ITC Limited
Sustainability Report 2006

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Chairman's Statement

ITC's Vision and Strategy

"Envisioning a larger societal purpose ('a commitment beyond the market') has always been a hallmark of ITC. The Company sees no conflict between the twin goals of shareholder value enhancement and societal value creation. The challenge lies in fashioning a corporate strategy that enables realisation of these goals in a mutually reinforcing and synergistic manner"

Y C Deveshwar, Chairman of ITC Ltd

I am delighted to present ITC's third Sustainability Report. This Sustainability Report, prepared in accordance with G3, the latest Revision of the Global Reporting Initiative guidelines and assured by PricewaterhouseCoopers Pvt. Ltd., represents a balanced and reasonable presentation of ITC's economic, social and environmental performance.

ITC is committed to sustain its position as one of India's most valuable corporations through world-class performance, creating growing value for the Company's stakeholders and the Indian economy. Over the last decade, Total Shareholder Returns, measured in terms of increase in market capitalisation and dividends, grew at a compound rate of over 30% per annum, placing ITC among the foremost in the country in terms of efficiency in servicing financial capital. ITC aims to sustain its premier market standing and leadership position in each of the business segments.

Sustainability reporting by corporates is of significant relevance and meaning in these times of escalating global opportunities and challenges. Business leadership worldwide is confronted with the realisation that the limits to sustainable growth will be determined less by access to financial capital and more by the commitment to preserve and augment social and ecological capital. Given the growing influence of corporations in driving economic, environmental and social change, investors and other stakeholders will expect the highest standards of ethics, transparency, sensitivity and responsiveness from corporates. It is my belief that stakeholders, including consumers, will increasingly raise the bar of expectation in relation to corporate response to issues of sustainable development. In keeping with this belief, ITC, along with the Confederation of Indian Industry, launched the -CII-ITC Centre of Excellence for Sustainable Development' in January 2006. The Centre seeks to address the institutional void in developing the requisite capability among Indian industry to pursue sustainability goals. The Centre will endeavour to transform Indian businesses by providing thought leadership, promoting awareness and building capacity.

Development in a country as large and diverse as India poses special challenges. As India embarks on a trajectory of high rates of economic growth, it is imperative to focus on the impact of such growth on society and the environment. Economic growth will translate to sustainable development only when it is inclusive, creating the capacity to consume among those living at the margin - the lion's share of whom are in rural India. Equally, sustainable development will be achieved only when environmental capital is enriched. The sharp decline in per capita availability of water, the low forest cover due to continuing deforestation, increasing levels of air and water pollution, the remorseless increase in the quantum of wastelands and the rising demand for fossil fuels are some of the serious issues that need to be addressed on a war footing if India has to realise its ambitious agenda for sustainable progress.

Envisioning a larger societal purpose has always been a hallmark of ITC - 'a commitment beyond the market'. This commitment finds expression in the Company's sustainable development philosophy, which recognises the need to not only preserve but also enrich precious environmental resources while providing a safe and healthy workplace for its employees. ITC sees no conflict between the twin goals of shareholder value enhancement and societal value creation. The challenge lies in fashioning a corporate strategy that enables realisation of these goals in a mutually reinforcing and synergistic manner. ITC's e-Choupal and social forestry programmes represents just two of the stellar examples of this philosophy in action.

Apart from crafting business models that establish direct linkages between businesses and societal goals, ITC is also engaged in implementing various other sustainable development initiatives towards making a meaningful contribution in the economic vicinity of its operating locations. The thrust of these initiatives, christened 'Mission Sunehra Kal', is in three areas: (i) natural resource management, which includes wasteland, watershed and

ITC seeks to contribute in meaningful measure towards social empowerment and genderised development

agriculture development; (ii) sustainable livelihoods, comprising genetic improvement in livestock and economic empowerment of women; and (iii) community development, with focus on primary education and health and sanitation.

ITC is committed to conducting its business operations with passionate respect for the environment. Several prestigious national and international awards (listed elsewhere in this report) testify to ITC's abiding commitment. Such recognition has further reinforced the Company's commitment to consciously synergise and direct the collective endeavour of its employees at all levels across all businesses, functions and locations to continuously improve sustainability practices, to ultimately attain and exceed global standards.

Internationally benchmarked specific consumption of water, dedicated pursuit of the goal of zero discharge and scaling up of rainwater harvesting in several moisture-stressed districts of India have enabled ITC retain its enviable position of a 'water positive' Company for the fourth successive year. The water harvesting potential created so far is over four times the Company's net water consumption.

It is a matter of pride that ITC became 'carbon positive' during the year on the back of several energy conservation measures, usage of carbon neutral fuels and carbon sequestration through large-scale agroforestry programmes. ITC is making rapid strides towards attaining 'zero solid waste' status. Upon this achievement in the near term, ITC would perhaps be the only global enterprise of its size in the world to have achieved these milestones encompassing all three critical facets of environmental sustainability.

In a nation where economic deprivation is widespread and the capacity of a large share of its citizens to participate effectively in economic growth is grossly limited, ITC seeks to contribute in meaningful measure towards social empowerment and genderised development. The ITC e-Choupal and Choupal Saagar infrastructure - a combination of digital, human and physical assets - already serves over 3.5 million farmers and is potentially an efficient delivery channel for rural development. Similarly, ITC's social farm forestry strategy enables the creation of substantial employment both on farms and off farms, besides converting private wastelands into productive assets, and simultaneously addressing serious issues relating to biomass depletion, soil erosion, water security, ecological balance and biodiversity.

ITC dedicates this Report to the cause of the Bharat Nirman programme initiated by the Prime Minister as a leading symbol of public-private partnership in India's development. It also acknowledges the contribution made by the employees of the ITC Group, whose initiative and commitment have enabled the Company make great strides in its sustainability performance.

Y. C. Deveshwar


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