“ESG Strategy and Net Zero Plan for ITC PSPD

by

Sruthi Murthala

Kautilya School of Public Policy

Environment, Social and Governance

Submitted to

Ms Leela Raina and Aditi Jha

4th February 2024”

Introduction:
ITC stands for Indian Tobacco Company, an Indian conglomerate. With 13 business lines
spanning five divisions, the company exports its goods to more than 90 nations. ITC
Paperboards and Speciality Papers Division (PSPD) is one of the five divisions with plants in
Kolkata, Bhadrachalam, Bollaram (Hyderabad) and Coimbatore. It is one of India's leading
producers of paper and packaging products. This division manufactures products that include
Kraft paper, printing paper, speciality boards for playing cards, art and ivory boards,
furnishing and tissue paper. It also provides customised packaging options for various sectors,
including FMCG, pharmaceuticals, and the food and beverage industry.
Need for a net zero plan:
ITC has received many awards for best practices in the industry. It has one of the best ESG
strategies when benchmarked with its competitors. It uses GRI principles to prepare
sustainability reports and TCFD (climate-related disclosures) for investors. However, the PSP
division of ITC needs a materiality assessment to identify the risks and opportunities. Thus,
there is a need to zoom into climate-related risks for this [Link], I have attempted to
create a net zero plan for ITC PSPD in this paper, considering every possible aspect of the
SBTi framework. This would make the company leader and set standard in the industry.
However, the dates and years with percentage reductions are not specified since they are
imaginary, and emphasis is given to the framework and methodology.
Sector-wise split for Indian corporates with climate commitments

Source: SBTi database

Materiality Assessment (Identify risks and Opportunities)
1) Raw materials like wood and pulp
 2) Water
3) Energy

ESG Strategy
Since the division I have chosen is a part of ITC, an exact ESG strategy cannot be formed
from the details in the sustainability report or the BRSR. However, I have tried to incorporate
the strategies that can be used for the material issues identified in the paper, which can form
the ESG strategy for the PSPD when integrated.

Framework to draw a decarbonisation plan for ITC PSPD

Assumption: The company will achieve a net zero target by 2040, with 1.5 degrees
centigrade of commitment.
Steps followed to draw a net zero plan
1) Baseline year: 2018-19
Creating GHG inventory for the baseline year 2018-19. The methodology chosen to
capture the GHG emissions is the 2006 IPCC guidelines (for National Greenhouse
gases)
2) Type of target:
Reducing emissions (absolute) over baseline.
3) Defining Scope:
Scope 1: Combustion fuels to generate energy on the site
Scope 2: Electricity purchased for operations
Scope 3: Upstream and downstream emissions that include the supply of raw
materials, employees' commute, logistic partners, etc.
Scope 3 emissions are the highest in PPI, and these must be addressed to achieve net-
zero targets.
4) Setting targets: short, midterm and long-term. These can be framed from the
emissions and the strategies described in the later sections of the paper.
5) Factors to consider to achieve the net zero goal
Nature of business: The paper and Pulp industry is energy and water-intensive,
and it is more challenging for this industry to achieve the target on account of
hard-to-abate sources of emission. This requires high capital, technology, and
R&D investments and difficulty mitigating emissions from suppliers, biodiversity,
and raw material issues.
Policy and Regulatory support from the government
A consistent policy landscape supporting environmentally friendly policies is
required to achieve the net-zero targets.
Technology maturity and availability: The advancements in India's paper and
pulp industry are less advanced than in other European nations. Technologies like
 green hydrogen and carbon capture and storage are expensive due to limited
availability.
Access to finance: Transition finance is required for technology adoption to
reduce GHG footprint, R&D, realignment of supply chains, skilling and training.
Ensuring Social Justice: Loss of jobs due to automation and switching to
industry 4.0 practices. A decarbonisation roadmap should be developed carefully
considering the supply chains and workers in the company's upstream and
downstream business.
6) Adopting a suitable decarbonisation plan from available options to achieve the net
zero goal. The following are the different options for the organisation to achieve
net zero targets calculated from the PSPD division emissions.
Technologies that can be used as levers for the decarbonisation of PSPD

Strategies

At present, there is no emission trading market in India. However, internal carbon pricing can
help companies reduce climate change risks and spot opportunities for a low-carbon future.
India recycles only 20% of its raw materials, while Europe's rate is 70%. Thus, by adopting
circular business strategies, ITC PSPD can create additional value and reduce emissions.
Policy angle:
The policy of the Government of India on Plastic Waste Management notified guidelines on
“Extended Producer responsibility” on plastic packaging, and prohibiting single-use plastics
should be seen as an opportunity by the company to promote R&D in innovation and
technology to provide a variety of sustainable paper packaging alternatives. Eco-friendly
labelling metrics for sustainable paper packaging products, cap and trade emission trading
system for energy-intensive industries, and Perform, Achieve, Trade (PAT) to reduce specific
energy consumption in PPI.
Responsible fibre Sourcing
ITC PSPD aims to source wood and pulp from its own plantations spread over 30 acres in
Badhrachalam near the paper mill, which reduces the scope three emissions considerably and
provides incentives to the farmers (Social angle). Pulpwood is currently sourced from tree
species Eucalyptus, Sababul and Casurina. Our paper products have an international “Forest
Stewardship Council” certification. ITC is the first Indian corporation to join the WWF
GFTN to support responsible forestry practices.
Strategy to achieve Net Zero: Setting up a state-of-the-art clonal facility to produce clones
that yield higher pulp. The company aims to use sugarcane bagasse from near sugar mills to
make paper and improve the use of recycled paper waste. We aim to identify new wood
species in collaboration with the Forest Research Institute. The idea is to commit to a
deforestation- and degradation-free policy for sourcing raw materials and ending illegal
fibre sources by tracking the supply chain partners using technology. We aim to innovate
other raw materials for paper production and avoid suppliers procuring from shrinking,
endangered and degraded forests. This will help achieve the SDG’s 8,12,13,15.

Use nature-based solutions for carbon sequestration, like improving soil quality and using
local species that can capture more carbon planted on the boundaries.
The above figure shows solutions to achieve the net zero target through the circular economy
model.
Strategy in manufacturing:
Energy efficiency: ITC PSPD uses a high-efficiency recovery boiler to increase the share of
renewable energy. It is India’s first thermos mechanical pulp mill. Our paper is 100%
elemental chlorine-free and produced with energy-efficient processes. All the buildings are
certified energy efficient byLEED.
Strategy to achieve net zero: Although solar and wind power are installed in the plant, a lot
of carbon dioxide is generated, as shown in the following figure.
Thus, we aim to use Carbon Capture and storage technologies for carbon dioxide capture.
Green hydrogen will be used instead of steam to produce paper since solar and wind power
cannot be used in this process—the adoption of Industry 4.0 to increase efficiency. We aim to
use environmentally friendly chemicals like oxygen and hydrogen peroxide to make the
process “green’. IOT-based predictive models will be used for energy and process
optimisation.
Water management: The company uses freshwater sources from the Godavari and Kaveri
River basins. The paper production unit contributes 80% of the company's water
consumption. Water is recycled and treated before discharging.
Strategy: Aim to expand the Alliance for Water Stewardship to all facilities by 2030 with
priority in high water-stress areas. Monitoring water released into waterbodies by measuring
the COD and BOD. The aim is to use the UN mitigation hierarchy to use water efficiently, as
shown below.

Biodiversity Conservation:
The company covers nearly one lakh acres as a part of its biodiversity conservation program.
We are part of a multi-stakeholder initiative to conserve biodiversity, “India Business and
Biodiversity Initiative”.
Strategy: The aim is to align with the TNFD framework and be proactively involved in
calibrating the practices to align with the stakeholder's interests.
Other strategies include
 Registration with the UNFCCC Clean Development Mechanism in the projects
 Conduct Life cycle analysis
 The company exports to other countries; hence, apart from the Indian standards,
complying with other countries' standards is of utmost importance. Thus, managing
and mitigating supply chain risks is vital.
 Complete elimination of plastic in the supply chain
 Key partnerships like Business ambition for 1.5^C, RE 100 are vital.
 Industry partnerships with IPMA, FICCI, CII, and IGCC to keep track of the best
practices in the industry.
 Inclusion of women on the board or top-line management, as there are none for the
PSPD (governance angle). There are signatories of the UNGC.

End Note: The company fares commendably well in the ESG aspects.

.
References:
Mondi Group. (2022). Mondi Sustainable Development Report 2022
[Link]
publications/2022/[Link]
Berg, P., & Lingqvist, O. (2019). Pulp, paper, and packaging in the next decade:
Transformational change. McKinsey & Company.
Bergquist, A. K., & Soderholm, K. (2016). Sustainable energy transition: the case of the
Swedish pulp and paper industry 1973-1990. Energy Efficiency, 9(5), 1179-1192
ITC Sustainability and Integrated Report (2023).
[Link]
[Link]
World Wide Fund for Nature. (2023). Net Zero Roadmap for Corporates in India.
[Link]
net_zero_roadmap_for_corporates___wwf_india.pdf
SBTi. (2023). Corporate Netzero Standard: Version 1.1.
[Link]
Soderholm ¨ P, Bergquist A-K, Soderholm ¨ K. Environmental regulation in the pulp and
paper industry: impacts and challenges. Curr For Reports 2019;5:185–98.