corporate social responsibility of itc hul

8/6/2019 Corporate Social Responsibility of Itc Hul

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Corporate Social ResponsibilityWednesday, March 11, 2009

Rural Initiative taken by ITC and HUL to fulfill theircorporate social responsibility and its impact on Indianeconomy

Paper presented in One day National Seminar on Corporate Socialresponsibility and Leadership On February 17, 2009 .

Held at GITAM Institute of International Business ,GITAM UNIVERSITY ,Gandhinagar Campus, Rushikonda, Visakhapatnam.

"Rural Initiative taken by ITC and HUL to fulfill their corporate socialresponsibility and its impact on Indian Economy" By R. Ramachandra Naik,Associate Professor, Integral Institute of Advanced Management,M.V.P.Colony, Visakhapatnam, Andhra Pradesh, ( E Mail: rrnaik2002 @rediffmail.com )

IntroductionCorporate Social responsibility means devising corporate strategies and

building a business with the societys needs in mind. Social responsibilityshould be impaired in business decision making and it also implies an

obligation to deal with social problems that business organizations arebelieved to have towards the society in which they function. Businesses havefar reaching effects not only on the economic well being of the nation but alsoupon its social fabric. Business organizations have become the mostsignificant social institutions having the power to influence the lives of thepeople.

While emphasizing that, the concept of social responsibility is fundamentally


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an ethical concept, Satish Modh explains that after Independence, policymakers suggested that companies use a part of their accumulated wealth toeradicate social problems. The concept of social responsibility in Indiaemerged as direct response to the policies of the Government making India asocialistic democratic state.

As the farmers and villagers of India are the main customers for ITC Ltd andHindusthan Unilever Ltd (HUL) the corporate are now seriously involved inimparting the knowledge to use modern methods and tools for their financialas well as social development. This rural initiative of the corporate is beneficialto the rural population and the corporate as well. The corporates are fulfillingthe social responsibility by investing in the implementation of the program inthe places where their product potential is substantial and a large network isdeveloped over the years. It also helps the corporate to win the confidence ofthe villagers and improves their brand image.ITC e- Choupal:

ITCs International Business Division one of the Indias largest exporters ofagricultural commodities, has conceived e-Choupal as a more efficient supplychain aimed at delivering value to its customers around the world on asustainable basis. The e-Choupal model has been specifically designed totackle the challenges posed by the fragmented farms of Indian Agriculturecharacterized by weak infrastructure and the involvement of numerousintermediaries among others. e-Choupal also unshackles the potential ofIndian farmer who has been trapped in a vicious cycle of low risk takingability, low investment, weak market orientation, low value addition, lowmargins and all this leading to further lowering of risk taking ability makinghim globally uncompetitive.For a country which is having very rich and abundant natural resources, hard

working and efficient farmers it is unfortunate that Indian agriculturalbusiness remains globally uncompetitive. It is identified that the mainproblem is low risk taking ability of Indian farmer and his dependence on themoney lender for his farm activity. He needs quality inputs such as fertilizers,chemicals, good farming practices and timely information about minimumsale price ( MSP ) for his product, weather data and insurance to safeguard hiscrop. Whereas the inputs for farming activity are supplied by Agri-inputretailer the information required to take a decision about the crop is provided

by the department of Agriculture of State Government through Village levelworkers (VLW s).In the traditional practice the farm output reaches the processor through theMandi system or the Money lender which end up in very low margins for thefarmer. The modern practice of going through a trader, broker and processorhelps the farmer to get a fairly good margin for his products. High margins

will enable the farmer to enhance his investment in the farming activity for


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higher productivity.Such a market led business model can enhance competitiveness of Indianagriculture and trigger a virtuous cycle of higher productivity, higher incomes,enlarged capacity for farmer risk management, larger investments and higherquality coupled with higher productivity.

Further a growth in rural incomes will also unleash the latent demand forindustrial goods so necessary for the continued growth of the Indian economy.This will create another virtuous cycle propelling the economy into a highergrowth trajectory.Operation and benefitse-Choupal provides real- time information and customized knowledge tomaking use of the physical transmission of data about the capabilities ofcurrent intermediaries, logistics, bridge financing. This enhances the ability ofthe farmers to take decisions and align their farm output with market demandthereby securing quality and productivity. The aggregation of the demand for

farm inputs from individual farmers gives them access to high quality inputsfrom established and reputed manufactures at fair prices. As a directmarketing channel virtually linked to the mandi system for price discovery e-Choupal eliminates wasteful intermediation and multiple handling. This helpsin reducing the transaction costs.e-Choupal ensures world class quality in delivering all these goods andservices through several product /service specific partnerships with theleaders in the respective fields in addition to ITCs own expertise.

While farmers benefit through enhanced farm productivity and higher farmgate prices ITC benefits from the lower net cost of procurement by eliminatingunnecessary costs in the supply chain. ITC also offers better prices to thefarmer compared to competition in the field.Sanchalaks: are the village internet kiosks managed by farmers for their useto enable the agricultural community access ready information in their locallanguage on the weather and market prices. It helps them to know more aboutthe scientific farm practices and risk management. It also facilitates the sale offarm products and purchase farm inputs from their door steps.The status of implementation and benefits:Launched in June 2000,e-Choupal has become the largest initiative amongall Internet based interventions in rural India. e-Choupal services today areused by 4.0 million farmers growing a range of crops such as soybean, coffee,

wheat, rice, pulses and shrimp in 40,000 villagers through 6500 internetkiosks operated in nine states (Madhya Pradesh, Haryana , Uttaranchal ,Karnataka, Andhra Pradesh, Uttar Pradesh, Maharastra, Rajasthan and Kerala).The problem encountered while setting up and managing these e-choupalsare primarily of infrastructure inadequacies, including power supply, telecom


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connectivity and band width, apart from the challenge of imparting skills tothe first time internet users in remote and inaccessible areas of rural India.Several alternative and innovative solutions are being used to overcome thechallenges, power back - up through batteries charged by solar panels,upgrading BSNL exchanges with RNS kits, installation of VSAT equipment,

Mobile Choupals, local caching of static content on website to stream in thedynamic content more efficiently. They have also provided round the clockhelp desks for the benefit of farmers.ITC has taken care to involve farmers in the designing and management of theentire,e-Choupal initiative. The active participation of farmers in their rural initiativehas created a sense of ownership in the project among the farmers. They seethe e-Choupal as the new age co operative for development.

An international study has shown that the farmers income have increased by20%. The productivity has increased from 14% to 29% by using e-Chaupal

services.Recognition:(1) ITC is the first Indian company and second in the world to win theprestigious Development Gateway Award in 2005 which recognizes ITCs e-Chaupal as the most exemplary contribution to the field of Information andCommunication Technologies (ICT) for development priorities like povertyreduction, its scale and replicability, sustainability and transparency.(2) E-Chaupal was declared as one of Indias best Innovations and won theInnovation for India Award-2006 for ITC.(3) ITC has won the Golden Peacock Awards for Corporate Socialresponsibility in Asia in the year 2007, the award for CSR in EmergingEconomies 2005 and Excellence in Corporate governance in the same year.These awards have been instituted by the Institute of Directors, New Delhi inassociation with the world council for Corporate Governance and Centre forCorporate Governance.(4) The Corporate Award for Social responsibility 2008 from, The Energy andResources Institute (TERI) in recognition of its exemplary initiatives inimplementing Integrated watershed development programmes across sevenstates in India.(5) United Nations Industrial Development Organization (UNIDO ) Award atthe International conference on sharing Agribusiness solutions 2008 at Cairofor ITCs exemplary initiatives in agribusiness through e-Chaupal. ITCsagribusiness was adjudged the winner out of 120 solutions presented by 65countries for providing innovative solutions including updated information oncrops in remote Indian villages. ITCs e-Chaupal the largest rural digitalinfrastructure in the world today covers over 40,000 villages and benefits over4 million farmers. This distribution network, comprising of digital and human


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infrastructure, not only empowers farmers with information but has alsohelped transform rural communities into vibrant economic organizations byco-creating thriving markets.Comparison with other Indian companies:TERI has judged ITC as the first company for the corporate awards on CSR in

2008. The second prize went to Cairn India Ltd for their efforts in launchingthe Micro Vendor Development Program by creating sustainable lively hoodopportunities. This independent evaluation of ITC e-Chaupal by TERI which isa Non Government Organization ( NGO ) shows that it is one of the bestinitiatives taken by a corporate in India as a part of their CSR.Other Indian Companies which have won TERI awards for their significantcontribution over the years towards fulfilling their Corporate SocialResponsibility are.1) HZL2) ONGC

3) Tata Tea4) Mahindra& Mahindra5) Numaligarh Refineries Ltd.ITC has consistently improved its performance by steadily expanding its eChaupal program to different states in India over the past five years and wonthe farmers appreciation in India. Many developing countries are nowfollowing similar initiatives for the development of agri-business.Future plans of ITC:(1) To improve the logistic efficiency ITC is planning to integrate bulk storage,handlingand transportation facilities.(2) Extension of the e-Choupal initiative to 15 states across the country.(3) To channelize other services related to micro - credit health and educationthroughthe same e-Choupal infrastructure.ITC estimates a payback period of seven years on its total investments in the eChaupal initiative with full bouquet of services to the farmers and ruralcustomers.ITCs philosophy for Rural Development:ITC believes that an effective growth strategy for our nation must address theneeds of rural India which is home to 75 % of our population. It is imperativeto ensure that Indias economic growth is inclusive, embracing its villages, soas to free millions of our disadvantaged citizens from the indignity of poverty.ITC has partnered the Indian farmer for close to a century. It is now engagedin elevating this partnership to a new height by using information technologye-Choupal initiative.HULs initiative in Rural Development - Shakti


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Hindusthan Unilever Limited (HUL) and its constituent companies have beenin India since 1931. The Company has consciously developed its strategies andoperations keeping in view, development of India as the focus for its growth.The companys main contributions are developing and using relevanttechnologies, stimulating industrialization, boosting exports, adding value to

agriculture and generating productive employment and income opportunities.HUL has been engaged in rural development since 1976 in India. The firstprogramme called IRDP (Integrated Rural Development Program) was startedin the year 1976 at Eta district in Uttar Pradesh as a part of its dairyoperations. This programme now covers 500 villages in the district. Later, inall the places where HUL established their factories, similar programmes werealso started in adjacent Villages. These activities focus on training the farmersfor better productive use of their agricultural resources, animal husbandry,generating alternative income, health & hygiene and infrastructuredevelopment.

The most important contribution for rural development is to create income -generating opportunities to villagers. Such initiatives will only be successful

when linked with the companies core business and is mutually beneficial toboth the customers for whom the programme in intended and also for thecompany.Based on these insights HUL launched project Shakti in the year 2001 inkeeping with the purpose of integrating business interests with nationalinterests.

Project ShakthiThe objectives of project Shakthi are to create income - generating capabilitiesfor underprivileged rural women by providing a small-scale enterpriseopportunity, and to improve rural living standards through health and hygieneawareness. It is ushering in prosperity and more importantly, self-respect to

women in rural India.Under the project, HUL offers a range of mass-market products to the SelfHelp Groups (SHG s) which are relevant to rural customers. HUL imparts thenecessary training to these groups on the basis of enterprise management

which the women need to manage their enterprises. For the SHG women, thistranslates into a much-needed, sustainable income contributing towards

better living and prosperity. Armed with micro-credit women from SHGsbecome direct-to-home distributors in rural markets.A typical Shakthi entrepreneur conducts a steady business which gives her anincome in excess of Rs.1000/- per month on a sustainable basis. As most ofthese women live below the poverty line and hail from small villages with lessthan 2000 population, this earning is very significant. Project Shakthi thusenables these families to live with dignity, with real freedom from want. In


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addition to money there is a marked change in the womans status within thehousehold, with a much greater say in decision making. This will lead to betterhealth and hygiene, education of their children especially the girl child and anoverall betterment in living standards.The important and notable aspect of this model is it creates a win-win

partnership between HUL and the consumers, some of whom will depend onthe organization for their livelihood and builds a sustainable cycle of growthfor all.

ConclusionFrom the study of these two successful rural initiatives taken by ITC and HUL

which are the leading and well established Indian Corporates, it is very clearthat it proved to be a competitive corporate advantage in fulfilling corporatesocial responsibility. The decision of ITC to extend e-Choupal to 15 other

states in the country shows their commitment to the objective of ruraldevelopment in India. The infrastructure of e-Choupal can be put to betteruse for other services especially in rural health and education area.Providing safe drinking water to villages in India is a challenge which requiresthe involvement of corporates and NGOs. State Governments are engaged indeveloping Schemes and involving their machinery for implementation, butthe success rate of these programs is very low. Corporates can play a key rolein educating the rural population about the importance of safe drinking waterin maintaining their health. It is estimated that the cost of providing healthservices for the villagers suffering due to contaminated water is 8 times higherthan providing free and safe drinking water. It is therefore suggested that allcorporates should take the example of ITC and HUL and do their best infulfilling their Corporate Social Responsibility and participate in the growth ofIndian economy.References:(1) http://www.echoupal.com/.(2) http://www.hllshakti.com/.(3) Business Ethics and Corporate Governance by Satish Modh, Macmillan,2005 .(4) Innovate to empower the Agriculture an address by Dr.A.P.J.AbdulKalam, President of India during the national symposium to commemorate60th year of independence on 05-06- 2007 at New Delhi.

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