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Counterproductive

| May 29, 2014

Anti-tobacco activists campaigning against tobacco companies’ social responsibility initiatives in India may do more harm than good.

By George Gay

For people such as I, who live in the U.K., where you vote in a general election on one day and wake up the next morning to hear the result, India’s election process gives pause for thought. Look at it this way: Whereas I am beginning this story just after the start of India’s national elections, you will possibly be reading it before they are through. It apparently takes more than six weeks to complete the process.

And little wonder: More than 800 million eligible voters have to cast their ballots at about 930,000 polling stations before it’s all over. So while in the U.K. you will often find yourself outnumbered at the polling station by officials and exit pollsters, in India, you are more than likely to be standing in a long queue.

And whereas election campaigns in the U.K. are mostly calm, almost staid at times, in India they can be boisterous—to the point where, this year, the election commission chief was quoted in The Guardian as saying his biggest anxiety was ensuring six weeks of rolling elections passed off with no disasters, “man-made or natural.”

The dynamic democracy that India has is a huge source of pride, and it is often used as a reason for explaining away aspects of what goes on in the country that outsiders find difficult to fathom. One example of this from the tobacco industry concerns the fact that flue-cured production, though officially the subject of Tobacco Board of India targets, is usually boosted by over-target leaf that is sold officially through the board’s auction system, albeit these days, subject to some sort of penalty. In the past, when I questioned why this happened, I was told that it was not possible to stop people from growing flue-cured because India was a democracy.

Some might see such a situation as more anarchy than democracy, but I have to say I admire the Indian way. A good helping of flexibility and its poor cousin, muddling through, must be needed in such a huge, populous and diverse society.

Excluding the industry

Of course, in such a society, there will always be times when the individual will feel frustrated by democracy, as anybody who has driven on some of the country’s motorways will appreciate. And I would imagine that, right now, some tobacco people will be ruing the day that public interest litigation (PIL) was introduced to India some 35 years ago. PILs, on the surface at least, are democracy squared. They provide a way for individuals and organizations that might not otherwise have the resources to air in court issues that they believe the government has failed to address in the interests of the public.

And so it is that, as I write this piece, a PIL is being heard that seeks to have tobacco manufacturers excluded from corporate social responsibility (CSR) initiatives. According to a story in The Times of India, this PIL, which was foreshadowed some time ago, was filed by S. Cyril Alexander, the state convenor of the Tamil Nadu People’s Forum for Tobacco Control. In it, he points out that, since April 1, companies in India have been required to spend 5 percent of their after-tax profit on various welfare, development and relief activities. And in return, the companies are allowed to use their brand names and company logos as part of these activities in order to create brand recognition and goodwill.

While welcoming in general the requirement that companies take part in CSR activities, the PIL adds that allowing the tobacco industry to be included would result in the promotion of its brands and thereby run counter to the purpose of the scheme because government expenditure on health, the environment and social welfare would be increased.

In the case of the tobacco industry, the PIL says, companies should instead pay the 5 percent levy to state and central governments for meeting the medical costs of people affected by tobacco products, and for furthering the National Tobacco Control Programme (NTCP) initiatives.

I am not sure how such a PIL, if accepted by the courts, would play out. I would have thought that current tobacco control legislation would have prevented tobacco companies from promoting tobacco brands anyway, though I would concede that some—but by no means all—corporate branding might prove to be more of a problem.

And I wonder which companies might be affected by such legislation, given that the PIL apparently talks about the tobacco industry. Would filter and tobacco-product packaging material companies, for instance, be excluded from the CSR scheme?

Delinked

And the big question is, perhaps, would ITC be excluded? Although the company is now highly diversified, and while its name no longer mentions tobacco, nor, I suppose, implies a tobacco connection (the 1910-incorporated Imperial Tobacco Co. of India became, in 1970, India Tobacco Co., then, in 1974, I.T.C., and, finally, in 2001, ITC), it is the biggest cigarette manufacturer in the country by a long way.

Not that some of India’s younger generations—a big slab of the country’s population—would necessarily link ITC with tobacco. The company has gone some way—whether by design or not—to expunge tobacco from its image, though not from its revenue and profits. If you take a look at its brands booklet, you could be forgiven for thinking that the company doesn’t make cigarettes. The booklet doesn’t mention tobacco or cigarettes, nor are there any images of tobacco products. In fact, the only tobacco vestiges are the brand names appropriated from cigarettes to boost the company’s apparel and personal care businesses.

Meanwhile, in March, a press note appeared on ITC’s website that said the company had been voted among the top two “Buzziest Brands in the Corporate category by ‘afaqs’, one of the world’s largest marketing and advertising portals.” And it took the opportunity of the Annual Buzziest Brands Awards to talk about its corporate brand and its consumer brands. “ITC is one of India’s most trusted and valuable corporates,” it stated. “Its world-class brands delight millions of Indian households. With quality and trust as its trademarks, ITC’s FMCG portfolio consists of over 50 vibrant brands. ITC’s brands like Aashirvaad, Sunfeast, Dark Fantasy, Delishus, Bingo!, Yippee!, Candyman, Mint-o and Kitchens of India in the Branded Foods space, Fiama Di Wills, Vivel and Engage in Personal Care, Classmate and Paperkraft in Education & Stationery; Wills Lifestyle and John Players in apparel, Mangaldeep in Agarbattis and Aim in Matches are popular across the country.”

Again, not a word about tobacco products, though they come under the FMCG portfolio. And if you look at the press release issued by ITC on Jan. 17, in respect of its financial results for the three months to Dec. 31, 2013, again it would be easy to miss the fact that ITC makes cigarettes. Cigarettes rate only one mention, and that has to do with the fact that taxes/duties on them were increased. It is only when you click on the bottom of the release and go to the figures that you see, in the final table, that cigarettes are the mainstay of the company.

Of course, while some of the younger members of the general public might be surprised to find out that ITC is a tobacco company, the fact that its diversifications have been built on tobacco wealth is not going to get by the Tamil Nadu People’s Forum for Tobacco Control.

Good business sense

So does this mean that ITC would be made to give up its CSR programs if the PIL were successful? I would hope not. A lot of the extensive CSR activities that ITC is involved in simply make good business sense in the environment in which the company operates, and they make good environmental sense, as has been recognized by organizations better placed than I am to judge such matters.

In March of last year, ITC stated in a press note that it was ranked No. 1 for the second consecutive year in the CSR category of the Nielsen Corporate Image Monitor 2012–2013.

ITC’s top position in the category Most Active in CSR was “an acknowledgement of the scale and impact of its sustainability initiatives which had created large scale livelihoods and augmented natural resources,” the company said. ITC’s businesses had created sustainable livelihoods for 5 million people, many of whom belonged to the poorest sections of society. The company’s performance on augmenting scarce natural resources, as well as combating climate change, had been globally recognized. ITC was the only company in the world to have been carbon positive for seven years in a row, water positive for 10 years consecutively and solid-waste recycling positive for five years consecutively. All of its luxury hotels were LEED Platinum Certified by the U.S. Green Building Council. Renewable energy constituted nearly 40 percent of its total energy consumption.

As part of its 360 degree interventions in rural agricultural communities, ITC had constantly endeavored to strengthen and diversify livelihood options through both farm and off-farm activities. Its e-Choupal, the world’s largest rural digital infrastructure, had empowered more than 4 million farmers. And its integrated Watershed Development Programme had provided soil and moisture conservation to farmers in water-stressed areas and helped promote sustainable agriculture, apart from contributing to the company’s water-positive status. This program covered more than 100,000 ha of water-stressed areas in rural India.

Meanwhile, ITC’s Social and Farm Forestry Programme, which helped rural wasteland owners convert their land into pulpwood plantations, had greened more than 140,000 ha while creating livelihood opportunities for poor tribal members and marginal farmers. The plantations had also sequestered more than 4,380 tons of carbon dioxide and played a major role in maintaining ITC’s carbon-positive status during the past seven years.

ITC said its business linked sustainability initiatives together with its social investment programs and had had a transformational impact on rural India. Its Livestock Development Programme had provided animal husbandry services to over 800,000 milch animals, thereby providing additional income avenues for farmers. And its Women’s Empowerment Programme had created sustainable livelihoods for more than 40,000 rural women, while its Primary Education Programme had benefited more than 300,000 children.

Winners and losers

That is quite a record, and you have to ask yourself who, given that ITC apparently goes to some length to apply a light touch to its tobacco brands, would benefit from a requirement that it could no longer involve itself in CSR projects. Or perhaps that question should be asked in a slightly different way. Given the morality test often used: How many people would benefit from taking such action against ITC and how many would lose? I don’t know—and nobody else knows—how many would benefit, because to benefit somebody who would have been drawn to tobacco use if ITC had been allowed to continue its CSR programs using its ITC logo would have had to have remained tobacco free because those programs were curtailed—a difficult number even to guess at.

The number of people who might lose is easier to quantify roughly. Some of them are hinted at above, though, clearly, even if ITC were no longer able to carry out CSR activities, at least some of its programs would continue, though not under a CSR banner.

And, as I wrote in 2010, the number of people who require the sort of leg up that ITC provides is huge. India is creating an additional 20 million people each year, so, just to stand still it needs to create more, lots more, of everything. “Feeding this growth is a major issue, but the biggest question of all is how can such growth be achieved and maintained in a sustainable way—a question to which ITC has been applying its creative resources for some years,” I wrote four years ago.

“This is a bold and, at times, frustrating mission to pursue. Bold, because ITC is a group that is not interested simply in changing over to low-energy light bulbs, commendable as such an effort would be; this is a group dedicated to what it terms the Triple Bottom Line philosophy of social, economic and environmental well-being—one of the only groups in the world, if not the only group, to be water positive, carbon positive and 100 percent solid-waste-recycling positive.

“But it must be frustrating at times because the size of the company and some of its 13 businesses tend to attract negative publicity in respect of social and environmental issues—the very areas where they excel. Take the group as a whole: It is still headlined by its tobacco division and therefore still burdened with all of the negative publicity that that entails.”

As the last sentence from 2010 indicates, opposition is nothing new. It blows hot and cold and, for all I know, the PIL might prove to have been a storm in a teacup. But the PIL does provide, I think, a good example of the dangers of unintended consequences.

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