Imperial Tobacco Company, Limited : Corporate Social Responsibility

In this paper I will review and discuss the Imperial Tobacco Company, Limited (ITC LTD). This document will be an informative case study and strategic proposal of this company. As part of this analysis and proposal I will discuss ITC LTD’s history, attributes, corporate social responsibilities to its internal and external stakeholders, strengths, weaknesses, its ethical decision-making process, as well as give my perspectives on what is expected from this company. Lastly, I will discover a strategic plan explaining any social responsibility issues they may encounter.

Introduction/History of the Imperial Tobacco Company, Limited (ITC LTD)

The Imperial Tobacco Company, Limited (ITC, LTD) is a well-diversified tobacco company that is stationed in India. (Ojha, 2010). ITC LTD was founded on August 24, 1910. Its founders began doing business out of a leasing office located on Radha Bazar Lane, in Kolkata (ITC Limited, 2017). ITC LTD is now one of the top cigarettes and tobacco manufacturer in India (Ojha, 2010). Amazingly, fifteen years later, they started a printing and packaging business (ITC Limited, 2017). ITC LTD entered the hospitality sector, by buying a hotel in Chennai as well as expanded to a luxurious hotel in Columbia, Sri Lanka and Dubai in the year 1975 (ITC Limited, 2017). In 1979, ITC LTD entered the paperboard business; ITC LTD later developed a paperboard manufacturing facility in Coimbatore, Tami Nadu (ITC Limited, 2017). Ten years later in the year 1985, ITC LTD started to do business in Nepal by introducing the Surya Tobacco company; which was later called the Surya Nepal Private Limited. ITC LTD started to diversify their business even further when they began to manufacture men jeans, formal and casual attires, as well as party shirts for men (Surya Nepal, 2016). Also, they started to produce other products such as incense sticks and safety matches (Surya Nepal, 2016). ITC LTD obtained the Tribeni Tissue in 1990; in which this new business produced paperboard and specialty papers (ITC Limited, 2017). The Agri-Business Division was initiated in 1990 as well in which the company worked soy farmers and now are one of the top exporters in India (ITC Limited, 2017). Ten years later, ITC LTD increased their business venture by partnering with Wills Sport (ITC Limited, 2017). In doing so, the company could design clothing that fit various individuals’ lifestyles. This company invent and produce men and women clothing. ITC LTD could discover and produce various clothing brands such as John Players, Wills Club Life Evening Wear, Wills Classical formal wear, and Wills Signature (ITC Limited, 2017). The company was recognized by the Fashion Design Industry due to its success in the fashion and design industry (ITC Limited, 2017). ITC LTD established the ITC Infotech India LTD. This business provided IT solutions to the retail, manufacturing, financial, insurance, airline and hospitality industries (ITC Infotech, LTD, 2017). On the verge to continue to diversify their business venture, ITC LTD became a part of the food industry in 2001. In doing so, the company presented their Kitchen of India, where they offer pre-cooked Indian gourmet dishes (ITC Limited, 2017). May I add, they introduced food brands such as Mint-O and the Candyman brand. These brands pertained Confectionery and Aashirvaad (wheat flour) products (ITC Limited, 2017). ITC LTD did not stop their business venture here, they also began to introduce educational and stationary products as well in the year 2002 (ITC Limited, 2017). ITC, LTD now provides book bags, notebooks, pencils, pools, drawing books, etc. (ITC Limited, 2017). Three years later in 2005, ITC LTD established the Engage brand deodorant along with other personal care products (ITC Limited, 2017). In 2010, ITC LTD returned their focus back to tobacco products (ITC Limited, 2017). In doing so, the company introduced its hand-rolled cigar, under the Armenteros brand which are only available in certain hotels, clubs and restaurants t (ITC Limited, 2017).

The Imperial Tobacco Company, Limited has numerous tributes over the years. With this being said, some of the attributes were negative and some were positive. In the mix of doing this analysis, I gathered significant information that provided me with not only the ITC LTD’s positive and negative attributes, it also provided me with feedback made by existing and prior employees’ personal experiences and feelings toward the company. There were a few negative attributes that I found which included displeased employees. Some employees were adamant that there was lack of work balance and no room for growth. The employees were dissatisfied with the company’s low wages and were not fully comprehensive to their job role(s). Also, there was a high number of employee turnover rate. Many of ITC LTD’s employees were leaving the company due to the negative attributes I discussed earlier. Despite the negative attributes, ITC LTD have numerous positive attributes as too.

ITC LTD’s positive attributes include: Drivers of growth:

 ITC LTD incorporates drivers of growth within the community in which they do business. They implement this strategy by establishing job opportunities and offering everyone within their community an opportunity to obtain necessary skills to seek employment.

Empowerment, Risk, and Accountability:

 ITC LTD allows their employees to increase their knowledge in various departments and encourage them to drive the company forward by implementing creativity and innovation ideas. ITC LTD officials encourage all their employees to be responsible and own up to their actions, shareholder value, and performances. (Mbaskool.com, 2016); (ITC Limited, 2017)

Diversified:

 ITC LTD is all about diversity in every aspect of the business. The shows diversity in the products, services, as well as ethnics (ITC Limited, 2017). AT ITC LTD everyone opinions are valued because ITC LTD officials believes that everyone has something to offer (ITC Limited, 2017). ITC LTD presents equal opportunity for their employees

Alignment and Sustainability:

 ITC LTD tends to standby by their vision statement which is; “to sustain ITC’s position as one of India’s most valuable corporations through world class performance, creating growing value for the Indian economy and the Company’s stakeholders” (ITC Limited, 2017). Their mission statement is “to enhance the wealth generating capability of the enterprise in a globalizing environment, delivering superior and sustainable stakeholder value” (ITC Limited, 2017). The company’s corporate strategies and corporate governance, along with their mission and vision statements, all coincide and aligns perfectly with how they conduct business. The Imperial Tobacco Company, Limited, ranked number one as the most admired company in India. This was all based on their quality of leadership, innovation, products/services quality, endurance, corporate governance, talent development, employee empowerment, and business footprint (Korn Ferry Hay Group, 2014). Also, ITC LTD is admired for their social impact on their society through education programs in rural communities, assisting with infrastructure of school facilities, watershed developments for soil & moisture conservation, providing vocational and skill training for the youth, health and sanitation programs, solid waste recycling, afforestation programs, and the ITC e-Choupal initiative that allows local farmers to increase their household income ( Korn Ferry Hay Group, 2014); (ITC Limited, 2017). The company is now worth $39.4 billion dollars as of May 2016 and considered the world’s largest public company (Forbes Media, LLC, 2016). The company stock is worth $253.75 million as of August 26, 2016 (Bennett, 2016).

Leaders:

 ITC LTD was placed 3rd for being one of the leading business in India, in terms of corporate reputation and most active in CSR initiatives, according to Nielsen’s CIM survey (Sengupta, 2015). This company was the first to initiate and publish a sustainability report and win the Development Gateway Award, for its e-Choupal initiative and contribution to information and communication technology. In 2012, the company was awarded the World Business Development Award, for its social and farm forestry initiatives. (HT Media Ltd., 2012) May I add, the company was recognized for their Triple Bottom Line Performance, for producing economic, environmental and social values in the communities they do business in (Ojha, 2010).

ITC LTD’s Strength and Weakness

Truth be told, every company, business, and/or organization has its strengths and weaknesses. It does not matter what size the entity is (large or small). Most importantly, it is how a company can sustain its strengths and overcome its weaknesses. The Imperial Tobacco Company, Limited has its strengths and weaknesses.

Imperial Tobacco Company, Limited, strengths:

 The company provides various products and services, through their several business ventures including the hotel industry, agriculture, packaged foods, lifestyle products, personal care, information technology, men and women clothing, and tobacco (Ojha, 2010). This has allowed them to be a dominant player in various markets and admired for their success (Ojha, 2010).

 ITC LTD has a century of strong brand presence and product advertisements (Mbaskool.com, 2016). An article was written in regarding the Imperial Tobacco Company, LTD, advertising its success; the article stated, “due to their advertising strategy, within a few months their Engage deodorant became the leading brand” (Chatterjee, 2013).

 Their brand presence success allowed them to reach over 4 million farmers, to assist and improve farm productivity and increase farmer’s annual income (ITC Limited, n.d.).

 ITC LTD has a strong workforce. The company has over 31,000 employees throughout their several businesses (ITC Limited, n.d.)

 The company has strong excellent development and research facilities, that have played a big role in the agri-business and their product lines success (ITC Limited, n.d.). This has allowed them to have a competitive edge in the market and the ability to enhance the lives of many.

 The company has a strong corporate management team. Each member brings over twenty years of experience to the company.

Imperial Tobacco Company, Limited, weaknesses:

 Although Imperial Tobacco Company, LTD has several business ventures, they are still dependent on their tobacco revenues. As of 2010, 65% of its gross revenues came from their tobacco business (Ojha, 2010).

 Their hotel chain has not been able to go international, like hotels such as the Hilton, which are found all over the world.

Analysis of Social Responsibility

Truth be told, the Imperial Tobacco Company, Limited (ITC LTD) has been very successful in being able to convey their innovations around the world as well as being recognized for their contributions; however, I feel that the company have not obtained its full potential regarding their corporate social responsibility (CSR). Although ITC LTD has expanded their business ventures by introducing other industries than tobacco, the company still are providing a lot of effort in their tobacco industry even though tobacco products contributes to death and diseases. Studies showed that about fifty-seven percent of men and eleven percent of women are tobacco users in India (Ojha, 2010). On the other hand, the number of Americans who are living with tobacco-related diseases exceeds over 16 million (CDC, 2011)

In addition, it is apparent that ITC LTD is adamant regarding making more and more money from their consumers. New government guidelines and rules were implemented on April 1, 2016. As part of the new government rulings in India, tobacco industries are required to provide health and warning labels on their tobacco products’ packaging. Additionally, the health and warning labels must be visible on all packages (meaning it should cover approximately 85% of the products’ package) (Pandey, 2016). Shockingly, the company was not satisfied with the new government rulings. The company felt that they were targeted, therefore, they decided to protest this matter; as a result, the company later decided to close their tobacco factories (Pandey, 2016). In my opinion, ITC LTD’s reaction to the new government ruling, simply clarifies how the company was not willing to uphold their corporate social responsibility. Corporate social responsibility (CSR) is the conscious effort to operate in a manner that balances all stakeholder interest (Lussier & Sherman, 2014). It is absurd that ITC LTD was not willing to comply with the new and fair government rulings. The company expressed unethical behavior due to their refusal to comply with the new government guidelines, as well as their lack of enthusiasm regarding their corporate social responsibility.

ITC LTD’s strategic plan regarding compliance:

ITC LTD’s new CSR policy apparently complies with today’s societal norms. ITC LTD base their CSR policy on the people, planet, and profits. This is also known as their Triple Bottom Line Concept. ITC LTD’s new CSR policy has been revised so that it will assist individuals within their community. The new policy will include educational and professional training, improvements to poverty areas (such as providing better drinking water). The revision of this policy will be targeted on offering significant information on health and rural development (ITC Limited, n.d.).

Furthermore, ITC LTD implemented a new E-Waste policy that focuses on improving the environment. The new E-Waste policy includes specifications that includes the following: specific review on the disposal of electronics equipment and accessories, watershed development program, (purpose of this program is to conserve moisture in the soil and initiate strategies in which reverses land degrading, as an effort to expand agricultural productivity in rural communities (ITC Limited, n.d.). Additionally, ITC LTD implemented a new program called The Afforestation Program. The purpose of the Afforestation Program is to work with landowners who are not effectively utilizing their land; this program is also designed to persuade landowners to plant trees to convert it into pulpwood (ITC Limited, n.d.). The company’s Afforestation Program has be consistent in sustaining their carbon positive status for the past eleven years (ITC Limited, n.d.). ITC LTD developed these environmental programs as an effort to fully comply with the environmental laws set forth by the Ministry of Environment, Forest, Central and State Pollution Control Board (ITC Limited, n.d.). Meanwhile, the company has been fulfilling the goal of the Triple Bottle Line idea, and at the same time was able to make a substantial amount of profits.

Potential risks involving ITC LTD’s internal and external stakeholders:

For the most part, after reviewing ITC LTD’S corporate social responsibility policy, I do not believe that there are any gaps in this policy that might provoke any risks to the company or their stakeholders. The new CSR strategy seems to cover the three factors under their Triple Bottom Line Concept effectively. ITC LTD requires that their team meet annually to resolve any issues that may impact internal and external stakeholders. Not only does ITC LTD’S CSR team are working hard to resolve any issues that may negatively impact their internal and external stakeholders, they are also seeking more opportunities to improve the environment, financial situation, as well as ways to implement strategies so that everyone within the company can receive great benefits.

Overall, the purpose of ITC LTD’s annual CSR meeting is for the team to see if there are any gaps in their corporate social responsibility policy that might create potential risks to the company or their internal and external stakeholders. If there are any risks found that will negatively impact the company and their internal and external stakeholders, the team will quickly resolve the issue(s) by implementing a more effective strategy regarding the corporate social responsibility policy.

Potential positive and negative impacts on ITC LTD’s internal and external stakeholders:

Nevertheless, ITC was the first company to publish a sustainability report and received the Development Gateway award. ITC LTD was placed 3rd for being one of the leading business in India, in terms of corporate reputation and most active in CSR initiatives, according to Nielsen’s CIM survey (Sengupta, 2015). ITC LTD achieved the World Development award in 2012 for its initiatives regarding societal and farm forestry (HT Media Ltd., 2012). Additionally, the company achieved a reward for their phenomenal Triple Bottom Line Performance. They reached a phenomenal performance regarding producing economic, environmental and social values in the communities in which they construct commerce (Ojha, 2010). Thus far, ITC LTD has an amazing record regard CSR implementation; however, a potential risk that the company and its internal and external stakeholders may face will be if the CSR team lack performance regarding the execution of the CSR policy. For the company to continue to thrive and satisfy everyone within their business, they must continue to create strategies to improve their corporate social responsibility. Also, if the company abandon their Triple Bottom Line concept, it will also create negative risks towards the company and its internal and external stakeholders.

The Evolution of ITC LTD:

Hence, the evolution of ITC LTD’s strategic planning initially came from reports presented in the 1960’s. Some of the reports indicated individuals’ overall health due to the consumption of tobacco products (CDC, 2016). Numerous surveys was recorded in India stating that 11 million females, 229 million males, and underage teenagers was tobacco users (Ojha, 2010). Because of these surveys, the tobacco industry was quickly frowned upon. The industry received a lot of negative criticism from the public due to the danger of these products. ITC LTD realizes that the increase in taxation on these products can hinder their business revenue, therefore, they decided to expand and diversify their business ventures (ITC Limited, n.d.).

In 1975, the company became involved in the hotel industry. By 2010, the company had expanded into a chain of industries such as clothing, personal care products, food industry, information, and technology development, retail products, etc…. (ITC Limited, n.d.). They went from a struggling tobacco company to a multi-chained industry that made them become one of the most admirable companies in the world.

ITC LTD’s consistency:

Most importantly, ITC LTD shows a substantial amount of consistency relative to CSR compared to other businesses. ITC LTD conveys CSR within their vision and mission statements. They continue to comply with the corporate governance and policies regarding code of conduct, E-Waste procedures, food restrictions, sustainability, etc….. (ITC Limited, n.d.). Also, the company shows consistency by expressing diversity in the workplace, executing effective environmental, technology, training and educational programs (ITC Limited, n.d). Contrary to this, I feel that ITC LTD lack social responsibility regarding their tobacco business. The company is continuing selling these harmful products although they cause health complication as well as death.

Ethical Decision-Making ITC LTD’s Decision-Making Process:

Moving forward, ITC LTD’s structural strategy regarding making ethical decisions are influenced by John Elkington’s Triple Bottom Line Performance concept. Societal norms, environmental and financial sustainability is the underlying message that this concept is trying to convey (The Economist Newspaper, Limited, 2009). There are several teams with the company. The teams concentrate on maintaining and sustaining internal and external balance, finances, recruiting qualified and talented individuals, improving CSR and operating components (ITC LTD, n.d).

ITC LTD’s aspects of ethics in the decision-making process:

For the most part, ITC LTD has formed a CSR team and board members, however, they did not fully execute their responsibility regarding ethics. Evidently, this was apparent when ITC LTD initially did not comply with the government rules regarding the tobacco products. The company decided to protest and close several of their tobacco factories. ITC LTD’s board members were aware of the harmful risks involving tobacco products, however, they continue to promote and sell these products.

Specifically, when ITC LTD established their sustainability policy they concentrated on the value of ethics and their corporate social responsibility to all stakeholders (internal and external). For example, their company policy states that they will not hire anyone under the age of eighteen, and prohibits forced labor at any of their facilities (ITC Limited, n.d.). ITC LTD improved their ethnic approach by showing compassion and consideration involving their corporate social responsibility. In doing so, the company formed a responsible sourcing policy; this policy was designed to ensure that their vendors comply with all the government compliance laws regarding code of conduct, human rights, bribery and corruption, safety and environmental procedures, labor laws, etc.(ITC Limited, n.d.).

Analyzation of any gaps within ITC LTD’s decision-making process:

ITC LTD formed a revised report regarding governance and compliance in 2013. The new report conveys the importance of ethical behavior, economic changes, effective decision- making, empowerment, innovation, trusteeship, transparency, control, accountability, sustainability, people and societal norms, environmental and technology development, training and education, profits, etc.

Additionally, ITC LTD’s CSR team is also concentrating on relative issues that can impact the environment. They are consistently gathering effective strategies that will decrease potential gaps within its decision-making process. ITC LTD’s CSR team are seeking opportunities that can provide opportunities that will not only give them a sustainable amount of profit, they also want to improve their financial strategies that can be beneficial for everyone within their organization.

Critique the Organization

Quite frankly, to have a well-structured analysis of the Imperial Tobacco Company, Limited, I must critique its current organizational CSR plan. The company was acknowledged by Forbes A-List, for their contributions to society (ITC Limited, n.d.). In addition, ITC LTD obtained the inaugural “World Business Award”, for creating sustainability for many and creating wealth in developing countries (ITC Limited, n.d.). ITC LTD received the Golden Peacock Awards for their CSR practices and corporate governance in 2007. In my opinion, I believe that the company has been a role model for numerous businesses.

Components for a strategic CSR plan:

Moving forward, ITC LTD’s corporate social responsibility policy purpose is to enforce strategies to make the environment in the people in it better. Also, its CSR plan is centered around maintaining ethical labor practices and behavior, creating values, accountability, safety, generating wealth for all its stakeholders, addressing global challenges, and giving back to the poor. In my opinion, I feel that an effective CSR plan will involve establishing and maintaining philanthropic, ethical, legal and economic responsibility. ITC LTD has contributed to the environment, society, and the economy. For example, for nine years in consecutively, ITC LTD has been faithful to recycling solid waste recycling, eleven years carbon positive, fourteen years water positive, and increased their renewable energy by 47% by utilizing carbon-neutral sources, such as biomass, wind and solar (ITC Limited, n.d.). The has over 32,000 employees and has developed growth in the economy by creating jobs through their diversified business venture, and has a turnover of over $8 billion as of 2016 (ITC Limited, n.d.). ITC LTD philanthropic responsibility policy provide education to over 4,700,000 children, helped over 50,000 women obtain skills that would generate income for their families, and provided training to over 34,000 youth so they would be able to obtain employment. They also empowered over 4 million farmers through their e-Choupal initiative (ITC Limited, n.d.).

Organization Comparison in regarding CSR plans:

Hence, ITC LTD’s CSR plan is consistent in comparison to the other top CSR ranked businesses, such as Tata Consultancy Services, Infosys Technologies, Larsen and Toubro, reliance industries, Bharti Airtel, Steel Authority, NMDC and India Oil and Natural Gas company (New Deli PTI, 2009). These companies including ITC LTD are focused on addressing environmental issues, sustainable practices, contributing back to the community in which they serve, creating economic wealth for all, complying with laws and regulations, and maintaining ethical standards (New Deli PTI, 2009).

Internal and External Influences:

Furthermore, some internal influences are leadership styles, management structure, employees, talents and strengths of the employees, organizational performance, technology, and committees within the organization. An internal influence on ITC LTD’s CSR strategy plan regarding compliance and industry standards has been ITC LTD’s chairman, Y C Deveshwar. Since the Chairman joined the company, he has been ranked the 7th best CEO in the world for his ability to create sustainability & strategies that enhance the development of natural solutions in their afforestation, watershed, and livestock programs (ITC Limited, n.d.). Chairman Deveshwar has been able to stop inequality, by providing training and education to children, youth, and women in India. In doing so, they can have an income for themselves and their families (ITC Limited, n.d.). Hence, ITC LTD’s values their vision and mission statements, along with their committees; which purpose is to bring sustainability and guidance to maintain its Triple Bottom Line Performance model and corporate social responsibility (ITC Limited, n.d.).

Nevertheless, some of the external influences that have influenced ITC LTD’s strategic plan regarding compliance with industry common practices regarding CSR include government, social interest groups, competitors, consumers, customers, suppliers, vendors, environment, farmers, economy, laws, and regulations.

Potential Risks:

On the other hand, ITC LTD has some potential risk in their current strategic plan is no different in comparison to other tobacco manufacturers like Kanhayya Tobacco company, M.R. Tobacco, Sapna Enterprise and Sudarshan Tobacco (Indian Mirror, n.d.). The company will always be looked at negatively by interest groups such as American Lung Association, Tabacoofree.org, and Smoke Screen Activist Networks if they are manufacturing tobacco products that cause diseases and even death. The company can perhaps reduce the potential risk, if they do extensive research on how to lessen the impact of tobacco product on a consumers’ overall health or create a product that gives a consumer the taste of tobacco, without all the toxic ingredients; by doing so they will also reduce the pollution let into the air, by smokers.

Revised Strategy Plan

ITC LTD has been recognized all around the globe for their corporate social responsibility and their CSR strategy plan. As part of their CSR strategy plan, the company utilizes its triple bottom line model. This triple bottom line model targets the following three categories: people, planet, and profit. Although ITC LTD’s current CSR strategy plan has brought a substantial amount of success, it is always room for improvement.

Revised Strategy Plan and Process:

As I mentioned earlier in this analysis document, ITC LTD’s current CSR plan is successful, however, it is always room for improvement. First, ITC LTD must initiate their revision to this policy by forming a well-planned CSR report that points of its current operations and plans regarding the people and planet (3P Contributor, 2013). By doing so, the company will be informed and update on their investments as well as be notified of any environmental issues and/or risks that my impact the environment and society. The company will also know that there has been no actions taken to decrease the influence of tobacco and its cause of diseases as well as death amongst smokers and non-smokers (Sifferlin, 2013). Many studies inform us that there is a 30% chance that non-smokers will suffer from lung cancer, risks of death from myocardial infarctions or ischemic heart disease, and more will be added to the list of 16 million American who are living with a disease caused by tobacco smoke (Healthycanadians.gc.ca, 2016); (CDC, 2015). Additionally, many smokers want to quit but are unable to do so, due to the nicotine in the tobacco products that they consume (CDC, 2015). Significant contributors and their committees will create an e-cigarette that does not contain habit-forming ingredients such as nicotine This plan is significant because ITC LTD’s main source of profit comes from their tobacco business, therefore, ITC LTD needs to be responsible for decreasing the impact of their product on individuals’ lives.

Ethics and Internal and External influences on CSR strategy:

For the most part, ITC LTD’s current corporate strategies, governance, and ethics policy have influenced its revised CSR strategy. This company has consecutively been recognized year after year for their CSR strategy, contribution to society, employees and their conservation effort for the environment. I believe it is in ITC LTD’s best interest to continue discovering ways to improve their CSR strategy although their current plan has been successful. In doing so, this allows the company to use enrich their efforts on how they can help reduce the impact of tobacco on society overall. Contrary to this, external forces that may influence ITC LTD’s CSR strategy is the interest group who are battling against tobacco industries as well as the government who implemented laws that demand tobacco industries to include or display the negative affect of using tobacco products. Underneath it all, it is safe to say that the internal and external factors of ITC LTD’s CSR strategy influenced the revised CSR strategy.

Conclusion:

In conclusion, every organization should implement an effective strategy(s) regarding their corporate social responsibility. As part of implementing an organization’s corporate social responsibility requires the following: compliance with the current acceptable standards or norms relative to social responsibility today, creating an organizational strategic plan for any gaps in social responsibility that might become potential risks to internal and external stakeholders, awareness that relates to potential positive and negative impacts to internal and external stakeholders regarding social responsibility that would result from the strategy plan, being consistent regarding their corporate social responsibility, and ensuring that the company is making ethical and effective decisions regarding the CSR. Although ITC LTD was not fully complying with the governance laws initially, they are now dedicated to complying with these laws. In doing so, they constr