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Sustainability Report FY2017

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Sustainability Report FY2017 IN FOCUS IN FOCUS FY2017 24. 30. PLOOM TECH AGRICULTURAL JT Group LABOR Sustainability PRACTICES Report INTRODUCTION OUR APPROACH TO SUSTAINABILITY OUR BUSINESSES OUR WAY OF DOING BUSINESS 6. CEO statement 12. The 4S model 18. Our tobacco business 42. Our business ethics 19. Health risks, transparency, and 45. Respecting human rights 8. The year in brief 13. Corporate governance tobacco regulation 22. Reduced-Risk Products 46. Our people 28. Supply chain management 10. Corporate profile 13. Risk management 29. Our tobacco leaf supply chain 34. Tackling illegal trade in 50. Our planet 14. Our materiality issues tobacco products 56. Our community 15. Driving our 38. Our pharmaceutical investment sustainability agenda business 16. Stakeholder 40. Our processed food engagement business 60. About this report Contents INTRODUCTION CEO statement 6 The year in brief 8 Scope of data and Corporate profile 10 information presented OUR APPROACH TO SUSTAINABILITY The 4S model 12 in this report Corporate governance 13 Risk management 13 Our materiality issues 14 Driving our sustainability agenda 15 Unless the context indicates otherwise, Stakeholder engagement 16 references in this report to ‘we,’ ‘us,’ ‘our,’ In this report we use the following scope and ‘JT Group’ are to Japan Tobacco Inc. notations: and its consolidated subsidiaries. References *A OUR BUSINESSES to ‘Torii Pharmaceutical’ are to Torii the entire JT Group, including subsidiaries Pharmaceutical Co., Ltd., our pharmaceutical (i.e., international tobacco business, Japanese Our tobacco business 18 subsidiary. References to ‘TableMark’ are to domestic tobacco business, pharmaceutical business, and processed food business.) Health risks, transparency, and tobacco regulation 19 TableMark Holdings Co., Ltd., our processed Reduced-Risk Products 22 *B food subsidiary, and its consolidated IN FOCUS: Ploom TECH 24 solely Japan Tobacco Inc. (JT) subsidiaries. (includes Japanese domestic tobacco and Supply chain management 28 This report contains Standard Disclosures pharmaceutical businesses, and excludes Our tobacco leaf supply chain 29 IN FOCUS: Agricultural Labor Practices 30 from the Global Reporting Initiative (GRI) G4 international tobacco business, processed food business, and subsidiaries of all businesses) Tackling illegal trade in tobacco products 34 Sustainability Reporting Guidelines. *C Our pharmaceutical business 38 We report data for the entire JT Group Japan Tobacco Inc. (JT) and Japanese domestic including subsidiaries, wherever possible. Group companies (includes subsidiaries of Our processed food business 40 Japanese domestic businesses, excludes See our Basis of Reporting document for international tobacco business) further detail. OUR WAY OF DOING BUSINESS *D Japan Tobacco Inc. (JT) and Japan Tobacco International (JTI) Our business ethics 42 *E Respecting human rights 45 solely Japan Tobacco International (JTI) Our people 46 FRONT COVER IMAGE (international tobacco business) Our planet 50 A view of the Bunda Hill in the vast plains of Lilongwe Any data without annotated scope in this Our community investment 56 in Malawi, an area where live barns are a common report covers the entire JT Group including practice on tobacco farms. This is part of our effort subsidiaries – *A. to improve environmental conditions in the tobacco growing communities, by saving vital wood resources. About this report 60 4 5 INTRODUCTION CEO statement 4S MODEL TACKLING ILLEGAL TRADE INTRODUCTION Uncertainty in the business environment characterized Tackling the illegal trade in tobacco products is another most of 2017, caused by an unclear global economic crucial aspect for the sustainability of our business. JT Group outlook, changes to the political climate and increases in is committed to fighting all forms of illegal trade, and we geopolitical tension. Nonetheless, we remained consistent continue to focus on securing our supply chain and working in our commitment to sustainability in 2017 and to our closely with law enforcement agencies as their credible management principle, the 4S model, under which we partner. CEO strive to fulfill our responsibilities to our valued consumers, shareholders, employees and the wider society. We achieve this by carefully considering the respective interests of these BUILDING ON OUR PROGRESS four key stakeholder groups and exceeding their expectations In order to respect human rights as stated in our policy, our statement wherever we can. initiatives focused on training and employee education and In this light, our approach supports the Sustainable the company also commenced a human rights due diligence Development Goals set out by the United Nations. As we program in our operations. fulfil our responsibility to our stakeholders, we will continue Environmental protection also remained a priority for the to consider how we contribute to the goals of this global Group. We are pleased to announce that the target set initiative. out in the JT Group’s Long-Term Environment Plan 2020 for reducing total GHG emissions was achieved ahead of schedule. SOLID PROGRESS ON SUSTAINABILITY STRATEGY We were recognized for our sustainability initiatives by a number of external institutions in 2017, and were selected as In 2017, our sustainability strategy took an important step a member of the Dow Jones Sustainability Asia Pacific Index forward with the development of our Sustainable Business for the fourth consecutive year. Framework (SBF) for the Group’s tobacco business. The SBF sets out four key strategic areas of focus and three We also continued to place great emphasis on the health, key enablers to help focus our efforts in this strategically safety and wellbeing of our employees. Our Japanese important area and to realize our goals. Our pharmaceutical operations were commended by the Japanese Ministry of and processed food businesses plan to set their respective Economy, Trade and Industry last year, in recognition of SBFs, in due course. the progress made towards the wellbeing and productivity among our employees. Our international tobacco business was awarded the Global Top Employer Award in 2017. COMMITMENT TO REDUCED-RISK PRODUCTS FOR A SUSTAINABLE FUTURE Another notable development for our tobacco business this As the uncertain global conditions look set to continue, we year was the redefinition of Emerging Products to ‘Reduced- understand that it is no longer sufficient to simply respond or Risk Products’ (RRP*). We believe RRP offer real benefits to adapt to the changing conditions from one year to the next. consumers, society and our business, and we feel it is our In order to navigate and succeed in these challenging times, duty to develop RRP, which have demonstrable potential for the ability to assess our strategy and manage our business risk reduction. By prioritizing investment in RRP, we expect to will be the key. By focusing our efforts on achieving the goals drive the sustainable future growth of our tobacco business, set out by our SBF initiatives, the JT Group will continue to although conventional tobacco products will continue to play develop a strong and sustainable future, for our stakeholders an important role as another platform for future profitability. and for our business, in the years to come. ADDRESSING LABOR CHALLENGES ON TOBACCO FARMS Throughout 2017, our Group remained committed to supporting and assisting the communities in which we operate, particularly our tobacco growing communities. The JT Group’s Agricultural Labor Practices (ALP) program helps us to address the key labor challenges on tobacco farms. The program made robust progress in 2017 and now Masamichi Terabatake covers 90% of our directly contracted leaf growers and 70% President and Chief Executive Officer of our leaf merchants. Japan Tobacco Inc. 6 * Reduced-Risk Products are products with the potential to reduce the risks associated with smoking. 7 INTRODUCTION The year in brief INTRODUCTION The year Reduced-Risk Community Products investment VOLUNTEERING REALLY TOOK OFF in brief In the JT Group’s Business Plan 2018, we redefined Emerging Products as Reduced-Risk Products* ACROSS THE JT GROUP: (RRP). While conventional tobacco products will employees continue to play an important role as a platform of volunteered 21,911 profitability, RRP will be the growth driver and the hours on company Anti-Illicit centrepiece of our tobacco business strategy, and time we will be making prioritized investments of over 9,785 100 billion Yen within the next three years. Trade * Reduced-Risk Products (RRP) are products with the potential employees volunteered We helped law enforcement agencies seize over to reduce the risks associated with smoking. 28,608 hours on one billion illegal cigarettes. activities proposed The seizure of genuine JTI products remained by the company, but below 0.01% of our annual production. BILLION YEN 7,649 outside company time. + to be invested within 100 the next three years Environment ARISE THE TOTAL GHG EMISSIONS REDUCTION ACHIEVING REDUCTION TARGET IN JT GROUP'S LONG-TERM OF CHILD LABOR IN ENVIRONMENT PLAN 2020 WAS SUPPORT OF EDUCATION ACHIEVED AHEAD OF SCHEDULE. children REDUCTION attended school Human rights in total Greenhouse through our % Gas emissions between 15,095 ARISE program. Having established the JT Group Human Rights 21.2 2009 and 2017*. Our people Policy in 2016, we started implementing our human rights due diligence process in 2017. Our Jordan factory is the first tobacco Our international tobacco business was certified as
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