Speciality Chemicals Ltd (1A, 1G, 2B, 2H, 3C, 3I)

Background
Speciality Chemicals Ltd. (SCL) is a ₹ 9,800 crore company that produces a range of inorganic
chemicals used in a wide range of applications, both industrial and consumer. Established in 1995,
the company is listed in the Bombay Stock Exchange. It has 3 plants located in various states in India
and it has also acquired plants in Belgium, Canada and Ghana to serve those markets. Its customer
base is therefore, global consisting of large multinationals and it ranks as the second and third
largest global producer in its product range.

Raw material
SPL sources its raw materials from mines located within 200 km of its various plants. It does not own
these mines but has long-term purchase agreements with the mining companies. The other principal
input into its process is water which is available locally nearby streams, lakes and in 2 plants, from
underground water. Two of its plants – one in India and the other in Ghana – are located in areas
that are gradually becoming water stressed. It has few input suppliers but being a capital-intensive
process industry, it has many suppliers of both capital equipment and maintenance services and the
latter have a strong presence in its plants to ensure they are kept running.

Production process
The production process is power intensive as well as heat intensive, the latter being provided by
boilers fired by coal, fuel oil and, increasingly, bio fuel from agri-waste available in the vicinity of its
plants. The plants depend upon grid electricity, backed up with diesel generators, though the
company has been exploring renewables as an alternative to diesel gensets. The effluents are
treated before being discharged into the local stream after ensuring that it meets all pollution
control norms. There is a lot of solid waste generated, including fly ash from burning coal, which is
settled in settling ponds and stored within the premises; this is a growing challenge.

While the production process is quite capital intensive, raw material movement, packaging, loading
and despatch is labour intensive. The company employs 24,000 people globally, 60% of them are
full-time and mostly white collared. Workers are generally hired on a contract or casual basis
through contractors, though they are employed in the plant.

A few years ago, SSL suffered a few fatalities in one of its Indian plants – which also caught the
attention of the media. Though the company has always emphasised on safety, the incidents has led
to an increased focus and apart from regular safety audits and certifications, the company has been
investing in safety training and drills of its staff and supply chain members,

Focusing on sustainability
Though the company has a reputation of being a highly ethical and well-governed, its growing global
presence has meant that there is greater scrutiny on its operations and how it deals with its
stakeholders. This scrutiny is coming initially from its overseas customers and investors but with
growing tightness of regulations in India in terms of environmental, social and disclosure issues, SCL
recognises that compliance with the law is not going to suffice and it needs to go beyond that. Media
attention was drawn to the company post the safety incident of a few years ago and since then it has
been tracked because of inherently disruptive nature of the industry but also because of the many
positive steps it has taken. SSL has begun the process of sustainability reporting but recognises that
this process not only needs to be accelerated but also be more systematic and strategic.
New India Auto Ltd. (1B, 1H, 2C, 2I, 3C, 3J)
Background
New India Auto Limited (NIAL) was set up in the 1980s as an ancillary unit of Premier Automobiles
Ltd., the then manufacturer of Fiat (and later Premier) cars in India. The company started by
producing castings and forgings for Premier but soon integrated its operations in producing internal
combustion engines and gear boxes. Before the downfall of Premier started, the company started to
offer its design and production capabilities to a number of global automotive players, principally in
Europe and to some extent in North America. When India liberalised its economy and global
automotive majors started setting up manufacturing facilities in India, NIAL was well poised to
provide these crucial sub-assemblies and design services. The company now has a turnover of
around ₹ 4,600 crores, it is privately held with the promoter family owning 60% of the equity, the
rest being held by institutional investors both Indian and international.

Raw material and manufacturing

NIAL built its first plant in Pune but now has a presence in Tamil Nadu, Karnataka and Rajasthan.
Casting and forging being the main operations, the process is both energy and water intensive. Its
principle raw material is cast iron and aluminium which it sources from both Indian and global
manufacturers. Additionally, it sources several components and assemblies from a range of
suppliers, some of which are large suppliers in their own right with diverse customers while others
are smaller ancillary units dedicated to producing these components and sub-assemblies exclusively
for NIAL as per its design and specifications. These ancillaries in turn source from several other
suppliers – NIAL’s analysis indicates that its supply chain consists of at least 3 and in some cases 4
tiers.

NIAL’s manufacturing process produces a lot of emissions, effluents and solid waste. The company
ensures that it meets all regulations but it constantly gets asked its customers about how it is
managing this waste and what its carbon footprint is. Its Rajasthan and Tamil Nadu plants have been
facing water shortages, especially in the summer months, and the company has had to get tankers
for water supply, causing some unrest in the communities around these plants. The Tamil Nadu
plant – its newest – is also facing some unrest from communities who were displaced when the state
government acquired land for the plant as they feel that the compensation is inadequate.

The manufacturing process is capital intensive and so its labour force is rather small numbering
8,000 people, including contract and casual labour that account for about 20% of the workforce. The
company has a strong design and engineering function where a team of about 400 are engaged in
designing cost- and energy-efficient solutions for its automobile manufacturing customers.

Focusing on sustainability
Though the company has a reputation of being a highly ethical and well-governed, its growing global
presence has meant that there is greater scrutiny on its operations and how it deals with its
stakeholders. This scrutiny is coming initially from its customers but with growing tightness of
regulations in India such as the accelerated introduction of the BS VI norms, its customers are
looking to NIAL to provide design and product solutions that will enable them to meet these norms.
Questions are also being raised by several stakeholders on its vulnerability to the growing interest in
Electric vehicles amongst Indian policy-makers as well as global manufacturers. Water shortages and
the consequent community unrest and its vulnerability to its supply chain have begun to engage the
attention of its promoters.
Bharat Steels Limited (1C, 1I, 2D, 2J, 3E, 3K)
Background
Bharat Steels Limited (BSL) uses the electric arc furnace route to produce steel. Though incorporated
in 2002, the company consists of over 20 steel plants, 16 of which were established at various time
from the 1980s in different parts of the world and merged into a single entity. Its 4 newest plants
have been set up in the past 8 years. The company is listed in the London and National Stock
Exchanges and the promoters and institutional investors own about 40% of the equity, the rest being
in the hands of the publc. It has a global turnover of ₹ 22,000 crores with plants in 12 countries,
including 6 in India.

The principal product of BSL is cold rolled steel sheets and coils that are used by the automotive and
the consumer durables industry. The specifications vary marginally depending upon the customer
and the application. Since being a commodity makes BSL vulnerable, it has been venturing into
speciality steels as well as new applications such as housing etc.

Raw material and production process

BSL’s principle raw material is steel scrap which is melted in electric arc furnaces, alloyed and ingots
produced which are then rolled into coils and sheets. The whole process is undertaken in house. The
process is energy and water intensive and produces both emissions and effluents in significant
amounts.

Apart from scrap, the only thing outsourced is capital goods and their maintenance. Like all process
plants, maintenance and uptime is key and so the company has long-term maintenance contracts
with suppliers who have a presence in the plants both in terms of equipment and people. BSL’s own
staff number 3,000 globally of which about 620 are in the sales & marketing function. The product
development function of the company has been growing steadily over the years as it has been trying
to provide technically differentiated products to its existing customers (light light-weight steel to
improve fuel efficiency of the vehicles produced by its automotive customers) and exploring new
applications and customers such as housing.

Since its major raw material is steel scrap, BSL inherently contributes to a circular economy. Having
said that, it is naturally vulnerable to availability of steel scrap and so its supply is crucial to its
survival. On the other hand, being energy and water intensive, its process does not leverage the
embedded carbon, energy and water in its raw material.

Focusing on sustainability
Though the company has a reputation of being a highly ethical and well-governed and it uses scrap
steel in its process, its pollution potential and its water-intensive operations has meant that there is
greater scrutiny on its operations. This scrutiny is coming from a range of stakeholders, particularly
its investors and communities. It has begun the process of preparing a sustainability report but
recognises that this process not only needs to be accelerated but also be more systematic and
strategic, involving all major functions.
Orion Sports International (1D, 1J, 2E, 2K, 3F, 3L)
Background
Launched in 2001, Orion Sports is one of the fastest growing brands in the sports apparel and
footwear markets. Founded by eight of Kenya’s famed long-distance runners, the brand has quickly
caught the imagination of an increasingly sport-crazy public and is now available almost across the
world. The company is headquartered in Nairobi and Geneva and is privately held by the promoters
and a bunch of global venture capitalists and institutional investors. There is little data available
publicly on the company’s financials but the fact that it has a market share equal to 40% of the
market leader Nike is testimony to its success. It has also recruited a few leading Olympic athletes as
its brand ambassadors and it has positioned itself as a company that is “fair and honest” – to its
customers, its suppliers and the planet, something that has caught the imagination of not just these
stakeholders but also the media.

Raw material and manufacturing

The production model followed by Orion is similar to all its competitors. Production is essentially an
outsourced to small manufacturers across the globe, with a focus on Africa (rather than Asia which
unlike the other brands). Design and product development is done in-house at Nairobi and it has
built collaborations with a few leading universities known for their research capabilities. Branding,
logistics and marketing is handled out of its Geneva office. The company employs 28,000 people
globally.

The principal raw materials are rubber – natural and petrochemical based – fabric, accessories and
consumables like chemical adhesives. Most of these are procured centrally but delivered to the
locations where the manufacturers are located. The company has set up hubs near the
manufacturing centres where the material is received, inspected and then dispatched to the
manufacturers. The hubs also house two sets of compliance teams, one which ensure that all
manufacturers comply with quality parameters while the other focuses on environmental and social
issues. Orion has learnt from the experiences of other brands and has ensured that it has strong
standards and processes in place to ensure that labour and environmental practices in the supply
chain are compliant with both internal and external standards.

Focusing on sustainability
As a relatively new but extremely successful company, there has been growing interest in Orion’s
business model and understanding its business success factors. Its promoters have tried to learn
from the experiences of its competitors by building a brand built on strong ethical and sustainability
foundations. Yet, questions arise on its supply chain, especially since Africa is relatively new to
manufacturing, both by various NGOs working on the issue and global media. The company has been
so focused on building its brand and its supply chain that it has not paid enough attention to its raw
material sources, especially given the concerns on ethically sourcing them. Though the company is
reasonably diverse in terms of ethnicity, it has not kept track of diversity in terms of gender and
sexual orientation and this has come up a few times. It has begun the process of preparing a
sustainability report but recognises that this process not only needs to be accelerated but also be
more systematic and strategic, involving all major functions.
Universal Consumer Products Inc. (1E, 1K, 2F,
2L, 3A, 3G)
Background
Established in the US in 1948, Universal Consumer Products Inc. is a global brand in the personal
products space. Starting with basic products such as soaps and toothpaste it has now diversified into
a whole range of products for the “home and the homer” – products that are useful for the home
and everyone who lives in it. Apart from product extensions – liquid soaps, detergents, dishwashing
bars and liquids, mopping liquids – the company now produces perfumes, creams, shaving creams
etc. It also has introduced a highly successful range of “natural” products, in response to competition
and a growing reluctance to use chemicals. The company sells its products in over 80 countries
through local subsidiaries and channel partners, has a global turnover of over US$ 4.2 billion and is
widely held and listed in several stock exchanges. It employs over 82,000 people across the globe.

Raw material and production

Universal uses a large and diverse range of raw materials. Over half of these are chemicals produced
by several chemical manufacturers big and small. The next big chunk of raw material is minerals
available in nature but need to be mined, refined and processed before use and are also sourced
from third parties. The third category – quite small at present but growing – is for its natural
products range; these either cultivated or available from nature and are sourced through a
completely different channel of aggregators as the producers are usually small scale and gatherers
are typically landless indigenous people. And finally packaging – it uses a wide range of plastics,
paper and board as packaging material.

The production process of most of its products is fairly low-tech, low temperature, low energy
chemical processes. Water is a key raw material, though volume requirements are not large.
Effluents are significant as with any chemical process, air emissions are largely due to boilers used to
create process heat and solid waste in not significant. Universal has over the years set up plants in
most of its major markets where these products are manufactured. In the past few years however, it
has switched to a contract manufacturing model and has built a large chain of suppliers across all its
markets and these now supply a bulk of the products it sells.

Branding and distribution

Universal’s brands are one of the most recognised, built assiduously over the years, is seen to stand
for “affordable quality”. Ensuring that the brand is available at the shelf is key and it does this
through a huge network of third-party distributors, dealers and retailors, managed by its own sales
and distribution offices.

Focusing on sustainability
Universal’s brand positioning has ensured that its systems are geared towards cost reduction
without compromising quality. However, market research in several countries have shown that this
does not build enough entry barriers. On the other hand, there is growing concern with
environmental issues led the company to begin its line of natural products and it is convinced that
unless its products embed concern for the planet and society, it will find it difficult to grow and
remain profitable. Plastic packaging has become a big issue and There is a growing expectation that
Universal will have to solve for that. Unilever’s success story has also convinced the board that
sustainability makes business sense and is seriously under consideration.
Vicinity Retail Pvt. Ltd. (1F, 1L, 2A, 2G, 3B, 3H)
Background
Vicinity Retail is the new kid on the retail block. Established in the late 1990s, the company started
as a brick-and-mortar affair and currently has a chain of 128 stores in 24 Indian non-metro cities. Its
positioning is literally physical – a store in the vicinity of every consumer in its segment and hence its
name. It also offers “clean, green and fine” products i.e. those that are procured from suppliers who
believe in minimising their negative impacts on society and the planet without compromising quality
but expects its customers to pay for this differentiation. In 2014, it started its on-line store and now
both operate side by side, the latter catering essentially to markets where it does not have a physical
store. Vicinity specialises in food products from all over the world – fresh and processed – but not
organic nor lifestyle. Vicinity is privately held, employs 4,200 people mostly in 2 areas – the stores
and procurement. It has recently introduced its own store brand for a select range of processed
foods.

Business process
As a retailer, its business process is both simple and complex. It is simple in that it procures, stocks
and sells products from other producers. It is complex in that it has over 1 million SKUs that it
procures from over 120,000 individual producers that range from MNCs on the one hand and Farmer
Producer Companies, SHGs and cooperatives on the other. All of the latter are located in India while
its global sourcing is from reputed MNCs and importers only. Locating reliable suppliers and
maintaining strong relationships with them is the key to success.

Expectedly, logistics is a big complexity of the operation. This includes transportation – from the
source to the stock points to the stores and safe stocking at various hubs and in each individual
store. This also requires capital – working capital to procure and stock as well capex to invest in
stores and stock points.

For the store brands, Vicinity uses a contract manufacturing process. It has roughly 40 such contract
manufacturers who produce against specific orders and are hence not exclusive. The arrangement is
that raw material and the formulae are provided by Vicinity while the processing and packaging –
including procurement of packaging material – is undertaken by the manufacturer.

For the e-tail operations, procurement and stocking is handled centrally while fulfilment including
despatch is handled by a separate team. This has ensured cost synergies.

Focusing on sustainability
Vicinity has differentiated itself from its competition in two ways – in the way the products it sells
are produced and the convenience of finding them nearby. Its e-tail business focuses more on the
latter. It recognises that its loyal customer base is on a “journey of responsible consumption” and
believes that Vicinity is a partner in this journey, an expectation expressed by its customers. This is
pushing the company into thinking more about these issues in the types of products it offers, the
shopping experience and even the e-tailing experience – in short, it knows it needs to “walk the
talk”. It recognises that the jury is still out on the sustainability impacts of going to a store vis-à-vis
getting it delivered – transportation miles, packaging, resource consumption in running stores – and
feels that it needs to address these issues more head-on and strategically. Vicinity recognises that its
suppliers are key its success as much as it is to theirs and getting this balance right is critical.