to embed principles of sustainability into the various stages of product or service lifecycle, 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, Lifestyle Retailing, Personal Care Products and Foods 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 the supply chain, ITC, as a preliminary step in 2013-14, started including the Notebooks manufacturers of ESPB which contributes to around 88% of the total business of ESPB, within the reporting boundary. The material aspects of these exclusive Third Party Manufacturers (TPMs) are included in this Report. In adherence to the guidelines developed for Matches and Agarbatti Business covering safety aspects for TPMs last year, the Business has established Safe Work Procedures (SWPs), strengthened operational and maintenance checks for all fire prone activities and initiated training programmes for the workforce across TPMs in 2016-17. These initiatives would sensitise the workforce of the various safety risks associated with their operations and equip them to mitigate such risks. Since over the years, majority of the road accidents have involved 2-wheeler riders, ITC had accordingly, extended the 2-wheeler rider's safety programme to its Trade Marketing & Distribution (TM&D) supply chain members. This 'Train the Trainer' programme helped in improving awareness of 'defensive road safety techniques' amongst them. Going forward, ITC will continue to support its supply chain members in these aspects.

Similarly, ITC continues to provide knowledge support in specific areas like energy & water conservation and waste management for TPMs of the Cigarette Business, to enhance their performance.

In line with Board approved Policies on 'Responsible Sourcing' and 'Human Rights Consideration of Stakeholders beyond the Workplace', supported with 'Code of Conduct for Vendors and Service Providers', ITC will continue to work along with the supply chain partners to enhance their understanding and performance on sustainability and progressively include their performance in the reporting boundary.