Imperial Tobacco Australia Limited

Australian Packaging Covenant Annual Report and Action Plan

2016-17 Annual Report 2017-18 Action Plan

Company Profile

STATEMENT OF COMMITMENT

This year, Imperial Tobacco Australia has renewed its support for the Australian Packaging Covenant and is enthusiastic to support the new strategy and direction of the Australian Packaging Covenant Organisation.

ITA is a long-term signatory to the APC, first signing to the Covenant in 2002, and has remained committed to address sustainable packaging in ways relevant for our business. Packaging sustainability is a key pillar in our environment sustainability approach to minimise our environmental impact.

This Annual Report is the first report under the APCO’s new strategy and reporting framework. The Report covers our financial reporting period - October 2016 to September 2017.

In FY 2017, we worked to set a new baseline to measure packaging sustainability against the packaging sustainability framework reporting tool. Our key achievements to date include:  Reviewed 100% of our packaging using the Sustainable Packaging Guidelines to identify opportunities which could improve the sustainability of our packaging  Introduced 2 new packaging formats which have improved product and packaging sustainability, however unfortunately these have since been withdrawn from market.  Introduced a new packaging sustainability assessment process for new packaging or packaging changes  Set a baseline for renewable packaging – 86% by weight of packaging is made from renewable materials - and working towards setting a baseline for packaging optimisation and recoverability  Commenced review of our business to business packaging to understand opportunities to reduce single use business to business packaging.  Maintained best practice recycling systems at head office – 78% of our waste was recycled in the reporting period. We also investigated new opportunities to divert product destructions from landfill, we were able to divert 15% of product returns to compost facilities.  Maintained our commitment to buying recycled products - including company stationery, copy paper, office stationery, and trade marketing materials. In total, we helped close the recycling loop by buying back 68% amount of material we recycled;

 Continued to support for the Tobacco Industry Product Stewardship Group to tackle butt litter.

Whilst we face legislation which restricts our ability to make major changes to our packaging, we are committed to continually review our packaging to identify better materials to improve our packaging sustainability. Our commitments for 2017-18 are outlined in this report.

We look forward to continuing our commitment to the Covenant and reporting our progress in 2019

Sincerely, Wayne Merrett General Manager Imperial Tobacco Australia March 2018

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Company Profile

COMPANY PROFILE Imperial Tobacco Australia Limited (ITA) is a subsidiary of PLC. As part of a larger international group, we have extensive operations in the sale of cigarettes; fine cut tobacco and pipe tobacco, cigars, rolling papers and accessories. In Australia, ITA is a packaging user and brand owner.

Market Share Table 1 details ITA’s market share of tobacco and tobacco related products sold in the Australian market. Table 1: ITA Product Market Share in 2016-17 (Source: IRi All Channels Scan MAT) Product market (Australia) Market share Tailor made cigarettes 29.3% Fine cut tobacco 52.2%

Cigarette and Loose Tobacco Portfolio Our Australian brand portfolio for cigarettes and loose tobacco products is detailed in Table 2. All brands are imported: Table 2: ITA Brand Portfolio in 2016-17 Cigarettes Pipe and Fine Cut Tobacco  Camel  Bank   Champion  Escort  Dr Pat  Horizon   JPS  Escort  Peter Stuyvesant   Horizon  JPS  Peter Stuyvesant  Stockman's  White Ox  Amphora  Log Cabin

Packaging materials Our packaging is regulated under the Tobacco Plain Packaging Act 2011, which prescribes the format and appearance of packaging. There are 3 main packaging types used to package our major product categories: 1. Tailor made cigarette 2. Fine cut tobacco 3. Pipe tobacco

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Company Profile

Tailor made cigarettes and fine cut tobacco packaging is made up of several packaging components which are fused together, and therefore is considered a composite material. Packaging layers are listed in Table 3.

Table 3: Packaging components for ITA products Tailor made Cigarettes Fine Cut tobacco Pipe tobacco Shipper Shipper Shipper Carton wrap Bundle wrap Tin Pack wrap Pouch wrap Tin liner Pack foil Pouch Pack frame

Business Locations The Imperial Tobacco Australia Limited head office is located at: 4-8 Inglewood Place Norwest Business Park Baulkham Hills NSW 2153

Sales offices are situated in the following locations around Australia:  Mulgrave, VICTORIA  Darra, QUEENSLAND  Adelaide, SOUTH AUSTRALIA

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Company Profile

APC MANAGEMENT

Our Australian Packaging Covenant obligations are managed as part of our broader corporate sustainability approach. Globally, our business strategy includes a commitment to ‘Respect Natural Resources’ which is also reflected in our local approach.

We focus on 5 key areas to reduce our environmental impact 1) reduce resource consumption 2) recycle to avoid landfill, 3) sustainable supplier engagement 4) packaging sustainability and 5) litter reduction.

Our APC action plan is incorporated into the business environment plan. Plans are developed and reviewed annually as part of our continual improvement program. The plan is owned and implemented by a cross-functional team including representatives from:  Corporate and Legal Affairs;  Procurement;  Operations;  Product Quality;  Logistics; and  Information Services

We also have a volunteer ‘Green Team’ committee which gets together to discuss new environment programs and engage staff to reduce our environment impact.

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Company Profile

2016-17 PERFORMANCE SUMMARY

Overview of reporting framework The new APC annual reporting tool provides an improved framework to assess packaging sustainability. The framework is divided into 3 categories and 13 categories relevant to packing sustainability covering areas of strategy and commitment, packaging design and sustainability, packaging recovery and supply chain influence. Further, there are 6 core criteria which we are required to address and 7 recommended criteria. A summary of APCO reporting criteria can be found in Figure 1. Members are rated against each criteria from ‘Getting started’ to ‘Beyond best practice’, producing an overall position. Members are then required to implement actions to improve their rating

Figure 1: APCO Annual reporting criteria

2016-17 report rating In 2016-17, we focussed on setting a new baseline to measure progress in meeting the new APCO criteria and to maintain previously implemented programs which support our APC and broader environment commitments. We responded to 10 out of 13 criteria (6 core and 4 recommended criteria) and were scored overall 46% rating our performance in the ‘Advanced’ category. A summary of our score can be found in Figure 2. Figure 2: ITA 2016-17 annual report rating A detailed summary of our performance rating can be found in Table 1.

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Table 4: ITA report rating and progress for 2016-17 Criteria Objective Report rating 2016-17 outcomes 1. Leadership ITA has an Environment Policy which states the company commitment to sustainable 1.1 Packaging Integrate packaging Beyond best packaging - "Encourage sustainable design as a fundamental part of local brand Sustainability sustainability goals practice development, and work with global packaging teams to continually improve the Strategy and targets in sustainable features of our packaging". corporate strategy, Our Environment Plan states sustainable packaging is a key focus area of the business including use of the environment response. Further detail of our actions to meet the APC criteria are Sustainable addressed in the company Environment Action Plan for 2017-18 FY. Packaging Targets for packaging sustainability are documented in our Action Plan. Guidelines (SPG) or  equivalent 100% new packaging or packaging changes reviewed using the Sustainable Packaging Assessment process.  100% packaging groups reviewed against the Sustainable Packaging Guidelines annually.  2 new sustainable packaging opportunities, to improve packaging optimisation, or improve the percentage of renewable, recyclable, recycled materials used, and post-consumer recovery of packaging investigated annually  70% recycling rate achieved at all company sites.  Collaborate with the Tobacco Industry Product Stewardship Group to investigate opportunity to recover flexible plastic consumer packaging.  Investigate 1 opportunity to reduce or improve reusability and recyclability of business to business packaging by end 2018. Our Action Plan is owned, managed and implemented by a cross-functional team including representatives from Corporate and Legal Affairs, Product Quality, Corporate Services, Procurement, Information Services and Logistics. Whilst we don’t have a documented Environmental Management System, an annual review of our environmental drivers and impact areas is conducted to continually improve our environment response. This is reflected in the annual review of our Action Plan.

Company Profile

Criteria Objective Report rating 2016-17 outcomes 1.2 Closed Encourage supply Getting started We participate in the Tobacco Industry Product Stewardship Group (TIPSG) which seeks Loop chain initiatives to to reduce tobacco product and packaging litter. In 2017, the group investigated the Collaboration recover packaging opportunity to participate in the Redcycle flexible plastic recycling program to recycle and create polypropylene wrap used to protect our pack and bundle packs together. This was not sustainable closed considered feasible at the time due to technical recyclability of the material. loop economies. Whilst we are working on opportunities to investigate closed loop programs for our packaging, we continue to support closed loop economies by purchasing recycled content materials - in 2016-17, we purchased ~6 tonnes recyclate, buying back almost 67% of the material we recycled from our sites and office. 1.3 Consumer To inform and Not relevant Not applicable to our industry engagement educate consumers Due to Tobacco Plain Packaging Act 2011 and tobacco advertising restrictions, we about sustainability cannot include any information about packaging sustainability on our packaging. through packaging. 1.4 Industry To promote other Leading As part of the TIPSG, we have funded projects targeting product and packaging litter. In leadership initiatives within 2017, we commenced a research project exploring a new opportunity to recycle Australia that cigarette butts to reduce butt litter and implemented an education campaign via improve packaging tobacconists to communicate the correct disposal of cigarette butts. This program was sustainability well received by tobacconists. through In addition, a representative from the TIPSG attended the inaugural Product collaborations and Stewardship Cluster meetings (funded by the NSW Govt) to discuss opportunities for industry alignment with other product stewardship programs. leadership. In 2016, ITA was presented the APC Award for the Tobacco Category and was a finalist for the category in 2017.

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Company Profile

Criteria Objective Report rating 2016-17 outcomes 2. Outcomes 2.1 Packaging Ensure that the Advanced Reviews of all existing packaging were conducted in 2013-14 following the introduction design and Sustainable of the Tobacco Plain Packaging Act 2011. Packaging was assessed against the procurement Packaging Guidelines Sustainable Packaging Guidelines, however no new opportunities to improve packaging (SPG) or equivalent sustainability were identified at the time. are being used to Two new packaging formats were reviewed using our tailored Packaging Sustainability evaluate packaging. Assessment process (which aligns with relevant principles from the APC’s Sustainable Packaging Guidelines). Whilst some aspects of the new packaging had favourable sustainability features, both products have since been delisted for commercial reasons. Lifecycle analyses are conducted for major packaging changes at a global level. For example, and LCA review was undertaken for a packaging material change for secondary packaging when the company transitioned from cardboard to a polypropylene wrap. LCA reviews are not undertaken locally. 2.2 Packaging To reduce material Getting We are committed to investigate new sustainable packaging opportunities to improve material consumption and started packaging optimisation, or improve the percentage of renewable, recyclable, recycled optimisation associated materials used. environmental The amount of packaging that is optimised has not been formerly assessed at this time. impacts in the A review of packaging to determine optimisation, recycled and renewable materials packaging life cycle and opportunities for post-consumer recovery will be conducted in 2018. by optimising the volume and weight of packaging.

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Company Profile

Criteria Objective Report rating 2016-17 outcomes 2.3 Recyclable To support a circular Leading A new baseline has been developed to understand the portion of packaging made from and renewable economy for renewable materials including paper and cardboard. materials packaging by 85% of our packaging by weight is made from renewable paper and cardboard, with optimising the 278 tonnes of our shippers made from 33% recycled content materials. quantity of materials that are renewable and/or contain at least some recycled content. 2.4 Post To increase the Getting Due to the composite nature of materials used for our cigarette packs, our packaging consumer proportion of started cannot be recycled in at home or away from home recycling systems. We are recovery packaging that can committed to review availability of new materials and manufacturing processes which be collected in could improve the recoverability of packaging in 2018 Australia for reuse, recycling, composting or energy recovery. Not applicable to our industry 2.5 Consumer Encourage the use of Not relevant Due to the Tobacco Plain Packaging Act 2011, restrictions are placed on the information labelling on-pack labels that that can be placed on the packaging including ability to display disposal information. enable consumers to easily determine the correct disposal method for post- consumption packaging.

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Company Profile

Criteria Objective Report rating 2016-17 outcomes Not applicable to our industry 2.6 Product To reduce the Not relevant Due to the Tobacco Plain Packaging Act 2011 and other controls on tobacco products, and packaging environmental the product packaging system cannot be changed to improve packaging sustainability. innovation impact of your packaging throughout its lifecycle, through innovation in the design of the product-packaging system. 3. Operations 3.1 Business to Reduce the amount Getting Work has commenced to understand business to business packaging used by our third- business of single-use started party manufacturers and distribution providers. A detailed review of business to packaging business-to-business business packaging will be conducted in 2018 to measure packaging used and to seek packaging. opportunities to reduce single use business to business packaging. 3.2 Onsite Increase the Advanced Best practice recycling systems are maintained at head office and are to be introduced waste recovery of at all state offices. diversion packaging waste We monitor waste disposed quarterly to estimate tonnes waste disposed and our generated on-site. recycling rate. In 2016-17, 11.38 tonnes were disposed from sites and office, of which 78% was recycled. Additionally, 64 tonnes product destructions were disposed which under Australian Taxation Office requirements is required to be destroyed. Product returns are usually disposed to landfill to meet these requirements however, we identified a new opportunity to compost a portion of product returns, resulting in 15% being diverted from landfill.

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Company Profile

Criteria Objective Report rating 2016-17 outcomes 2.4 Supply Engage with Getting We engage with our local suppliers to conduct a bi-annual supplier survey which chain suppliers to build started provide a product or service that contributes to our overall environmental impact. This influence support for, and survey communicates our commitment to the Australian Packaging Covenant and seeks capacity to achieve, alignment between the supplier’s service and our APC goals. In addition, we have packaging regular contact with the Supply Chain Manager at our major manufacturing site in New sustainability goals. Zealand to communicate our APC commitment and to participate in packaging reviews. As part of a global business with overseas manufacturing, packaging procurement and selection is managed above-market by regional and global teams. Therefore, we cannot directly communicate our commitment to packaging sustainability to packaging suppliers.

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2017-18 Commitment

Targets Our packaging sustainability targets include:  100% new packaging or packaging changes reviewed using the Sustainable Packaging Assessment process.  100% packaging groups reviewed against the Sustainable Packaging Guidelines annually.  2 new sustainable packaging opportunities, to improve packaging optimisation, or improve the percentage of renewable, recyclable, recycled materials used, and post-consumer recovery of packaging investigated annually  70% recycling rate achieved at all company sites.  Collaborate with the Tobacco Industry Product Stewardship Group to investigate opportunity to recover flexible plastic consumer packaging.  Investigate 1 opportunity to reduce or improve reusability and recyclability of business to business packaging by end 2018.

Commitment

Commitment Criteria Detailed commitment level 1. Leadership 1.1 Packaging Beyond best We are committed to maintain our packaging sustainability Sustainability practice strategy as part of our overall environment response. Strategy (Core) Our APC commitment is incorporated within our Environment Action plan and specific targets have been developed. Progress in meeting our APC targets and environment action plan will be reviewed annually to identify opportunities for improvement. 1.2 Closed Loop Getting We are committed to explore new opportunities to Collaboration started participate in closed loop collaborations to improve the (Core) recovery and reuse of tobacco packaging. 1.3 Consumer Not relevant engagement to our (Recommended) business 1.4 Industry Leading We are committed to continue our partnership with the leadership Tobacco Industry Product Stewardship Group to address (Recommended) tobacco product and packaging litter. ITA will also participate in the Product Stewardship Cluster via the Tobacco Industry Product Stewardship Group, and the New South Wales Roads and Maritime Services Tidy Roads Steering Committee. 2. Outcomes Company Profile

Commitment Criteria Detailed commitment level 2.1 Packaging Advanced We are committed to conduct annual reviews of packaging design and against the SPG to understand opportunities to improve procurement packaging design. Outcomes of these reviews will be (Core) prioritised and investigated to assess feasibility to implement positive changes to improve the sustainability of packaging 2.2 Packaging Good We are committed to review existing packaging to material progress understand the amount of packaging that is optimised for optimisation product protection. A new baseline of packaging (Core) optimisation will be developed for 2016-17 data which will identify opportunities to further optimise packaging. 2.3 Recyclable Leading Currently 86% of our packaging is made from renewable and renewable materials, including shippers, cigarette packs and a materials (Core) component of fine cut tobacco packaging. We will review our packaging annually to identify opportunities to improve renewable and recycled materials used in our packaging 2.4 Post Good We will review all existing packaging to understand the consumer progress recoverability of packaging in at home and away from home recovery recycling systems. We will develop a baseline to understand (Recommended) the % of packaging that can be recovered and seek opportunities to improve recoverability. 2.5 Consumer Not relevant labelling to our (Recommended) business 2.6 Product and Not relevant packaging to our innovation business (Recommended) 3. Operations 3.1 Business-to- Good We are committed to review business to business packaging business progress and establish a database of packaging specifications to packaging (Core) understand amount of single-use packaging used. A review of packaging will also be conducted to understand opportunities for improvement 3.2 On-site waste Leading We are committed to maintain recycling systems at all diversion company sites to maximise our recycling rate and waste (Recommended) diverted from landfill. Our target is to recycle 70% office waste and investigate opportunities to divert 50% trade returns from landfill.

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Company Profile

Commitment Criteria Detailed commitment level 2.4 Supply chain Getting We are committed to maintain dialogue with our local influence started suppliers to investigate new opportunities to improve (Recommended) sustainability of products and services supplied to ITA and which support our environment and APC goals and objectives.

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4-8 Inglewood Place Baulkham Hills NSW 2153