Evaluation of a Corporate Ethics - International Tobacco and Cigarette Company - Case Study Example

EVALUATION OF A CORPORATE ETHICS OR SOCIAL RESPONSIBILITY PROGRAM 29th SEPTEMBER, 2008 1.1 INTRODUCTION Corporate social responsibility is an expression used to depict an organization’s commitment and obligation to be answerable to all of its stakeholders in regard to all kinds of activities and operations undertaken by the company. Corporate responsibility focuses on the impact of company’s decisions on the communities and environment in which an organization works. Ethics program of a company integrates business environmental concerns including social, economic and political aspects in their business functions. In other words CSR means care for the community by creating opportunities for the underprivileged communities through imparting knowledge, better means of livelihood, improving the living conditions etc. According to H. Stephen Grace Jr. and John E. Haupert, 2006, social responsibility can be achieved when the unchecked consolidation of power is prevented. One such organization which has actively contributed in establishing a CSR in its work structure is the well renowned company ITC. Through its trailblazing e-choupal system, ITC has helped the rural people to turn their wastelands into productive land, incorporating techniques such as rain water harvesting etc to turn the dry lands into productive manor through irrigation. ITC has been able to change nearly three million lives by encouraging women empowerment, aiding infrastructural support and various other areas (Catalyst Special Issue on CSR, 2007) International Tobacco and Cigarette Company is a private company personified through its values of quality, service and price with a market capitalization price of approximately US $ 15 billion and turnover of US & 4.5 billion. It was established in 1992, revealing the distinct leadership, creativity and flexibility in its business approach. ITC diversifies in various product and service lines such as cigarettes, hotels, paperboards, packaging, confectionery, greeting cards, branded apparels and many more. The company’s desire for excellence has aided in a steady growth in the company’s graph since 1994. Its sense of integrity and creativity in community approach has resulted in an increased number of workforces supported by the company. Financial assistance, donations and charities is a regular feature of the CSR exhibited by the organization. It drives towards attaining international competitiveness along with the larger value chain of which it is already a part off. 1.2 ITC AND CORPORATE SOCIAL RESPONSIBILITY ITC is well acknowledged through its E-Choupal concept initiated towards incorporating corporate responsibility in its work culture. The concept deals with the integration of the rural workforce and the technological advancements. The company has installed a computer with solar charged batteries thereby relieving itself from the trouble of power supply in such areas. A conductor is assigned the responsibility to operate the computers on behalf of ITC, just for the farmers. The e-Choupal initiative taken by ITC is a step towards conferment of knowledge to every farmer, facilitating him in the decision making and keeping the farmers update about the market demands, pricing, and quality and productivity concerns. TC understood the importance of corporate responsibility towards the village community thereby rendering five main services through the unique concept of E-choupal. Information regarding the price fluctuations of the crops, daily weather forecast etc, knowledge about various farming methods, soil testing, means of purchase of fertilizers, seeds, pesticides, tools and other Equipments, awareness about the local market for selling the products, access to health and education is also included in the process. The ITC’s creatively framed e-choupal opens up the path for the welfare and upliftment of the small and poor farmers through resource development initiatives .On the whole it can be said that ITC has always laid utmost importance to its social responsibility of extending a helping hand in the protection, conservation and enriching the environment. ITC integral part of the corporate social responsibility is its triple bottom line approach creating several sustainable livelihoods. ITC joined hands with NABARD to work on water shed development plants which created a direct of 5.36 lakh person-days. ITC has been awarded with prestigious titles at the ‘TERI Corporate Award for Social Responsibility 2008’ in regard to its incredible performance for the implmentation of watershed development programmes spreading in seven states covering an area of almost 35,000 hectares with over 2000 water-harvesting structures in dry areas. (Kumar K, 2008) The Annual FICCI Outstanding Vision Corporate Triple Impact Award 2007 was bestowed on ITC for initiating and contributing to the triple bottom line benchmarks of building economic, social and natural capital for the country (Press Release, 2008). ITC received the first ever Indian company bagging the `Social Accountability - 8000' award of US, for its social projects in Chirala, set up for assuaging the poor and the needy. The Chirala unit of ITC also received the ISO-14001 - for environmental management, and was entitled as the Sword of Honour from the British Safety Council UK, regularly for six times in duration between 1994 and 2000 (Padmanabhan M, 2003) To grace the leader’s efforts, the ‘World business award' was honored in support of the United Nations' Millennium Development Goals. ITC also won the Wharton-Infosys 'Enterprise business transformation award 2004' for the Asia-Pacific region. The company acclaimed international success, when the Harvard Business School included a case study on the ITC e-Choupal movement and the transformation of the Indian agriculture. ITC is being rated at the world’s leading company by Forbes magazine 1.3 STANDARD INCORPORATED IN THE EVALUATION ITC’s Triple Bottom Line standard evaluation includes areas mainly covering the economic performance, environmental performance and social performance. As per the ITC standards, it is revealed that Sustainability and sustainable development are core part of the company’s culture and philosophy, and the Triple Bottom Line benchmarks of economic, social and environmental capital. As far as economic performance is concerned, ITC’s vision statement reveals it all; the statement reflects sustainment of ITC’s position as one of the most valuable corporations of India through imparting a world class performance and achieving international competitiveness locally as well as globally. The Triple Bottom Line evaluation of the company certainly confirmed the ITC’s position as one of the most valuable Indian company along with its leadership strategy in all of its business segments and a higher return on capital employed as per the ‘Report of the Directors and Management Discussion and Analysis’ , 2008. 1.4 ELEMENTS OF THE PROGRAM ITC’s environment performance is strictly in accordance with the Environment, Health and Safety policy framed by the corporate management of the company, extending to all sites of the organization. Four main aspects relating to the environment concern are defined which include performance beyond conformity, ITC follow norms which go beyond the specified range of the Factories Act, 1948. Carbon Positive footprint was targeted so as to wipe out completely the ozone depleting substances. Water positive footprint by returning to the nature excess water in comparison to what the company has extracted from the nature, waste water treatment plants help in water conservation and recycling. zero solid waste are achieved by the reduction of specific energy consumption through biomass, wind and solar power along with the segregation of wastes into categories such as hazardous, bio-medical, nuclear, non-hazardous, biodegradable and non-biodegradable wastes for appropriate treatment of the above wastes. The corporate environment Health and safety department, certified via the ISO 14001 Environment management system, of the company is responsible for revising the standards as per the need and current status, along with constant rendering of support and guidance to all the concerned people. To preserve the environment, ITC has undertaken extensive tree plantation, watershed development programmes, afforestation not only in India but all other countries where the company has expanded its business generating a significant employment number which approximates to 160,000 people (ITC Sustainable Report, 2008). Apart from the obvious benefits of increasing the forest cover this effort also directly contributes to moisture conservation, groundwater recharge and a significant reduction in topsoil loss due to wind and water erosion. On the social front, ITC is deeply committed to retain the individual identity, dignity of its employees, with heartfelt respect for human rights. Its practices avoid all sort of discrimination promoting talent only on the basis of the potential, capability and merit of the candidate. The company’s capability development agenda focuses on polishing the skills and right attitude of the workers through rigorous training and creating a social environment that is benchmarked globally for the quality and standards of its EHS policy. The social performance of ITC focuses on the Labour practices and the decent work including areas of occupational health and safety, human rights and a commitment for soaring up the social capital of the country taking full responsibility of each and every product promoted by the company. It even complies with the International Labour Organization requirements for maintaining workers health and safety (ITC Sustainable Report, 2008). 1.5 RELEVANCE OF THE STANDARD Triple bottom line was introduced by John Elkington in 1997 which emphasizes on the people and the planet they live in, stating the impact which the company lays on the local as well as the global scenario. Corporate social responsibility and triple bottom line approach is essential to establish standards against which the performance of the organization could be effectively judged. Parameters such as enhanced employee loyalty, consumer loyalty, healthy public relations, positive brand image, reduced environmental costs etc can be achieved and well judged through acting in a socially responsible manner along with inculcating a set standard criteria like triple bottom line approach for varied operations carried by the companies. The standard encourages company’s in sustaining up there bottom lines as well develop a critical eye towards the social cause of the community they live in. 1.6 CONCLUSION Corporate social responsibility must be regarded as more than just a means for a hiked publicity stunt. Initiatives where competitive advantage and corporate social responsibility can be balanced must be encouraged. In the 21st century almost all top companies have re-structured their strategies so as to fulfill the requirements of a social corporate responsible firm. Not only ITC but others like Tata consultancy services, Cisco, Infosys Technology Ltd, Larsen and Toubro Ltd etc have joined in the rage of community service, rural reach programmes, and welfare activities like employment, zero tolerance zones for child labour and many more activities on the list. But apart from the well acclaimed actions , organizations like ITC have been criticized by many too, for instance in an article by Milton Friedman, ITC was accused of making profits through selling cigarettes, hence the entire CSR turns vague, when the core ITC business does not supports the rules of the game (Neelakantan,2006). 1.7 REFLECTION ON THE EVALUATION Although ITC has done everything possible to display itself as a role model in the field of corporate social responsibility for other competitors but still the fact cannot be denied that 80% revenues of the company are earned through selling cigarettes and other tobacco products. Such statistics definitely raise a crucial question to justify the social responsibility the company owes to its community. The public growing consciousness about health issues certainly has a deteriorating effect on the company’s revenue. ITC needs to chalk out areas where the lost gains could be regained. The debatable questions still need a clear cut solution whether the profound issue on corporate social responsibility ultimately means to chuck off possible attacks on ITC's "sin" business? Or does the role model of being the good corporate citizen have any links with the two previous chairmen being imprisoned for numerous for various offences? (Ninan N T, 2006) The e-choupal initiated by ITC enables a farmer to break through the cycle of low risk taking ability leading to low investment and productivity heading towards weak market orientation, low margins and again low risk. The concept ensures a world class quality standard through partnerships with the leaders of specific fields. After the in-depth analysis and the past statistics of the researches done, it is a prominent fact that ITC is one among the few organizations who have been honored with the A+ status who voluntarily follow the GRI guidelines based on the Triple Bottom Line performance measurement standards. On the whole ITC has worked giving an exemplary performance which is certainly taken to be as benchmarked for the other emerging giant firms of the business world. BIBLIOGRAPHY 1. H. Stephen Grace Jr, Haupert E J, April 2006, , the CPA Journal Online, Viewed on 29th September, 2008, How To Make An Ethics Program Work, http://www.nysscpa.org/cpajournal/2006/406/essentials/p66.htm 2. Catalyst Special Issue on CSR, June 2007, Corporate Social Responsibility: Initiatives and Examples, Viewed on 29th September, 2008, http://www.karmayog.org/newspaperarticles/newspaperarticles_9994.htm 3. ‘Report of the Directors and Management Discussion and Analysis’, 2008, http://www.itcportal.com/itc_annualreports04/pdfs/RPTDIR.PDF 4. Ninan N T, 12th Aug2006, why can’t ITC give up its tobacco biz?, Viewed on 29th September, 2008, http://www.rediff.com/money/2006/aug/12guest1.htm 5. Neelakantan, 9th March 2006, Interim Thoughts: Corporate Social Responsibility, Viewed on 29th September, 2008, http://ecophilo.blogspot.com/2006/03/corporate-social-responsibility.html 6. ITC, Sustainability Report 2008, Viewed on 29th September, 2008, http://www.itcportal.com/sustainability-report-2008/index.htm 7. Kumar K, June 6th , 2008, ITC wins TERI Corporate Award for CSR, Viewed on 29th September, 2008, http://www.itcportal.com/newsroom/press-teri-corporate-award.htm 8. Press Release, July 28, 2008, Premium Company Profile - ITC Limited - New Research Report on Companies and Markets, Viewed on 29th September, 2008, http://www.prlog.org/10095038-premium-company-profile-itc-limited-new-research-report-on-companies-and-markets.html 9. Padmanabhan M, 8th August, 2003, ITC shows Social Responsibility at Chirala, Viewed on 29th September, 2008, http://www.thehindubusinessline.com/2003/08/08/stories/2003080801701700.htm Read More