The Concept of Sustainable Business Practice - ITC India - Case Study Example

Please fix the notes below: 1. Check all words or sentence that I did highlight it with a yellow colour 2. Could you provide the page number of each academic journal you used or book 3. The link of the webpage references you used. And thank you very much for that Executive Summary This paper examines the concept of sustainable business practice using the case of ITC India. A key acknowledgement highlighted by the report is that organizations should be proactive in adopting sustainable business practices. ITC Company has attained high ratings in its efforts to attain sustainability. However, an analysis of the company’s sustainability reports discloses certain failures by the company which further impacts on the capability of the organization in achieving sustainability. The report highlights deficiencies in the area of corporate social responsibility, stakeholder management and the use of resources. The report therefore provides key recommendations that can be adopted by the organization to resolve the identified insufficiencies. Table of Contents Please fix the notes below: 1 1.Check all words or sentence that I did highlight it with a yellow colour 1 2.Could you provide the page number of each academic journal you used or book 1 3.The link of the webpage references you used. 1 And thank you very much for that 1 Executive Summary 1 Table of Contents 2 Introduction 3 How Sustainable Business Practice is reflected on the IIRC (2013) Business Model and Associated Capitals 3 How Sustainable Business Practice is reflected on Managing Stakeholder Interests and Concerns 5 How Sustainable Business Practice Is Reflected On the Management of Resources and Externalities 5 How Sustainable Business Practice Is Reflected on CSR and Corporate Citizenship 6 Objective of the Framework 7 A Critique and Analyse ITC’s Approaches to Sustainable Business Practice 8 Corporate Social Responsibility and Corporate citizenship 8 IICR (2013) and GRI Guidelines 9 Stakeholder Management 9 Managing Resources and Externalities 10 Conclusion and Recommendation 11 References 12 Introduction The implementation of sustainable business practices is imperative in the dynamic business environment. A key question that emerges is whether executives fully understand the meaning and importance of sustainable business practices. For many managers, the idea of sustainable business practices is a theoretical and abstract subject that is partially adopted with the objective of pleasing external stakeholders. For instance, the recent corporate scandals such as the Volkswagen emission cheating scandal raises concerns about whether organizations understand the importance of adopting sustainable business practices. This report seeks to examine how the notion of sustainable business practice is reflected on various conceptual frameworks. The paper will also examine the interrelationships and dynamics of the frameworks using a conceptual diagram. Lastly, the paper will use the framework to critique and analyse the case of ITC approach to sustainable business. How Sustainable Business Practice is reflected on the IIRC (2013) Business Model and Associated Capitals The IIRC (2013,p13) business model and associated capitals is grounded on the premise that at the centre of every organization is the business model which utilises various types of capital as inputs and through the business operations converts the inputs into outputs which can be in the form of waste, services and products. According to the framework, the capital may originate from the organization, the society or other stakeholders. Consequently, both the society and the organization have a stake in the cost of capital that was used as input and also the value that was developed by the organization. The framework further proposes that in the process of creating outputs, the organization creates value for itself and also so for others. For instance, when a firm uses water to cultivate crops that feeds the society and also animal, both parties are bound to get value out the capital (water) used. According to Crowther and Selfi (2011, p42) sustainable business practices should result in creation of present and future value for the business, the society, shareholders and stakeholders. The creation of value by the firm should add value to the welfare of the society at large (Aagaard, 2016, p57). Based on the fact that the IIRC (2013, p1) business model propagates the need for value creation, it can be stated that the framework reflects the sustainable business practices. Sustainable business practices are characterised by innovation and responsiveness to change (Burchell and Kolb, 2006, p35). It can be stated that sustainable business practices are reflected in the IIRC (2013, p13) business model based on the fact that the framework promotes an innovative culture with the objective of inventing services and products that meet the demands of the consumers in terms of reducing the effects on the environment, society and the effective use of technology (IIRC, 2013, p13). Sustainable business practice is established by reporting where communication is considered essential. The International Integrated Reporting Council (IIRC, 2013, p2) is a model that promotes reporting. The framework involves integrated reporting (IR) where communication concerning the performance, strategy and prospects of the organization are communicated to the external environment. Mechanisms that use communication such as reporting are initiatives that promote sustainability (Stone 2006, p15). Additionally, Milne and Tregidga (2006, p 219) examine the role of reporting and communication in promoting sustainable business practices. The authors argue that reporting is a fundamental way that depicts that a business has adopted sustainable business practices. How Sustainable Business Practice is reflected on Managing Stakeholder Interests and Concerns Sustainable business practice involves meeting the needs of all stakeholders from customers, the employees and the community (Oracle White Paper, 2011). According to the Oracle White Paper (2011) adopting sustainable business practices implies that an organization implements activities and strategies that meet the needs of the stakeholders while enhancing, sustaining and protecting the natural and human resources that are required for the future. The framework that involves managing stakeholder interests and concerns is also built on principle of meeting the needs of the stakeholders. It can therefore be stated that sustainable business practice is reflected on managing stakeholder interests and concerns. Sustainable business practice is also reflected in managing stakeholder interests in the sense that in order to attain sustainability, the organization has to put into consideration the interests of the stakeholders when devising the strategic objectives. This will provide an opportunity to integrate the interests of the stakeholders within the processes and activities of the organisation (Ricceri, 2008, p149). The interests of the stakeholders are evaluated in terms of economic, social and environmental areas. How Sustainable Business Practice Is Reflected On the Management of Resources and Externalities The management of resources and externalities of an organizing involves ensuring that organizations use their key resources to gain a competitive advantage while at the same time being accountable to the business eco-system. As argued by the Resource Based View (RBV) the resources that an organizations resources are the main contributors to its performance and they result to gaining a sustainable competitive advantage (Helfat and Peteraf, 2003, p998). Sustainable business practice is mirrored on the management of resources when resources are used with accountability to the ecosystem and other stakeholders. The managing of resources and externalities can be used to attain more sustainable business practice through measures such as dealing effectively with workplace injuries, ensuring that productivity is attained, implementing initiatives to support the community, reduction of carbon emission, effective use of water, energy and the recycling of waste. It can be stated that by implementing this approaches, the management of resources and externalities reflect sustainable business practices. How Sustainable Business Practice Is Reflected on CSR and Corporate Citizenship Corporate Social Responsibility is derived from the premise of enhancing sustainability (Eweje, 2014, p7). When an organization gets involved in activities outside its normal operations to promote the good of society, employees and its customers it can be stated that sustainable business practice is mirrored by such initiatives. The concept of corporate citizenship has progressively become significant to enhancing business sustainability. When an organization complies with the set environmental, economic and ethical regulations as instituted by various stakeholders, then sustainability can be attained. Some of the benefits include: lowering carbon emission and the level of wastes and using energy efficiently (The economist, 2008, p1). Dependent variables Figure 1: Conceptual Framework Objective of the Framework The framework highlighted in Figure 1.0 demonstrates the interrelationship between sustainable business and the key variables such as managing resources and externalities, stakeholder management, IICR (2013) and CSR and Corporate Citizenship. The common objective that inter-relates the framework is attaining sustainable business. As discussed earlier the dependent various have the capability to influence the level of sustainable business within organisation. A Critique and Analyse ITC’s Approaches to Sustainable Business Practice A study conducted by the Boston Consulting Group (2010, p1) discloses that ITC is ranked as one of the most sustainable value creating organizations in the world. It is imperative to critically analyse this rating and to determine if indeed the company’s ranking is valid. The conceptual framework above will provides a critical analysis of ITC sustainable business practice. Corporate Social Responsibility and Corporate citizenship In terms of CSR and corporate citizenship ITC has been very proactive in implementing CSR initiatives and was rated as one of the leading Indian companies in the implementation of CSR (Press Trust of India 2010, p1). The company uses the Triple Bottom Line approach in order to develop social, economic and environmental capital that is able to increase sustainability within its market. The company’s CSR initiatives are based on evaluating its activities in terms of three areas of sustainability: economic sustainability, environments sustainability and social sustainability. For instance, in the context of environmental sustainability, the company has put emphasis on increasing the amount of renewable energy. This commitment has seen a reduction in the amount of waste that emanates from the company (ITC Sustainability Report, 2015, p110). In terms of corporate citizenship, ITC has adhered to the set rules and legislations as outlined by various regulatory bodies. For instance, the company has complied with the Indian regulations on food and safety. In addition, ITC ascertains that it conforms to the set environmental regulations both in the country and at the global level, a case in point is by setting a pathway of low carbon emission through the use of 50% renewable energy by the year 2020 (ITC Sustainability Report, 2015,p8). From the ITC Sustainability Report, (2015) it can be stated that ITC is proactive in implementing corporates citizenship and CSR initiatives using the Triple Bottom Line approach. Nevertheless, the level of sustainability is affected when the organization seeks to maximize own interests as opposed to the greater interest of adopting sustainable business practices. For instance, it can be noted from the CSR report that the company has set targets that are to be attained to overcome key environmental challenges, nevertheless, the objectives are not met. The CSR report states that the company intends to reduce its energy consumption level. On contrary, in 2014-2015, the company used a total 21,777 Terra Joules (TJ) of energy which was a rise of 2 % when equated to the previous year 2013, when the company used 21,433 TJ. The upsurge in the level of energy consumption was as a result of the increase in production activities where new products such as Noodles and snacks were introduced to the manufacture process (ITC Sustainability Report, 2015, p80). IICR (2013) and GRI Guidelines As noted earlier the IICR (2013) business model highlights that sustainability is attained by communication, which is mainly undertaken through reporting. Based on the evaluating of ITC’s GRI 4 reports, it can be stated that the company communicates the manner in which it uses its capital to add value the organization and society. For instance; the company has GRI-G4 disclosers on Food Processing which reveals the steps taken by the organization to ensure production of quality foods and food safety. The ITC report also covers a wide range of topics that relate to sustainability. GRI Standards are principally developed in order to formulate sustainability reports that are focused on different topics (GRI Standards 2016, p1). It can be stated that the company has meet the GRI-G4 guidelines effectively. In addition, ITC has put in place a system in which every department has to present a periodic report about their compliance to the set regulations. Stakeholder Management The stakeholder management initiatives adopted by ITC have been beneficial to the customers, the employees and the community. The company ascertains that it meets the needs of these groups. A recent Survey conducted to examine ITC’s stakeholder relations by Scottmadden Management Consultants (2016, p2) involved 274 stakeholders from various organizations and also from the customers. A total of 69 responses were gathered. The findings of the survey disclosed that stakeholder satisfaction was high and was rated 91%. The highest scores were derived from the manner in which the company deals with customers and the level of open communication with the various stakeholders which improved stakeholder relations. The lowest scores were from accounting and billing management and construction processes. In order to attain sustainability, the organization has to put into consideration the interests of the stakeholders when devising the strategic objectives. As a results, the current and future needs of stakeholders are effectively met (Scottmadden Management Consultants, 2016, p4). An interesting aspect that a rises in the stakeholder management capabilities of the company that affects the capability to attain sustainability is the fact that the attrition rate of the company is very high. Kulshrestha (2016, p1) discloses that many young employees in the company leave the organization after a period of 2-4 years which affects the operations of the company. Interestingly, it is not only the employees that exit but also executives. The increased level of attrition can lead to questioning whether the stakeholder management practices of the organisation especially on the part of employees can assist in maintaining sustainability. Managing Resources and Externalities ITC manages its resources with accountability to the ecosystem and other stakeholders. The company has been actively involved in utilizing ecological resources in order to strengthen the community. The company also ensures that the management of the human resource is conducted appropriately through initiatives such as building capabilities and continuous training of the workforce (ITC Sustainability Report, 2015, p130). A key challenge that emerges in the company’s initiatives for resource management is that enhancing sustainability is affected by some of its product lines. As one of the biggest players in the $10 billion Indian Cigarette production industry, the company was forced in 2016 to halt its Cigarette production. This was mainly attributed to new government regulations that stated that the company’s production is a health risk to many (Pandey, 2016, p1). Amid the controversy about the health concerns ITC resumed the cigarette production in the same year (The Times of India, 2016). It can be argued that the implementation sustainability is affected by involved in cigarette production Conclusion and Recommendation The above discussion has examined sustainable business practice using the case of ITC India. Several key issues have been identified by the report. Foremost, sustainability is an independent variable that can be achieved by increasing the level of CSR, resource management, the use of the IICR (2013) and related capitals model and effective stakeholder management. From the above report ITC is an organization that has put tremendous efforts to attain sustainability, however, there is need for key reforms that can stabilize the organization’s capability to attain sustainability. The key recommendations include: Setting CSR objectives and targets that the organization can attain while working towards meeting the objectives. There is need for the company to acknowledge that sustainability does not come about by just setting targets it is important to work towards them. It is also essential for the organization to stop the production of goods that affect sustainability for instance a product that has effects on human health. The company ventures in multiple areas such the hotel industry, food production and agro-business. It is essential to use resources to produces goods that promote corporate citizenship. In terms of stakeholder management, ITC should look into the welfare of the employees and resolve the issue of increased attrition rates. References Aagaard A 2016, Sustainable Business, River Publishers. Retrieved Boston Consulting Group 2010, ITC is the world’s 6th largest sustainable value creator, BCG. Burchell, N and Kolb, D 2006, “Stability and change for sustainability”, Business Review, vol.8, no.2, pp.33-37. 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