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ITC Has Progressively Turned Environmentally & Socially Responsible
The tobacco major has steadily juggled its product mix over the years to move towards non-tobacco products that are socially and environmentally responsible
Photo Credit : Shutterstock
As an exciting live role model for business model transformation, ITC has progressively increased its non-tobacco business and moved its production base towards a majority of non-tobacco products that are socially and environmentally responsible.
Over the last two decades, ITC’s non-cigarette businesses have grown over 25-fold and now constitute over 60 per cent of the net segment revenue. In aggregate, the non-cigarette businesses account for over 85 per cent of ITC’s operating capital employed, about 90 per cent of the employee base and over 90 per cent of its annual investments.
% of revenue FY20
% of revenue FY15
% of revenue FY10
FMCG - Cigarettes
FMCG - Others
Paperboards, Paper and Packaging
Non- Cigarette products
Transformation Towards Sustainability
Discriminatory taxation on cigarettes has caused progressive migration from consumption of duty-paid cigarettes by the public to other lightly taxed or tax-evaded forms of tobacco products such as illegal cigarettes, bidi, chewing tobacco, gutkha, zarda and snuff. Consequently, while the share of legitimate cigarettes has declined considerably from 21 per cent in 1981-82 to a mere nine per cent (against a global average of 90 per cent) in the total tobacco consumption in the country, aggregate tobacco consumption has increased over the same period. As a result, despite accounting for less than 1/10th of the tobacco consumed in the country, duty-paid cigarettes contribute more than 4/5th of the revenue generated from the tobacco sector.
While the volumes of the legitimate cigarette industry have declined by about 20 per cent between 2010-11 and 2019-20, the illicit duty-evaded cigarette segment has grown by 36 per cent during the same period, accounting for about a fourth of the domestic industry and making India one of the fastest growing illicit cigarette markets in the world.
The regulatory framework for cigarettes in India is one of the strictest in the world. The Cigarettes and Other Tobacco Products (Prohibition of Advertisement and Regulation of Trade and Commerce, Production, Supply and Distribution) Act, 2003 (COTPA) requires cigarette packages to bear the statutorily mandated pictorial and textual warnings covering 85 per cent of the surface area of the packet (one of the largest in the world).
The Classmate and Paperkraft range of notebooks leverage ITC’s fibre line at Bhadrachalam, which is India’s first ozone treated elemental chlorine free facility, making it environmentally more responsible. In FY20, ITC has continued to scale up the Paperkraft range of notebooks, using Forest Stewardship Council certified paper.
Over the years, ITC has implemented several measures to enhance the competitiveness of the Agarbatti (incense sticks) value chain in India. These include facilitating the mechanisation of Agarbatti manufacturing and backward integration into sourcing raw battis manufactured using indigenous inputs at small-scale vendor locations. The business has also started sourcing Mangaldeep incense sticks, manufactured from indigenous bamboo grown in the North-East region. The Agarbatti business of ITC has been working closely with the government of India under the aegis of the National Bamboo Mission and other nodal agencies at the state level. It is pertinent to note that during the year, the Indian government imposed restrictions on imports of raw battis imports with the aim of generating large-scale employment opportunities in the country through import substitution.
Inclusivity by Savlon
ITC Savlon, in line with its commitment to create an equitable and inclusive society, launched the first ever Braille-enabled antiseptic liquid. Indeed, everybody gets hurt and individuals who are visually impaired are no different. The Braille pack of Savlon Antiseptic liquid in India have been designed not just to enable access but also to help the visually impaired to identify and access the product easily. Savlon won a Gold prize at EMVIE for the best integrated campaign for turning mass media into Braille in 2019.
In line with some of the most outstanding companies of the world such as the $12 billion DSM (formerly Dutch State Mines) who moved its three-decade-old mining business to become a leader in Nutrition and Materials sciences industries with no revenue loss, ITC’s transformation into a purpose-led business is commendable. However, given that 45.7 per cent of its revenues still come from tobacco and hence, harm consumers, a low score on the KPI ‘Number of lives positively impacted as a result of business’ and negative scoring in the KPI ‘Number of lives negatively impacted as a result of business’ in the SLP Sustainability cube has dragged ITC’s overall score down. We are hopeful that ITC’s sustainability score will rise as the company persists with its transformation towards being more responsible towards public health.