ITC SUSTAINABILITY REPORT 2016 GRI - G4 COMPLIANT, IN ACCORDANCE - COMPREHENSIVE

The world today is witnessing a shift in the global climate change politics and policies and a significant impact in global energy scenario is anticipated in near future due to 2015 United Nations Climate Change Conference of Parties held in Paris in December 2015. India has already submitted its Intended Nationally Determined Contributions (INDCs) to United Nations Framework Convention on Climate Change (UNFCCC) with the key aims of:

• Reducing the emissions intensity of Gross Domestic Product (GDP) by 33% to 35% by 2030 below 2005 levels.
• Increasing the share of non-fossil based energy resources to 40% of installed electric power capacity by 2030, with help of transfer of technology and low cost international finance including from Green Climate Fund (GCF).
• Creating an additional (cumulative) carbon sink of 2.5-3 GtCO2e through additional forest and tree cover by 2030.

In order to meet the commitments made under INDC to UNFCCC, India's post-2020 climate action plan is focused upon promotion of clean energy, enhancement of energy efficiency, development of less carbon intensive and resilient urban centres, promotion of waste to wealth, safe, smart and sustainable green transportation network, abatement of pollution and enhanced carbon sink through creation of forest and tree cover. All these in turn would imply targeted interventions from the various industrial sectors of India.

Apart from the impending stringencies in Perform, Achieve and Trade (PAT) and Renewable Energy Certificate (REC) Mechanisms driven by the committed INDC of Government of India, the nationwide thrust for low-carbon economic growth is expected to lead to an increased carbon tax on select energy intensive industries and/or products in order to incentivize energy efficient production. Furthermore, energy security, energy equity i.e. the accessibility and affordability of energy supply across the population continue to be amongst the biggest developmental challenges for India in the context of energy. Extreme volatility in energy prices, one of the top global risks as identified in World Economic Forum (WEF) Report on Global Risks 2016, will further aggravate stresses on developing economies.

Based on existing as well as the evolving energy scenario, ITC has mapped its challenges and has strategised its response as follows:

Energy Consumption within the Organisation

In 2015-16, ITC Units consumed 21,946 Terra Joules (TJ) of energy as compared to 21,777 TJ in 2014-15. This marginal increase of 0.8% in total energy consumption is directly attributable to significant growth in majority of ITC Businesses. Bhadrachalam unit of Paperboards & Speciality Paper Business that accounts for over 77% of energy consumption in ITC, has recorded an increase of 2.1% in its production as compared to previous year. Similarly, Foods Business and Hotels Business Divisions that together contributes to 5.3% of ITC's energy consumption, have recorded an increase of 6.5% and 8.5% in their respective outputs.

In addition, the reporting boundary in 2015-16 has also been expanded to include the following units that have caused an increase of 23 TJ (0.1%) in ITC's total energy consumption:

Dairy unit at Munger, district offices (Kolkata and Mumbai) and warehouses (Ambernath, Hyderabad and Malur) of Trade, Marketing & Distribution Division and facilities of Technico Agri Sciences Ltd. (a subsidiary of ITC) at Chandigarh and Manpura.

The concerted efforts on energy conservation implemented across several ITC units have helped in restricting the increase in ITC's total energy consumption to 0.8% only, despite considerable growth in most of ITC's Businesses and expansion of the reporting boundary as explained above.

Energy Consumption within ITC across Businesses

In 2015-16, additional units that have been added in 'Others' are district offices & warehouses of Trade Marketing & Distribution Division, facilities of Technico Agri Sciences Ltd. (a subsidiary of ITC) at Chandigarh and Manpura.

Primary reasons for the increase in renewable energy utilisation from 9392 TJ in 2014-15 to 10375 TJ in 2015-16 are as follows:

• The Paperboards Unit at Bhadrachalam utilised increased quantity of wood, and in turn produced more virgin pulp leading to reduced dependence on imported pulp. This in turn enhanced availability and utilisation of black liquor for steam generation and consequentially led to lesser coal consumption.
• Higher consumption of chip/saw dust, de-oiled bran and charcoal at the Paperboards Unit in Kovai.
• Installation of additional solar energy based photovoltaic systems in Munger and Saharanpur Units of Cigarettes Business.
• Utilisation of electricity from wind for the entire year in Anaparti and Chirala units of Leaf Tobacco Business, as compared to around 8 months during 2014-15.
• Increased utilisation of purchased steam generated from biomass in Pune Unit of Foods Business and Bengaluru Unit of Cigarettes Business.

Energy savings within ITC

Substantial improvements in specific energy performance were achieved at many of the Units by a focused approach on energy conservation through rigorous third party audits and implementation of the viable recommendations, coupled with better capacity utilisation. As a result of implementation of energy conservation measures, a total saving of 102.3 TJ in energy consumption has been achieved in 2015-16.

The LEED® Platinum rating accorded to all of ITC's luxury hotels, making it the greenest luxury hotel chain in the world, implies a significant reduction in specific energy consumption with respect to conventionally designed hotels. ITC hotels are not only energy efficient by design but also conserve fossil fuels - with several of ITC's hotels sourcing more than 50% of their electrical energy requirements from wind farms. In order to continually reduce our environmental footprint, green features are integrated in all new constructions and are also being incorporated into existing hotels, manufacturing units, warehouses and office complexes during retrofits.

Targets and Performance

In order to continually improve on our energy performance, ITC Businesses have set voluntary specific energy reduction targets. Accordingly targets have been set at the Unit level for maintaining this performance.

Since the three Units (Bhadrachalam, Kovai and Tribeni) of Paperboards and Specialty Papers Division (PSPD) together account for 89% of ITC's total energy consumption, greater focus is directed towards the energy performance of each of these Units. The share of these Units in ITC's total energy consumption is shown below:

Performance of these three Units of Paperboard and Specialty Papers Division against the targets are as follows:

For computation methodology of energy consumption within organisation, please refer to Quantification Methodologies: Energy and GHG Emissions.

Energy Consumption Outside of the Organisation

During 2015-16, ITC has expanded the upstream boundary of energy accounting. Accordingly 2731 TJ of energy consumed outside of the organisation has been accounted for during the year.

For computation methodology, please refer to Annexure - Quantification Methodologies: Energy and GHG Emissions.

The boundary of accounting will be progressively expanded in the years to come, based on deepening of our engagement with the supply chain members.

With an objective to evaluate the impacts in the value chain and to identify additional areas for improvement, ITC continued with the life cycle assessment (LCA) studies for its products. Having developed internal competencies in this area, life cycle assessments of the products from Personal Care Products Business and Paperboards & Speciality Papers Business were carried out during the year which have helped in identifying areas for improvements in packaging, energy & water use, etc.

Going forward, ITC intends to undertake more LCA studies for evaluating further opportunities for optimisation in the value chain of its products and services.