Beyond Profit & Compliance: ITC's Ethical Octagons for Shared Value & ESG Triumph

 Introduction. 

The Indian company ITC Limited is a prime example of the effectiveness of a values-based strategy. ITC has continuously put building value for all of its stakeholders first, from its modest beginnings in the tobacco sector to its current expansive empire comprising FMCG, hotels, paperboards and agribusiness.

This blog explores the core principles, effective applications, and influence of ITC's value-based philosophy on the company's incredible journey.

To Begin with, let us try to understand what is Value-Based Management?

A strategy framework known as value-based management (VBM) places emphasis on maximising long-term value generation for all parties involved, not just shareholders. It considers the environmental, social, and governance (ESG) aspects that affect a company's total sustainability and societal effect in addition to standard financial measurements.

ITC's VBM approach rests on five core pillars:

Sustainable Value Creation: ITC acknowledges the relationship between environmental health and corporate success. The business has put in place a number of programmes to support renewable energy sources, lessen its carbon footprint, and preserve water. For example, ITC's paperboard division leads the world in sustainability, sourcing more than 80% of its raw materials from forests that are responsibly managed.

Emphasis on Stakeholder Engagement: To understand the needs and expectations of all of its stakeholders—including workers, clients, communities, and investors—ITC actively engages with them. This cooperative strategy guarantees that the company's choices reflect the interests of its stakeholders.

Innovation and Excellence: Throughout all of its operations, ITC promotes an innovative culture. The business makes significant investments in R&D since it's always looking for new methods to enhance its services, procedures, and goods. This commitment to quality has fueled ITC's expansion and position as a global leader across a number of industries.

 

 

LSTC scientists and product development teams have made it possible for the Branded Packaged Foods and Personal Care Businesses to offer a choice of distinctive and higher quality goods in the "new normal," even as the COVID-19 pandemic has increased demand for health and hygiene products.

Cutting-edge scientific initiatives are still being used to encourage a methodical decrease in the amount of fat, sugar, and salt in recipes for packaged foods without sacrificing the items' sensory qualities. Prominent technological platforms in the domains of hygiene and health and wellness persist in driving innovation and enabling the creation of next-generation product offerings to cater to the demands of evolving consumers.

Engaging Stakeholders: Creating Trusting Relationships

ITC is aware that the welfare of all of its stakeholders is essential to its success. This cooperative strategy is demonstrated by:

Employee Empowerment: ITC makes significant investments in the training and development of its staff, promoting an environment that values lifelong learning. The company's continuously excellent employee satisfaction scores are evidence of its dedication to the welfare of its workforce. 

ITC trains its staff using a coaching technique.Employee coaching varies by ITC industry; for example, coaching for hotel management takes 18 months, but coaching for team leaders takes only two months.Basically, the industry and position determine how many days an employee in ITC needs instruction.ITC supports lifelong learning. ITC Hotels Ltd., in partnership with Starwood Hotels, is effectively implementing Six Sigma. Six Sigma (SS) is a crucial management tool used by several businesses throughout the world in their pursuit of excellence.

Forging Robust Community ties: ITC actively participates in the local communities around its activities, meeting their needs via a range of social development programmes. These initiatives have a beneficial effect that goes beyond the boundaries of the business and concentrate on topics like healthcare, education, and rural development.

Open Line of Communication with Investors: ITC upholds the strictest corporate governance guidelines, guaranteeing accountability and openness in its financial reporting and decision-making procedures. Due to its dedication to moral business conduct, the company has gained the respect and confidence of investors all around the world.

Innovation and Superiority: Exceeding the Limits of Advancement

ITC's growth and global leadership are fueled by its unwavering pursuit of innovation. This commitment is demonstrated by:

R&D Prowess: With cutting-edge facilities and a staff of top scientists and engineers, the firm makes significant investments in research and development. This commitment to innovation has resulted in the creation of innovative goods and procedures that have revolutionized several sectors.

Product Diversification: ITC consistently adds new products to its lineup and enters untapped markets and market niches. Because of its agility, the business is able to keep ahead of the competition and adapt to changing customer requirements.

Operational Efficiency: ITC is always looking for ways to increase productivity and efficiency within its operations. To this end, it has adopted lean manufacturing techniques and is making use of technology. This emphasis on ongoing development guarantees that the business.

Women Empowerment Initiatives

In the course of the Digital Leaders Programme, which was hosted by the Asian and Pacific Training Centre for Information and Communication Technology for Development (APCICT/ESCAP) in Incheon, South Korea, on the topic of Empowering Women Entrepreneurs through Digital Transformation, T. Khéchoyan, Director for International Cooperation and Development at the Public Administration Academy of RA, took part in discussions and the introduction of new training modules for the Women ICT Frontier Initiative (WIFI).

Draft action plans were created by each participant and offered for execution in their respective nations. The actions for establishing the WIFI curriculum in Armenia were presented by T. Khechoyan.

Armenia, the Philippines, Thailand, Sri Lanka, Fiji, Bangladesh, Cambodia, Vietnam, India, Nepal, Kyrgyzstan, Samoa, and Papua New Guinea are all included in the WIFI programme.

 The Public Administration Academy of RA and UN-APCICT/ESCAP collaborated to host virtual training sessions in March 2022 as part of the WIFI programme for the teaching and administrative staff of PAARA, representatives of public organisations involved in women's entrepreneurship matters, and invited specialists from Georgia, Latvia, and Kazakhstan.

throughout 2024, new training modules will be introduced throughout the region's countries, including Armenia.

Value Octogen of ITC 

Strategy and Business Model: To hedge against economic swings, ITC expands its operations into FMCG, lodging, and tobacco. The intended demerger of the hotel firm centres on its fundamental beliefs and skills. ITC supports "Responsible Luxury" in the hotel industry, which is consistent with morality and sustainability. In line with the digitalization trend, ITC InfoTech exhibits digital transformation and operational efficiency.

Capital Allocation: The business retained a 40% ownership after sensibly merging its hotel segment to maximise shareholder value. By strategically investing in high-growth industries and optimising asset efficiency ratios, the hotel and food sectors were able to maintain their mutual benefits.

Strategic Financial Decisions: ITC Hotels' solid, debt-free balance sheet shows responsible financial management, paving the way for expansion and investment possibilities in the future. The board's financial allocation decision permits flexibility for growth and changes in the market. The industry trend of technical efficiency and digital transformation is aligned with ITC InfoTech's excellent performance and investment in future-ready capabilities.

Organization Architecture:

The SBUs collaborate with local communities and suppliers to ensure fair trade practices. ITC's e-choupal platform benefits over 4 million farmers in 35,000 communities across ten states. The company procures over 6 million tons of agricultural produce through the platform annually. A comprehensive training and development program, including leadership development, technical skills improvement, cross-functional training, employee wellness, soft skills training, and diversity & inclusion training.

Cost Management:

ITC has significantly reduced costs, increased efficiencies, and improved competitiveness through cost management. From FY22 to FY23, costs grew less than revenue, with a steady operating margin of around 35%. The company implemented initiatives like supply chain optimization, value engineering, and energy efficiency programs, achieving cost reductions above Rs. 1,000 crores. The company also ramped up its AI/ML-driven real-time purchasing platform to enhance leaf tobacco procurement effectiveness. Additionally, the company purchased a green boiler, reducing coal consumption by 25%.

 

Mergers, Acquisition & Restructuring:

ITC leverages mergers and acquisitions to expand its business portfolio, streamline processes, optimize cost structures, and divest non-core businesses. This strategy strengthens ITC's brand portfolio, notably in paperboards and packaging. Successful M&As have increased revenue by 10% CAGR over the past five years.

 

ESG TRIUMPH 

Environmental

 ITC is dedicated to promoting energy efficiency and the utilisation of renewable energy sources in order to protect the environment. With a target of 50% reduction by 2030, a 25% drop in carbon footprint has been accomplished since 2013. The business has recycled or processed garbage for more than 16 years, and it has been water-positive for more than 21 years. Through community collaborations and green infrastructure initiatives, ITC also strives to protect biodiversity. The goal of these initiatives is to leave future generations with a lasting legacy.

Social

Through initiatives like the ITC e-Choupal initiative, which supports fair farming and gives rural people more authority, Social ITC is dedicated to community development. The organisation invests in infrastructure for healthcare and education and also aids women via skill development and microfinance programs. It also promotes equality of opportunity and diversity.

Governance

ITC supports corporate governance norms through a strong, independent Board, robust risk management system, and open communication with stakeholders. With 71% of its members serving as Independent Directors, it fosters trust, attracts ethical investors, and ensures moral conduct. ITC has received numerous accolades for its governance standards.

Conclusion.

Accepting Worth, Spurring Development, ITC's value-based approach is ingrained in the organisation as a guiding principle rather than merely a business strategy. From innovation to shared value creation, from environmental stewardship to stakeholder involvement, ITC promotes a holistic strategy that benefits not just its financial line but also the people it serves and the world we all share. The company's steadfast dedication to values promises to spur more growth and open the door for a more fair and sustainable future as it continues on its path.

The success of ITC is a compelling example of value-based management's potential. Companies that prioritise purpose over profit can succeed financially and leave a long-lasting beneficial legacy in the community. ITC's guiding principles provide a compelling blueprint for other firms to navigate the future with responsibility and integrity, while also generating shared prosperity for all, as India's economic environment changes.