For this project we will be looking at a case study done on ITC Ltd. ITC is a company based in India that seems to be well diversified. The company is involved in various industries. These include hotels, personal care products, packaged foods, education and stationary products, packaged foods, paper and packaging and agriculture. Of all these products in the ITC portfolio, agriculture seems to be the most important industry because of one product, Tobacco. Tobacco plays a vital role in ITC Ltd because ITC Ltd happens to be one of the biggest cigarette companies in India. The location of the organization in India is both a strength and weakness. The positive of being in India is the history of tobacco crops and usage in the country. Tobacco was brought to India by the Portuguese and then used as a currency and later agricultural staple by the British. The prevalence of tobacco moving throughout the country led to usage increases and as we know tobacco/cigarette addiction is a real thing and quitting is extremely difficult fo many people. Another strength to operating in India is the sheer number of people in the country. With such a large population, a company doesn’t need to be the most popular or biggest name to be successful. It becomes a number game where you only need a small percentage of the population who use tobacco products to use the ITC brand in order for the company to turn a profit. A major weakness of operating in India are the taxes the Indian government implemented to curve usage. It doesn’t matter how many cigarettes a company produces and sells when they are being taxed up to 132% of the value, it will definitely affect your bottom line. What makes ITC Ltd really interesting is that the company has been trying to position itself as a socially responsible organization. We all have an idea of the history of cigarette usage especially in the United States and we are more than aware of the health risks associated with cigarette and tobacco usage. This combination of a company taking the stance of trying to do better for the sake of society but also having a business that is revolved around a product that harms society is like a paradox.
ITC LTD’s strategy plan falls in line with the current acceptable standards of social responsibility today. This strategy plan is consisted of attempts to create social, environmental and economic value. These three aspect together create a triple bottom line approach that ITC LTD has adopted. Environmentally they have committed to being sort of a green company. The company stored twice the amount of carbon that they emitted, created water recycling initiatives and roughly 31 percent of the company’s energy came from renewable resources. The economic value of the company is pretty obvious. We all understand that most tobacco companies tend to have a pretty good profit turnovers. ITC LTD has a turnover of over 6 billion USD and a market capitalization of 30 billion USD. Stakeholders were treated to an annual compound rate of 24 percent for 15 years. It would be safe to say that the stakeholders were happy with their returns over this time. The social impacts of ITC LTD’s strategy plan may hav had the biggest impact for the company. Because of their wide range of business under the ITC LTD umbrella, they were either fully or in part responsible for the employment of over 5 million people. Just take a minute to think about that number of people. That is more people than there are living in Los Angeles, according to the US Census Bureau. The company also created social programs to help farmers by turning dry lands into useable farm lands through watershed initiatives. ITC LTD also created programs aimed for women’s empowerment, education and animal husbandry. They programs were specifically aimed to help disadvantaged members of Indian society become empowered and more self sufficient. The use of triple bottom line approach and having a diverse portfolio provides for great framework for social responsibility that leaves very few gaps.
The strategy plan that ITC LTD has enacted has positives and negatives that could impact stakeholders. Many of the positives of the strategy plan have been outlined above with the social, environmental and economical programs that help a wide range of people in India and in turn create a positive around the ITC LTD brand. The strategy plan can also have a negative impact if the company failed to keep a close eye on the programs they have instilled to ensure that they are working and reaching the groups they were meant for. If these programs stumble or fail to grow, it can create an issue where the public puts added emphasis on the negative connotations associated with the tobacco division of the company. This situation would undoubtably affect profits and stakeholders as well. There is also the delicate social balance of the company making most of its income from tobacco sales. Right now its seems that the means justify the ends with the emphasis on social responsibility but if there is a dramatic rise in tobacco related diseases, the public may no longer feel the same sentiment.
ITC LTD is in a very unusual position when it comes to comparing it to other organizations, especially other tobacco dominate organizations. The company operates to some degree as a philanthropic organization while also holding on too its tobacco industry roots. They would be towards the top of their industry in social responsibility and could very well be on that same level when it comes to other organizations in other industries.
When it comes to making decisions and creating a strategy plan for the organization, ITC LTD has chosen to make decisions that are centered on whats best for the stakeholders. This is done by creating a system of checks and balances to ensure that the company doesn’t go off the rails with poor decision making. This is specifically outlined in the company’s governance policy with the statement, “Since large corporations employ a vast quantum of societal resources, ITC believes that the governance process should ensure that these resources are utilized in a manner that meets stakeholders' aspirations and societal expectations” (ITC, n.d.). This statements outlines and reassures stakeholders that while the company is creating and running programs aimed to improve social responsibility, the stakeholder is still a top priority and the decision making process is centered around them. When it comes ethics, ITC holds their employees to a strict code of conduct. The company’s code of conduct revolves around Good corporate governance, good corporate citizenship and exemplary personal conduct. This means they expect all their employees, including board members, to act in an ethical manner on behalf of the company and any one who does not adhered to this code is to be reported to human resources. The company also has another interesting policy written on its website. This policy states, “ITC is driven by the compelling vision of enlarging its contribution to society. Towards this end, systems and policies, principles and practices in ITC are not only benchmarked to international best practices but also comply with the regulatory requirements” (ITC, n.d.). This policy furthers the organizations commitment to social responsibility and links the company’s ethics to its decision making process. The gaps in the decision making process are similar to those in the social responsibly plan. There aren’t many gaps in the decision making process but it is a process that must remain under careful watch and they must stay on course because of the industry they are profiting from.
ITC LTD’s strategy plan is very comprehensive. Their CSR plan covers many different areas and aspects of social responsibility. ITC’s CSR plan impacts people not only in India but across the world. The CSR plan ITC LTD has implemented consists of coverage for dour different sections. The four sections in the plan are philanthropic, economic, legal, and ethical. Each of these are very important to the ITC CSR plan. The largest part of the CSR strategy plan for ITC is improving the quality of life for the people and consumers in India. They also made sure the plan has an emphasis on women, farmers, and children. The next section of the CSR plan is the economic section. The company must be profitable to be able to be able to maintain a successful CSR strategy plan. ITC LTD has been very good at this “as the organization had a turnover of over US $6 billion and a market capitalization of nearly US $30 billion.” (Ojha, n.d.). The company is very well managed and has a strong presence in all of the business segments. In table three in the case study, it shows that every business segment besides one was very profitable. This shows the true strength of the company and that they are being successful in diversifying in an attempt to help their social responsibility stance as tobacco is their main segment currently.
Many companies have CSR strategy plan components similar to that of ITC LTD. Obviously every organization is going to be different depending on the organization’s business sector, size, and many other factors. All CSR strategy plans are going to have the four main cornerstones which are philanthropic, economic, legal, and ethical. However, the individual components and programs that fall into these cornerstones will almost always differ in some way. ITC LTD’s components are somewhat similar to that of Philip Morris USA. Philip Morris USA is another large company whose main business segment is tobacco. Philip Morris USA has many components to help farmers across the world, sustainable farming, and good agricultural practices. These components are all in the CSR plan for ITC LTD as well.
There are many influences that go into a CSR strategy plan. These influences are a mix of internal and external. With ITC LTD it seems to be a fairly even mix. The company has many CSR components throughout their own values and CSR is embedded in their core beliefs and values. However, they still have some components due to external influence. Tobacco companies receive a lot of criticism across the world for the negative health effects of tobacco. This needs to be countered with strong CSR plans to show the general public that the company is concerned with social responsibility. The internal influences come from the core values of ITC LTD. Two of the core values of the company are respect for people and nation orientation. Many components of the CSR strategy plan are derived from these two values. The company believes strongly in supporting their nation in many ways. There are many programs in their CSR policy that donate many resources to helping people all across India in many way. There are also many programs designed to help the environment and sustainable farming practices. These internal and external influences have greatly impacted the company’s CSR plan to match and exceed industry standards and common practice.
There are some small risks or gaps in the CSR strategy plan for ITC. One of the major risks is that there is little to counter the negative publicity from the company’s main segment being tobacco. The company is diversifying into other sectors in an attempt to get away from tobacco. However, the company is not doing any research in the negative health effects of tobacco to see if there is any way that this can be changed or the negative effects be lessened. This would go great lengths in showing the external influences how dedicated the company is to social responsibility. Another risk is there is little being done to prevent pollution due to cigarettes. Cigarette butts and smoke are fairly significant when it comes to pollution. These risks are not unique to the company. Many other companies in the industry experience the same risk as it is a problem that spans the entire industry.
The revised strategy plan for ITC LTD has many similarities to the old plan. One of the major differences will be philanthropic in nature. There will be new programs dedicated to researching the links between tobacco and common health risks associated with tobacco. The organization will need to do this jointly with an experienced partner in the health research field. Another change will be dedicated to the environment. There will be new programs designed to do research and development on making cigarette butts completely biodegradable and less hazardous to the environment. All other components will mirror the current strategy plan.
All of the components remaining from the old plan were selected due to their impact. All of the programs made a huge impact and will continue to do so. The new components were both selected because tobacco obviously has negative effects on health and on the environment. I feel as a company, we are not doing enough to find ways to lessen these negative effects on society. As a huge part of our business is selling cigarettes, we should be responsible for finding ways to prevent these negative effects.
In developing the plan, internal and external influences were considered. Internally, our values and our approach to CSR show how much dedication we have to improve society and our planet. I feel that all of our current programs and components of our CSR plan show these values. However, there was something lacking. Considering that we are one of the top cigarette sellers in the world and all of the health issues that have been associated with cigarettes. We should be trying to find ways to make cigarettes safer and better for people as well as the environment.
There were no issues with ethics in the previous CSR strategy plan so this did not need to be considered or revised. All of the CSR plan is based around ethics and ITC does an excellent job of that. All of the programs and components of the old CSR policy were very regarding ethics as are the new components.