Case study: How ITC creates economic value for its stakeholders
ITC is one of India’s foremost private sector companies and a diversified conglomerate, with businesses spanning Fast Moving Consumer Goods, Hotels, Paperboards and Packaging, Agri Business and Information Technology. ITC’s diversified portfolio of businesses positions it to contribute meaningfully to India’s growth and development, spanning across all the three sectors of the economy – agriculture, manufacturing and services -, creating value for all its stakeholders.
This case study is based on the 2021 Sustainability Report by ITC, prepared in accordance with the GRI Standards, that can be found at this link. Through all case studies we aim to demonstrate what CSR/ ESG/ sustainability reporting done responsibly means. Essentially, it means: a) identifying a company’s most important impacts on the environment, economy and society, and b) measuring, managing and changing.
Abstract
ITC’s innovative business models synergise to create significant value for India and its stakeholders Tweet This! through superior performance, enhancing the competitiveness of Indian agriculture and industry, generating large-scale employment opportunities and sustainable livelihoods, driving import substitution, and creating brands to maximise value capture in India. In order to create economic value for its stakeholders ITC took action to:
- create value for shareholders
- contribute to the National Exchequer
- support employees
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With this case study you will see:
- Which are the most important impacts (material issues) ITC has identified;
- How ITC proceeded with stakeholder engagement, and
- What actions were taken by ITC to create economic value for its stakeholders
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What are the material issues the company has identified?
In its 2021 Sustainability Report ITC identified a range of material issues, such as consumer experience, ethics and governance, climate-resilient agriculture, sustainable packaging, water security for all. Among these, creating economic value for its stakeholders stands out as a key material issue for ITC.
Stakeholder engagement in accordance with the GRI Standards
The Global Reporting Initiative (GRI) defines the Principle of Stakeholder Inclusiveness when identifying material issues (or a company’s most important impacts) as follows:
Stakeholders must be consulted in the process of identifying a company’s most important impacts and their reasonable expectations and interests must be taken into account. This is an important cornerstone for CSR / sustainability reporting done responsibly.
Key stakeholder groups ITC engages with:
To identify and prioritise material topics ITC engaged with its stakeholders through the following channels:
| Stakeholder Group | Method of engagement |
| Providers of financial capital
| · Annual General Meeting · Exclusive section in Corporate Website on ‘Shareholder Value’ which serves to inform and service shareholders · Exclusive e-mail id: isc@itc.in for direct interaction with shareholders · Regular interaction with institutional investors |
| Government and regulatory authorities | · Representation on policy issues through industry associations and other bodies · Participation in policy advocacy discussions at various forums |
| Customers | · Market surveys · Direct connect/visits · Personalised lifestyle privilege programme · Customer satisfaction surveys · Key account management |
| Employees | · Induction programmes/trainings/workshops · Individual performance appraisal · Employee engagement survey · Grievance handling processes · Trade union meetings |
| Farmers
| · Regular formal/informal conversations · Farmer training programmes and workshops · Agreements for all procurement activities · e-Choupal and Choupal Pradarshan Khets (demonstration farms) · Participatory rural appraisals to identify needs and challenges |
| Supply chain partners
| · Manufacturers’ meets · Vendor meets · Pre-agreement negotiations · Procurement agreements |
| Media | · One-on-one media interaction · Press conferences/press releases · Advertisements/promotions · Interviews with senior management |
| Civil society
| · Partnerships for implementation of CSR programmes under ‘Mission Sunehra Kal’ · Discussions on community issues with civil society organisations |
| Local communities | · Community needs assessment activities undertaken in collaboration with independent parties/civil society organisations · Formation of village institutions and regular meetings thereon · Public hearings for greenfield/expansion projects · Assessment of direct and indirect impacts of ITC’s social investments on communities |
What actions were taken by ITC to create economic value for its stakeholders?
In its 2021 Sustainability Report ITC reports that it took the following actions for creating economic value for its stakeholders:
- Creating value for shareholders
- In the last two decades, ITC’s non-cigarettes businesses have grown over 25-fold and presently constitute over 60% of net Segment Revenue. Total Shareholder Returns, measured in terms of increase in market capitalisation and dividends – the total dividend for the financial year ended 31st March 2021, amounts to ` 10.75 per share (previous year: ` 10.15 per share) -, have grown at a compound rate of 16% per annum during this period, placing ITC amongst the foremost in India in terms of efficiency of servicing financial capital.
- Contributing to the National Exchequer
- Over the last 5 years, ITC’s value addition aggregated approximately ` 2390 billion, of which over ` 1670 billion accrued to the Exchequer. Including the share of dividends paid and retained earnings attributable to Government owned institutions, ITC’s contribution to the Central and State Governments represented over 75% of its Value-Added during the year. ITC remains amongst the Top 3 Indian corporates in the private sector in terms of Contribution to Exchequer.
- Supporting employees
- ITC’s employees are entitled to retirement benefit schemes which include employee pension, provident fund and gratuity. All statutory payments, as applicable, e.g., Provident Fund and Family Pension contributions, are deposited with the Government in a timely manner. The pension plans and other applicable employee benefits obligations are determined and funded in accordance with independent actuarial valuation. The assets of the trust funds are well diversified, and investments are made within the prescribed statutory pattern with the objective of protecting capital and optimising returns within acceptable risk parameters.
Which GRI Standards and corresponding Sustainable Development Goals (SDGs) have been addressed?
The GRI Standard addressed in this case is: Disclosure 201-1 Direct economic value generated and distributed
Disclosure 201-1 Direct economic value generated and distributed corresponds to:
- Sustainable Development Goal (SDG) 8: Decent Work and Economic Growth
- Targets: 8.1, 8.2
- Sustainable Development Goal (SDG) 9: Industry, Innovation and Infrastructure
- Targets: 9.1, 9.4, 9.5
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References:
This case study is based on published information by ITC, located at the link below. For the sake of readability, we did not use brackets or ellipses. However, we made sure that the extra or missing words did not change the report’s meaning. If you would like to quote these written sources from the original please revert to the following link:
https://www.itcportal.com/sustainability/sustainability-report-2021/sustainability-report-2021.pdf
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