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Chairman Speaks

 

'Creating a more Secure, Sustainable and Inclusive Future'

Inaugural Address by Mr Y C Deveshwar at the
11th National Conference of the National HRD Network, Nov 29, 2007

Introduction

I am delighted to be here this morning at the 11th National Conference of the National HRD Network. At the outset, I must compliment you, Mr Busral, and your team for envisioning a very relevant theme for this Conference.

I must also express my deepest appreciation to the HR Fraternity present here today for another reason. India's growth story is about brilliant minds, who have been given the opportunity, the environment, exposure and training not only to become world-class managers, but to hone a spirit of entrepreneurship that endeavours to make the impossible happen. I pay tribute to all of you today for enabling this change, and for helping create the India of tomorrow - a confident young generation capable and passionate to take on the world on equal terms. Congratulations, ladies and gentlemen.

Indeed, this century belongs to India. We stand today at the threshold of India Unlimited - unlimited in terms of opportunities, unlimited in terms of capabilities, and unlimited in the spirit which is indomitably Indian. Enriched with the heritage and tradition of the past, the values enshrined in our DNA, enlightened by the knowledge of generations, we have commenced today a march to assume our rightful place in the global economy.

India's Pride

There is reason to be proud. Early this year, India joined the ranks of the 12 countries with a Trillion dollar GDP in nominal terms. The World Bank, I believe, has already posted figures that make us the third largest economy in the world in PPP terms, surpassing Japan, and just behind the superpowers of US and China. India Inc., the backbone of the nation's business and industry, doubled the number of companies to 200 with a market cap of over $ 1 billion, in a span of just one year. The Forbes list has the highest number of billionaires in Asia living in India. A sustained 9 % GDP growth is showing up visible signs in India's landscape. Per capita income has moved from $ 200 in 1990 to $ 800 today. The prospect of world class Highways and modern new airports, a wireless revolution in telecom, state-of-art construction, a huge retail explosion, an army of outstanding IT professionals indeed shape a new India of the 21st century today.

Predictions for the future are even more encouraging. Goldman Sachs predict that India's economy will move ahead of several G6 countries by 2032. India will continue to reap the demographic dividend with declining dependency rations for the next four decades. Entrepreneurs will have larger access to resources, in terms of technology and capital. Already, current & capital account flows have risen from 40 % of GDP in 1991 to around 80 % now. India is today attracting the largest flow of private equity in Asia. A recent AT Kearney study says that India has displaced the US to become the second-most favoured destination for FDI after China. Gross inflows of FDI touched nearly $ 20 billion last year, up two and a half times since 2001. In the first five months of the current year, FDI went up 97 % over the same period last year.

The entrepreneurial ability and appetite in India has not only fuelled this spectacular trajectory of growth, but has spread wings and crafted some big-ticket acquisitions across the world. If Indian capital is now infusing life into corporations across the world, our diaspora is one of the key reasons for the success of several advanced nations. Even India's gourmet skills and the entertainment industry are bowling over foreign palates and hearts. Clearly, we are going places, and this is only the beginning.

There is no doubt that India's cautious and calibrated liberalization has paid off. Despite successive Governments, India has not only demonstrated resilience but a continuance of policies since 1991. Unfettered, Indian industry rose to the challenge and has today demonstrated what it is capable of. India's people skills in managing adversity, deep analytical insights, a tradition of scientific temper and technological adaptation has given us the competitive edge in a challenging global economy. India's manufacturing sector, exposed to competition, has redefined competitiveness and earned for itself respect in the world arena. We are today matching strength with strength. Be it in asserting our position by even staking a seat in the expanded UN Security Council or as a nuclear power. India commands a new respect in the world today, and all of us can truly lift our heads and say to the world that we are proud to be Indians.

The other face of India

Even as we celebrate this success, there is a large millstone on our conscience that reminds us of a dark reality that also defines India. Co-existing with a prosperous 300 million middle class, firing consumption in malls and real estate, there is a silent, but dangerously frustrated 300 million people living in abject poverty without even a proper roof over their heads. More than half our population live on less than $ 2 a day. Despite the advancements and glory, India's poor give us reason to hang our heads in shame. This is still a country where 1 in 3 people remain illiterate, where 1.1 million infants die within the first month of their birth, and one mother is dying every seven minutes due to complications related to childbirth. Unemployment figures among the educated run into millions, and a majority of children in this country go without food, leave alone a nutritional diet.

Is this what we won freedom for, 60 years ago ? Can we revel in our economic successes, when there is so much instability in the social fabric ? Something has gone terribly wrong in the model of development that the world has adopted, and we have followed. A recent UNDP Report states that 10 % of the richest adults in the world own 85 % of the world's household wealth, while the bottom 50 % of adult population have just 1 % of the total household wealth. The situation in India will not be very dissimilar.

Between the glossy advertisements that exult the consumer boom in TV and print, are everyday stories of a rising discontent. Streets after streets across the country, farms after farms across the nation are violently displaying the rage and anger of this growing inequity. At the slightest provocation, people's frustrations find expression in violent acts. Highways have been laid to siege, and village after village are becoming victims of barbaric acts. Somewhere between the scripts written for Davos and Vidharbha, there lies a story of our collective failure.

An unsustainable future

The question is : have we created a model of growth that is unsustainable? Over the years, there has been a massive depletion of natural capital and bio-diversity. We have now a new threat of global warming that can impact India more adversely than any other country, according to a recent study by Lehman Brothers. There is a persistent growth in population adding to the challenge of poverty. Indeed, we face enormous challenges and can ignore them only at our own peril. While we can rightfully take pride in India's spectacular growth story, the foreseeable future is already throwing up warning signals of a possible natural resource disaster. We must remember that we do not possess infinite natural capital to provide fuel to this growth engine. With 17 % of the world's population, we have only 2.4 % of the world's land mass, 4 % of the available water resources and 1% of the global forest resources. Unless we replenish and conserve precious resources, specially soil and water, this spectacular journey will hit a roadblock sooner than later.

We - the privileged, the educated and the resourceful - therefore have a greater responsibility, because society and the environment have given us in generous abundance relative to many. And it is now payback time. The bottomline is that future economic growth will be severely constrained if it is not inclusive. And business can only be sustainable if we consciously build natural and social capital. Unless the millions of disadvantaged get the opportunity to earn, save, spend and invest, India's growth story will be restricted by limited markets, limited skill availability and limited natural resources.

A sustained level of high growth is indeed crucial for eliminating poverty. As good corporate citizens, we have a responsibility to create and secure a better future for the coming generations and this is a challenge that we must rise to.

Finding a sustainable solution

Businesses do not operate in an economy in isolation. They are organs of society, and will have to harmoniously coexist with the natural and social environment. It is my firm belief that the primary purpose of business is to serve society. Be it by providing goods and services to consumers, and continuously enhancing returns to the shareholders, businesses can create value for society, beyond the market, in innovative ways that are sustainable and inclusive. We draw heavily on societal resources in the form of both natural and social capital. It is therefore incumbent on us that we also find innovative solutions to build and augment social and natural capital.

We may not be able to accomplish all this entirely on our own. We will have to forge public-private and community partnerships and craft business models that synergise shareholder value creation with the super-ordinate goal of ensuring inclusive and sustainable growth. My own experience at ITC gives me the conviction to be able to tell you today, that it is eminently possible to achieve this synergy through innovative strategies with a deep commitment that goes beyond the market.

Corporate India's commitment will only take a meaningful shape if we measure our businesses in terms of their contribution to the triple bottom line objectives of building economic, ecological and social capital. To my mind, this is the only way we can secure long term sustainability for our organizations, for the stakeholders, the society and the nation. Sustainability of business and its long-term growth prospects are entirely dependent on societal well being and growing markets.

Challenges ahead

The challenges ahead in our common task to contribute to the triple bottom line balance sheet of the nation are many and varied. Given that 75 % of our population reside in India's rural areas, future economic growth will depend critically on finding solutions to rural India's unique problems. Agriculture is the mainstay for almost 60 % of the workforce in India. Unfortunately, it only contributes to 18 % of GDP. This clearly points out the disparity and the potential in rural India.

The lack of opportunities in rural India have also led to a huge migration of workforce to urban areas, further adding to an already over-stressed infrastructure. In its wake, it has also created a large mass of urban poor. It is therefore critical to create productive capacity and employment in rural areas, so that this segment is able to live a life of dignity in their own habitats and can be spared the pains of displacement.

The Rural Challenge

Given the overarching importance of raising incomes and the standard of living in rural areas, it is necessary to understand the nature of problems that plague India's villages.

  • India's 6,40,000 villages are not equally dispersed in terms of population. 60 % of the villages have population fewer than 1000, 35 % have a population base between 1000-5000 people and only 0.7 % have a base of over 10,000 people. As a result, individual village market size is very small and does not lend itself to organized market interventions.

  • Farm size on an average is smaller than 1 hectare, and 10 % of India's rural households are reported to be landless. Fragmented holdings do not provide the farmer with economic scales of operation, and add to the problems of lower productivity in the farm sector.

  • Rural Infrastructure is extremely poor, with acute shortages of electricity, absence of all-weather roads, and poor irrigation facilities.

  • Farmers, by and large, are at the mercy of the vagaries of nature and are worst affected by floods and droughts. Future climate change will impact them even further.

  • Agriculture extension services are poor and the farmer has little or no access to know-how or technology.

How do corporates intervene in such a diverse landscape with multiple deficiencies ? While there is no single "one-size-fits-all" solution, let me share with you, very briefly, ITC's own example of engagement with rural India.

I must seek your pardon in being somewhat immodest in presenting examples from ITC. I am aware that there are several companies who have done laudable work, and I share with you our own experience more because I have a deeper understanding of these initiatives.

The ITC Story

Evolving from our abiding vision to pursue a triple bottom line contribution for sustainable and inclusive growth, we have fashioned our CSR strategies in two distinct areas. One, where the business model itself is so fashioned as to make the triple bottom line objectives an integral part of business strategy. These are exemplified in ITC's e-Choupal operations and our Social and Farm forestry programmes. The other interventions are purely of a philanthropic nature. These create sustainable livelihoods in the catchment areas of our operating units, aided by our managerial and financial resources. These interventions are in watershed development, livestock enhancement, supplementary education, and women's empowerment.

I have immense satisfaction that our endeavours to embrace a larger context of sustainability has today given us many reasons to be proud of. For five years in a row, we have achieved and sustained our status as a 'water positive' organization, creating water resources four times in excess of what we consume. We have also been 'carbon positive' for the last two years, sequestering twice the amount of carbon than what we emit from our operations. We continue to strive towards recycling 100 % of the solid waste produced, and have already come very close to this milestone during the past year. This makes us, to the best of my knowledge, the only business enterprise in the world, of our size and complexity, to accomplish these three dimensions of environmental excellence - an extremely challenging task given the fact that we are continuously growing our manufacturing operations.

In addition, through a concerted effort to develop innovative value-chains across our diverse business segments, we have created sustainable livelihoods for nearly 5 million people, many of who represent the weakest sections in rural India. It is a matter of deep satisfaction that these endeavours of ITC have earned us significant global recognition as an exemplar in Triple Bottom Line Performance.

Let me now share with you a few highlights of our initiatives :

E-choupal

ITC's e-choupal is the world's largest rural digital network that empowers nearly 4 million farmers. By providing digital connectivity, and by training lead farmers who we call sanchalaks, we provide farmers customized information on prices, best practices in farming, a competitive channel to procure quality inputs and a choice to sell their produce at the farm gate. By eliminating wasteful intermediation, farmers become a part of an efficient supply chain and secure higher margins, and also gain from a two-way flow of goods and services procured through the e-choupal network. Sanchalaks today offer insurance policies, and are also placed well to offer other rural services. Currently there are around 6,400 choupals serving nearly 40,000 villages which we are endeavouring to scale up to meet the needs of 10 million farmers in time to come.

Creation of physical infrastructure in the form of Choupal Saagars, not only provide an effective collection and storage facility, but also bring the benefits of modern retailing to the doorstep of the rural community bringing benefits of convenience and choice.

We have not only gained from an efficient supply chain and identity preserved procurement, which in turn adds value to our packaged foods business, but in the process have also created an inclusive model of business that empowers small and marginal farmers by giving them the power of digital connectivity and access to markets.

Social and Farm Forestry

In the Social and Farm Forestry initiative, ITC has invested in extensive R & D to create clonal saplings which apart from being disease resistant, grow much faster and in harsher conditions. A large number of tribals and marginal farmers have benefited by growing these saplings on their private wastelands. ITC is a willing buyer of such produce, whilst the growers are free to sell to the highest bidder in the open market. Today, this programme covers over 75,000 hectares and has provided 35 million man days of employment.

ITC could have taken the easier route by importing pulp, rather than a more difficult route of mobilizing tribals and marginal farmers, involving long gestation and substantial investment exposure. However, adoption of this more challenging route has brought about a multiplicity of benefits -- creation of a green cover for carbon sequestration, ground water recharge and soil conservation and a source of sustainable livelihoods to a large number of disadvantaged sections of our society.

Committed engagement with the farming community, over time, has led to capacity building and higher productivity. This in turn has provided ITC with a sustainable source of quality and cost competitive pulp wood for its paperboard business. As a result, a business which was nearly sick a decade ago, is today a world class producer of environmentally friendly, state-of-the-art elemental chlorine free paperboard - the only one of its kind in India. This, in my view, exemplifies the integration of triple bottom line objectives as a part and parcel of business strategy.

Other CSR Initiatives

Recognising the vital role that irrigation and water play in the rural economy, ITC has helped create watershed projects covering 30,000 hectares in water-stressed areas, providing precious water resources for agriculture, rural communities and livestock. In addition, our integrated animal husbandry services have been launched benefiting over 1,25,000 milch animals in 1900 villages. Over 88,000 children attend our supplementary education centers, and 7000 women entrepreneurs have been created through 1000 self-help groups. These are philanthropic programmes that are, in the short run, a drag to the financial bottom line. It is my belief, however, that shareholders of ITC, in the long run, would greatly benefit from the support and trust of the communities where we operate.

Sustainable and Inclusive Growth

Our experience encourages us to believe that corporate strategies can indeed be designed to meet a larger goal of social inclusiveness and sustainability. We believe that these interventions, by securing competitiveness across the entire value chain of the businesses that ITC is engaged in, also enhance our business sustainability and create more enduring value for the nation and our shareholders.

Making Markets work for CSR

The big question is : how do we make such success stories replicable, and also inspire other innovative models for greater corporate contribution to social and environmental capital ?

In our experience, financial markets do not necessarily reward such long-term orientation. I am, therefore, convinced that it is only when market forces make CSR a crucial component of shareholder value creation that new competitive forces will emerge in favour of responsible corporate action. It is then that CSR will assume a new dimension - one that is defined by market forces, and not inspired by corporate conscience alone.

At the heart of this lies the immense power of consumer franchise. Consumers, by exercising an enlightened choice in favour of socially responsible enterprises, can unleash a powerful force of market incentives. It will be this commanding force exercised by consumers that will energise corporates to make CSR a unique value proposition for winning markets and bring about a dimensional change in social intervention.

I have advocated that Government support the development of a 'CSR Sustainability Trustmark', or a series of Trustmarks defined by Industry segments, which can be displayed on products and services to convey to the consumer that the enterprise follows a strong commitment to building natural and social capital. The Trustmarks could also be supplemented with Ratings, based on the extent of the individual company's involvement in creating societal capital. It will be important to create an institutional framework that will develop, measure, and award displayable Ratings for corporate social initiatives which can help the consumers make an informed choice. In the future, we may even be able to move towards trading in such Trustmarks, so that organizations who are not able to directly intervene in social projects can also contribute to the effort much like the Carbon Trading across the world today.

I am sure with an innovative mindset, we will not only be able to meet our corporate aspirations, but unleash a multipler impact on the development of societal capital for long term sustainability of the nation and its people.

A movement for economic freedom

While focusing on India's poor and the upliftment of the rural economy, I recognize that India also has other challenges that it must meet, to achieve sustainable growth. The unprecedented surge in manufacturing and services will unleash a war for talent, and much more will have to be done to educate, train and develop our human resources. The quality and capability of our people will drive India's future, and every investment must be made to prepare our human capital for the challenges of tomorrow. Again, this must be an inclusive process, so that the disadvantaged have an opportunity to participate in India's growth story. I am sure, with a concerted effort to forge a partnership among Government, Academia and the Corporate sector, we can achieve much more in this critical area.

There are serious infrastructural deficiencies as well, which need to be addressed lest we should choke our already over-burdened infrastructure. Prime Minister's Bharat Nirman programme and the 11th plan proposals to invest $ 500 billion will hopefully create a new super structure that will aid a 10 % GDP march, and also build the fortunes of the rural economy.

However, India's economic progress needs a much larger support - a support that is intangible but is the bedrock on which we can grow our wings to shape a new future for our nation. More than a century ago, India launched a movement for political freedom. The nation rallied together with a shared vision and a common purpose. We fought against the mighty with determination and leadership committed to freedom. We need another movement now to define the new Indian century. And this time for economic freedom of our people. To take those who live at the margin out of poverty. To give them the freedom to exercise a choice for a better future. And to empower them to live a life of dignity.

It is important that we believe in ourselves, have faith in our capabilities and the courage to carry out our convictions. Like every drop that makes an ocean, each one of us have within ourselves, the capability to make a difference. We must give wings to our dreams, content to our aspirations, and move with confidence to grasp a new world of opportunities. We must do this with the faith that change will begin with each one of us. We do not need to wait for others to move so that we can follow.

Never before in our history have we come to a juncture where we have been blessed with so much. Technology, resources, world class entrepreneurship, human capital, and global respect. Yet, we as a society, unwittingly fragment our efforts and fail to demonstrate our common will to achieve a new future for those who have been left out of the race. It is time that we get together again to forge a new movement that will not only take our nation to even greater heights but ensure that the fruits of growth and development reach the most disadvantaged. We can certainly do it. And we must do all that we can to achieve this transformation.

As I conclude today, let me recall what Rabindranath Tagore said many years ago, :

"Into that heaven of Freedom, my father, Let my Country Awake"

Thank you, ladies and gentlemen