ITC Limited is a large Indian diversified conglomerate. It is an exemplar of managing exceptional growth and environmental sustainability. All its major sustainability initiatives are closely tied to its core businesses, either to provide raw materials, or as form of backward integration, and therefore receives serious attention from business leaders.
ITC and its supply chain
ITC’s primary businesses consist of CPG, tobacco, paper products, agri-business, and hotels. Its stellar growth rate of ~12% CAGR for 20 years has been built on the back of a complex agricultural supply chain which extends over 17 crops spread over 19 states in India. In 2016, ITC sourced over 2 Million tons of agricultural commodities. Characterized by small land-holdings, inadequate access to modern farming practices, and over-reliance on rainfall for irrigation, India’s agricultural communities have always been at high risk of being adversely affected by climate change. As such, ITC has been working closely with these agricultural communities to help guard against, and mitigate the impact of climate change and ensure the robustness of ITC’s agricultural supply chain.
Impact of climate change on India
With 17% of world’s population, and only 2.2% of the world’s land mass, India is a densely populated nation. Thus, it is already in a state of high natural resource stress. Any climate change impact has an immediate and major effect. A major climate change related problem is of water supply. Global warming has already led to significant shrinkage of the Himalayan glaciers that feed India’s major rivers. Changing weather patterns have caused a decline in monsoon rainfall. With 60% of agriculture still being rain-fed, the water stress due to less rain, more frequent drought, and an alarming drop in the groundwater table due to excess usage has created a severe challenge for agriculture.
Due to global warming and the Indian government’s consequent commitment to reducing GHG emissions, industry has been forced to look at cleaner energy sources. Conventional power generation in India is challenged by lesser water supply (hydro power stations are becoming water starved, and thermal power plants are not finding enough fresh water to maintain cooling systems).
Impact of climate change on ITC
Being a very prominent company, ITC is always in the public spotlight for its sustainability practices. ITC is particularly sensitive to climate change challenges since it is heavily dependent on the agricultural supply chain for raw materials. Additionally, its newer CPG and paper businesses require a greater variety of agricultural inputs and are more water and power intensive than before. Any disruption to its supply of inputs has a direct impact of the company’s performance.
Remedial and preventive measures
Water conservation: ITC’s integrated watershed development program has brought 2 Million Hectares of land under soil and moisture conservation and strengthened the availability of water for ~150,000 households. With ITC’s help, rural communities engage in activities such as building check dams and farm ponds.
Making agriculture sustainable and resistant to climate change: ITC works closely with farmers to help them adopt sustainable agricultural practices. These include usage of “high yielding seed varieties, promotion of intact root seedling production systems for lower mortality, and dissemination of information and best practices on drip irrigation and micro sprinklers for improved yield and lower water consumption.” Through this combination of natural resource augmentation and scientific agriculture, the company is helping agricultural communities cope with the impact of climate change.
Energy conservation: ITC draws a significant amount of its energy from renewable sources. More than 43% of the energy consumed by ITC in 2015 was from sources such as biomass, wind and solar. It has a total installed wind power capacity of ~135 Mega-Watts. It has lowered its carbon footprint by enhancing carbon sequestration through large scale afforestation (currently coverage of ~0.23 Million hectares). These efforts have contributed to ITC being carbon positive over the last decade. ITC’s luxury hotels, office complexes and factories are LEED® (Leadership in Energy and Environmental Design) certified at the highest level by the US Green Building Council. This indicates that they are in the upper end of the rankings of buildings that are efficient in their use of water and energy and low on carbon emissions.
ITC claims to be the only company in the world of comparable dimensions to have achieved being carbon positive (for 10 consecutive years), water positive (for 13 consecutive years) and solid waste recycling positive (for 8 consecutive years).
Potential next steps for ITC
ITC should look to increase the share of renewable energy in its total energy consumption. Given its extensive CPG and consumer paper products business, ITC could to look to introducing product labelling on its packaging that indicates the level of sustainability or environment-friendliness. This will allow consumers to make an informed choice and give ITC an edge over other brands in the market.
- “India: Climate Change Impacts.” World Bank. 04 Nov. 2016. http://www.worldbank.org/en/news/feature/2013/06/19/india-climate-change-impacts
- “ITC plans to scale up watershed development program.” Economic Times. 04 Nov. 2016. http://economictimes.indiatimes.com/news/company/corporate-trends/itc-plans-to-scale-up-watershed-development-programme/articleshow/47552089.cms
- “ITC’s holistic approach to addressing climate change risks.” Sanjib Bezbaroa. Bombay Chamber of Commerce and Industry. 03 Nov. 2016
- ITC corporate sustainability report 2016
- “Here’s how ITC’s social outreach program works.” Economic Times. 03. Nov. 2016 http://economictimes.indiatimes.com/articleshow/45372587.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst