Corporate Reputation

ITC’s Dairy Development Initiative CSR or CSV Submitted to Instructor: Prof. Asha Kaul Academic Associate: Sudhir Pandey In partial fulfillment of the requirements of the course Communicating Corporate Reputation By Jyotirmoy Pathak PGP – 12126 Section – A On 20th August 2013 INDIAN INSTITUTE OF MANAGEMENT, AHMEDABAD ITC Limited: A Prologue The journey that began way back in 1910 was very straight and simple for ITC Limited with only tobacco and tobacco products in their portfolio.It was in 1970 that then chairman of ITC Shri Ajit Narain Haskar decided to diversify the business to Hotel Business. Soon enough, ITC ventured into paperboards industry as well and by the end of the twentieth century, ITC increased their portfolio by manifold by investing into agri-business, FMCG products, packaging and information system etc. Almost two decades thereafter, the investments have started paying their returns and presently, the conglomerate is a USD 42 billion entity with businesses diversified to as many as 35 different divisions.Success of ITC was linked to the innovative business models to deliver shared value for both societies and shareholders, by leveraging synergies across businesses to create new differentiated products and superior value propositions. This was also the period when ITC thought of working towards building an ecosystem rather than trying to protecting it. In true sense, it differentiated itself from the rest of world in such a manner that the competitors were left behind by at least two generations. Sole purpose of ITC was to serve as a market anchor to the entire value chains.As Shri Y. C. Deveshwar, present chairman of ITC Ltd said, “A country’s brands are a reflection of its competitive strengths and a manifestation of its innovation and intellectual capacity. I strongly believe that a country’s economic capacity is significantly enriched when its institutions build and own internationally competitive brands. Winning brands serve as market anchors to support the competitiveness of the entire value chains of which they are a part. Strong domestic brands create much larger value since they create, capture and retain value within the country.Your Company (ITC) takes justifiable pride in creating world-class Indian brands that have demonstrated immense vitality in the global Indian market place. ” Several initiatives which were way different from the conventional marketing mantra were introduced by ITC and it created a value chain that connected a wide range of stakeholders from the villagers, peasants to the end users. E- Choupal, social and farm forestry, watershed development program etc are a few example of those initiatives. These laid platforms that connected the rural India to the rest of the world; creating a two way transaction flow.Also it focused on delivering triple bottom line. Flipping through the past: As mentioned, ITC has faced many ups and downs since its inception and the experience it carried forward throughout its journey helped the organization work on many initiatives which were way unconventional. It pioneered the idea of “catalyzing and channelizing investments towards upgrading of human capital expansion and modernization of infrastructure and productivity enhancement in the agri-sector. ” The rationale of the idea was to create a shared value in terms of “a commitment beyond the market”.For Ashesh Ambasta, vice president and head of Social investment, business could and should never overlook the twin problems of India, “economic inequity and depleting natural resources”. ITC being traditionally a agriculture based company, couldn’t ignore both these factors invested everything considering these two factors in mind. Creating a societal as well as shareholder value: The key to achieve and sustain economic growth of modern India, as identified by ITC, was simply “by enhancing the competitiveness of the Indian farmer and effectively linking them to remunerative opportunities in the world market. Since agriculture was the primary means of livelihood of more than 58. 4% population of India and with agriculture being the base of ITC’s business, ITC worked for the betterment of the farmers thereby making its base strong for the future endeavor. E-Choupal was a challenging business concept that was meant to embed the social goals of empowering the farmers and trigger a cycle of higher productivity, enlarged capacity for future investments. E-Choupal was digitization of the agricultural sector thereby enhancing the competitiveness of the agri value chain.Real time information and customized knowledge provided e-Choupal enhanced farmers’ ability to make decisions and align their farm outputs with market and consumer demand. This was meant to build a system of trust with the farmers “as a reliable supplier of goods and services on the one hand and as a buyer of high quality, cost effective farm output on the other hand. ” This finally resulted the company to become one of the largest exporters of agricultural products. 4-pronged strategy to tackle Climate Change: By the end of 2009, ITC unveiled its 4-pronged strategy to meet challenges of climate change.It was voluntary and transparent disclosure of the Company’s sustainability initiatives and its contribution to building economic, environmental and social capital to secure the long term interests of its stakeholders. Recognizing the challenges of climate change and global warming and its impact on competitiveness, ITC has adopted decisive strategies to progress its own efforts to support national and international endeavors in mitigating the effects of climate change. ITC is ‘carbon positive’ for 4 consecutive years, currently sequestering twice the amount of carbon that emitted from its operations.For 7 years, it has also sustained its ‘water positive’ status, creating rainwater harvesting potential that is more than twice that consumed by the Company. Irrigating water stressed areas is a critical need following the impact of climate change on India’s farming sector. ITC’s sustainable agricultural practices also help farmers adapt to the vagaries of climate change. [www. itcportal. com] Integration, synergy and growth: The goal of inclusive and sustainable growth: “The goal of inclusive and sustainable growth – the philosophy underlying the Triple Bottom Line approach – is based on the realization hat economic growth cannot be engendered without embracing the vast multitudes living in poverty and addressing the alarming depletion of finite natural resources. Over 75% of those below the poverty line reside in rural India, where agriculture continues to be the predominant source of livelihood. The declining share of agriculture in GDP has led to the present situation where nearly 60% of India’s population shares barely 22% of output. In terms of the foundational view of Dr.Amartya Sen, poverty manifests itself not only as material impoverishment but also in the lack of capacity for the poor to emerge from such a condition. Such fundamental deprivations of freedom suffered by individuals affect their economic performance as well as their ability to seize opportunities offered by functioning and expanding markets. Inclusive and sustainable growth is therefore crucially dependent on creating the capacity to consume among the rural poor. ” Riding in the belief of inclusive growth, ITC committed itself to India and beyond the market.With the initiatives like “farm to food product value chain”, “ tree to textbook value chain”, “agrabatti value chain” “women’s empowerment”, ITC not only proved its commitment beyond business motive but also established itself as an organization which put nation before company. The problem: The problem in front of ITC is two-fold: 1. With its strong value chain linking the rural and urban economies, especially the fact that rural marketing is the core competence of ITC, should the conglomerate invest in livestock development program so that it can enter into the dairy business? . If the answer of the previous question is yes, then how should the company go about it? Should it consider a pure business model or like several other CSV initiatives, it should work on a model of shared value connecting the villagers in the value chain? Options: 1. Simply working on a business model by adhering to the law of the land and paying due taxes without exploiting or exploring the natural resources. 2. Not restricting to only business but working for the societal good by investing on philanthropic work. 3.Going beyond CSR to help out the NGOs, self help service providers of the villages to develop and work for the community betterment. 4. Create a sustainable value chain as its other initiatives by leveraging the innovative capacity of the organization and thereby building the strong synergy between the business objective and socio-economic development. Recommendation: With the objective of bringing about a significant increase in yield rates during the lactation period, ITC stepped up its breed improvement program initiated in 2004-05.From 32 Cattle Development Centers (CDCs) at the close of 2004- 05, the number increased to 72 CDCs covering 1,500 villages during 2005-06. A total of 27,392 Artificial Inseminations (AIs) were conducted during the period, taking the cumulative total to 46,200. The program recorded 3,531 live births during 2005-06, taking the cumulative total to 5,544 high-yielding crossbreds. The most significant breakthrough in Munger, Bihar, was that the tie-up with Sudha Dairy (COMFED) for supply of milk from this region finally became a reality. ITC portal] Since, ITC already has a huge experience in the rural market developing program and a strong commitment towards the society, it can defiantly work on the dairy business by enabling families to upgrade to high-yield livestock and form co-operatives to market their milk. In this process ITC can turn a dormant family resource into an easily adoptable and dynamic rural enterprise. ITC can train and equip technicians to provide an integrated package consisting of artificial insemination, cattle health and nutrition, pregnancy and post-natal services right at the farmer’s doorstep.This development can also act as a bridge to link its food business by providing self sufficiency and thereby, in long term enabling a greater value creation. Examples from other industry: As an example of value chain system of an organization to strengthen its base, we would like to discuss about GCMMF and its most trusted brand, Amul. Of course, there is a difference between Amul and ITC about the kind of organization they are, but in terms of CSV, Amul can provide a good example. CSR-sensitive Business Philosophy: The first step towards discharging the CSR is the business philosophy of the GCMMF.It is twofold: one, to serve the interests of milk producers and second, to provide quality products to consumers as value for money. Evolution of an organizational system has ensured that the corporate social responsibility towards the primary milk producers, village and the ecological balance is fulfilled. The milk producers are paid for their milk in accordance with market forces and realization of value for their produce. Invariably the price paid to the member-producers in Gujarat is higher by 15 per cent than the national average. 1] CSR-orientation To Distributors ; Retailers: The GCMMF has identified the distributors and retailers are its important link in its vendor supply chain. Through surveys the GCMMF found that 90% of the distributors do not get any opportunity of exposure to latest management practices. The GCMMF realized that it was a corporate social responsibility to strengthen the core business processes of its distributors so as to keep them in mainstream business and compete with those with formal training in management.The GCMMF has developed and trained all its distributors through Value-Mission-Strategy Workshops, competence building, Amul Yatra, Amul Quality Circle meetings, computerization, and electronic commerce activities. Competency Building Module of the GCMMF is meant to infuse professional selling skills by making the distributors and their salesmen aware of latest sales management tools and techniques; enhance their knowledge of products; positioning and segmentation strategies for various products.Through one to one talk with the farmers, the distributors and salesmen realize AMUL is a large business of small farmers and by selling AMUL products; they are discharging a social responsibility towards a large number of poor farmers whose livelihood depends upon their skill and integrity. [1] 1. http://www. financialexpress. com/news/corporate-social-responsibility-the-amul-way/112172/4

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