The cynics believe that there is no such thing as a socially responsible tobacco company and call it an inapt tag. They say it is a sheer digression in the name of sustainability or corporate social responsibility? How do you react to this?
First of all, it is not for me to say that ITC should get out of tobacco business as we are working for the shareholders. However, I would certainly like to endorse that as a company we deal with tobacco business much more responsibly. The money generated out of the tobacco business because if we did not do it, somebody else would do it. If India does not produce it for consumption in India, it will come across the boarders and revenues would be lost. We are steadfast towards creating a portfolio of businesses that are businesses of tomorrow that is for the next century and those businesses that sub serve societal purposes of tomorrow. We are determined to conduct the business in a manner where it is not a burden on environment and it contributes to the formation of social capital and natural capital. I can assure you that we have created a global standard.
It has been observed that ITC has continually and religiously been releasing sustainability report. What is the concept behind this triple bottom-line philosophy and when did you start it?
With time, people have started to speculate whether the purpose of business should really be restricted to a tapered purpose of creating shareholder value. And for that we should re-identify the rationale of business. For us, the purpose of business is to serve society. If you do it well then as owners of risk capital you should be rewarded and that is what is called shareholder value. We have created a greater value than what normally people expect, it is not that we have taken away from the shareholder anything, we have created a compound rate growth in shareholder returns and thus we have created so much more. In the coming days, civil society tends to value such body corporate who subscribe to sustainable ways for all-round growth. So the triple bottom-line actually says that you can create financial capital provided you do not destroy natural capital, rather build upon it. You also contribute to the social capital. So these are the three dimensions which we integrate.
As a forward looking company, how you are reinventing ITC to remain pertinent and socially acceptable ahead of its time?
Unless it doles out a significant contribution to the society, a business can’t be connected with it. This business sense goes without saying. At the end of the day, the company needs to reinvent itself, every part of it to be germane to society and to consumers. I believe that ITC’s most relevant initiative to date has been partnering the Indian farmer. We are working to bring farmers into the information technology age and have so far empowered around 6 million people. Connecting everyone in the value chain including the small and marginal farmers who are making their way to the village internet kiosk to access ITC’s e-Choupal programme, they are using our website to gather local weather forecast, expert knowledge on best farming practices and local, national and international agricultural commodity prices.
With the direct marketing channel linked virtually to the mandi system for price discovery and operating as a virtual buyer’s cooperative, they are able to better manage risk and maintain an efficient two way delivery channel of commodities. The produce yielding farms are sold and the money earned is used to purchase FMCG goods, brought into the village and made available at the Choupal Sagar retail outlets, which is India’s first rural retail chain.
E-choupal has really been a big success in the rural domain. It’s over 12 years of the start of this initiative, how has been the experience and what’s the future course?
The Essential Commodities Act which is periodically enforced actually hinders the creation of an organised supply chain that would actually be good for the consumer ultimately. For us, the state has been a biggest hindrance as of now. In fact, it is depressing because it really dispenses a body blow to a very refined concept of e-choupal that brings to his doorstep the advantage of a competitive market.
How do you see the rural India? How it is emerging in the years to come and what will be the future of rural India vis-à-vis ITC?
Rural India will continue to grow manifold as incomes go up there, opportunities open up and innovations keep going. What we are always trying to do is trying to integrate the ideas of the corporate social responsibility and intertwine it with the strategy of our business, which is part and parcel of our business model. For us we want the first person in the value chain, a small and marginal farmer, to be empowered by making him competitive and making him more capable and making him more aware of his scarce resources and how to make them more productive so that we then in turn can become more competitive. And as his incomes rise we can sell more goods and services to him.
So it is all in the enlightened self interest that we have created this value chain, so that as we create more shareholder value, automatically the small and marginal farmers grow with it. So it is not something which is in the nature of charity. Individuals fade away, charities fade away because it is part and parcel of a business model then you have got a sustainable engine of empowerment to the weaker sections of society. ITC is committed to go beyond the corporation and create sustainable models for the country.
Headquartered in a state like West Bengal, which has a record of labour protests and other agitations, do you see it as a problem?
No, I don’t see it as any problem. People in West Bengal have actually been very supportive of ITC. ITC is the only company in the top 500 companies that has not left Kolkata and Bengal and we want to continue to be there. I have to say that we have no reason to complain, but even there we find it extremely difficult despite the government wanting to help us out due to the issue of land.
As the chairman ITC, how do you see the growth path for the company?
The FMCG business is fast turning into ITC’s big growth driver. The segment is even outperforming the cigarettes division. Many of our categories within have now turned around. The major drag now is our three-year old personal care business which requires a huge amount of investments. I am very satisfied with the progress and the growth rate of above 25 per cent. That is transforming the total composition of our portfolio. We expect to generate a profit of Rs 1500 crore from other FMCG divisions. We have a target of Rs 15,000 crore for our topline. We want to be the number one fast moving consumer goods company, because we want to build Indian brands. We are investing heavily in research and development and we are investing heavily into building Indian brands.
Our investments are in the pipeline. We have 45 projects that are under implementation. I have to say that the problem lies in execution. We should be spending Rs 25,000 crore of investment in the next five years. However, I am afraid every year whatever we plan we end up doing a much lesser amount because there are hurdles in execution.
How do you see the future progression of ITC and what are your main concerns?
When I became the Chairman of ITC the market cap was Rs 5,000 crore and today the market cap is Rs 1 lakh 92 thousand crore odd. It is my duty to make sure that this company is an institution and has a life of its own. I have said many a times that it should be there when my grandchildren grow up; they should have an option to be able to serve ITC the way I have done. As we go into the future, it is going to be extremely important that we use science and technology to be able to really create differentiated product for the unmet needs of consumers. So what we have done in the last few years is invested very heavily in research and development. We have discovered that we are the only company in the world who has three delivery vehicles for health and well being. One is the agri-business you can add the property to the agri-commodity that is good for health. Then there is value added foods you can actually create functional foods that do less harm or actually accretive in the future. Then we have a third vehicle is the personal care. So there is a convergence of all these three. The other thing is that all the businesses that we are in, they are businesses of the future. There is enormous growth potential.