MODERN SLAVERY STATEMENT 2019 Our business and Managing risk Training and Measuring effectiveness supply chain Group policies Due diligence and remediation capacity building and next steps 01

OUR BUSINESS AND SUPPLY CHAIN

This statement is published in accordance with the UK The Board Committee is underpinned by our Regional Audit and CSR Committee Modern Slavery Act 2015. It sets out the steps taken by framework, with committees for each of the (BAT) plc and Group companies1, three Group regions, for the US business, and for locally listed Group entities and specific during the year ending 31 December 2019, to prevent markets where considered appropriate. modern slavery and human trafficking in our business This provides a flexible channel for the structured flow of information, monitoring and supply chain. and oversight of key issues, including those relating to human rights and modern slavery, at all levels of the Group from our local Our commitment Our business business units to Board level. We have a long-standing commitment BAT is a leading, multi-category consumer Our Management Board, chaired by our to respect fundamental human rights, goods company. Our ambition is to deliver Chief Executive, is responsible for overseeing as affirmed by the Universal Declaration long-term sustainable growth with a range the implementation of Group strategy and of Human Rights. This includes always of innovative and less harmful products policies set by the Board, and creating the conducting our operations in a way that that stimulate the senses of new adult framework for Group subsidiaries’ day-to- respects the human rights of our employees, generations. In 2019, our Group revenue day operations. the people we work with and the communities was £25,877 million, we had 45 cigarette in which we operate. factories in 43 countries and our brands were Find out more about our Group strategy business model, structure and governance in our Annual Report distributed across over 200 markets. We recognise that, like all businesses, we run at bat.com/annualreport. the risk of being exposed to modern slavery Our Group headquarters is based in the UK either within our own operations or those of and we have subsidiary operations around our extended supply chain. Modern slavery the world, employing over 53,000 people. Key achievements in 2019 encompasses slavery, servitude and forced or Our employees work in a range of roles and compulsory labour and human trafficking, environments, including managerial office- – Updated our Human Rights Policy to – Continued to extend the scope as defined in UK Government guidance2. based, manufacturing and operations, trade include strengthened human rights and of our Intertek supplier to marketing and distribution, and research modern slavery provisions; additional supplier categories; In 2019, we continued to build upon, and and development. strengthen, our approach to tackling this – Conducted two independent human – Implemented a new due diligence global issue within the context of our broader The Board of Directors of BAT plc (the rights impact assessments in tobacco framework for the responsible sourcing Group-wide human rights strategy. ‘Company’) is collectively responsible to our growing areas in India and Indonesia; of conflict minerals; and shareholders for the long-term sustainable Find out more about our human rights strategy at – Published an independent – Underwent an independent gap success of the Company and for the Group’s bat.com/humanrights. research study into the impacts of analysis of our approach to modern strategic direction, purpose, values and tobacco growing and the role it plays in slavery with experts from the Slave- governance. It provides the leadership rural livelihoods; Free Alliance. necessary for the Group to meet its business objectives within a robust framework of internal controls.

1 This includes British American Tobacco plc and subsidiary Group companies worldwide, including all relevant BAT companies according to the requirements of the UK Modern Slavery Act: British American Tobacco (Investments) Limited, British-American Tobacco (Holdings) Limited, British American Shared Services (GSD) Limited, British American Tobacco (GLP) Limited British American Tobacco UK Limited, British American Tobacco Western Europe Commercial Trading Limited, B.A.T. (U.K. and Export) Limited, B.A.T. Services Limited, British American Tobacco Global Travel Retail Limited and Nicoventures Trading Limited. 2 ‘ in supply chains: a practical guide’, Annex A, pages 17–19, UK Home Office.

BAT Modern Slavery Statement 2019 Our business and Managing risk Training and Measuring effectiveness supply chain Group policies Due diligence and remediation capacity building and next steps 02

Our supply chain Our supply chain consists of two discrete elements, managed by different areas of the business. Tobacco leaf Our global Leaf department has centralised management over our tobacco leaf supply chain. The majority (approximately 68%) of our tobacco leaf is sourced by our own BAT leaf operations in 18 countries, which contract directly with over 90,000 farmers. The remaining leaf we buy is sourced through third-party suppliers in 26 countries that, in turn, contract with an estimated 250,000 farmers. The vast majority of tobacco farms in our supply chain are Tobacco Other materials and smallholder family farms of just two hectares on average. leaf goods and services In addition, there are a small number of larger, commercial farms in countries such as Mexico, the US and Zimbabwe. 400,000+ tonnes of tobacco 30,000+ suppliers across leaf purchased each year 150 countries Other materials and goods and services Managed by our Procurement department, the highest-value Subject to the industry-wide Sustainable Subject to human rights risk assessments strategic area of this part of our supply chain is for direct Tobacco Programme (see page 4) and independent on-site audits by Intertek product materials suppliers. These cover all the materials, (see page 5) other than tobacco leaf, needed for the manufacture of Group products, such as filters, paper and adhesives for cigarettes, or electronic devices and e-liquids for vapour and tobacco heating products. As well as thousands of materials suppliers that supply BAT Direct Indirect goods companies directly (tier 1), we also have mapped a small product materials and services number of suppliers of our suppliers (tier 2) in higher-risk, 68% 32% Filters, paper, Production machinery, business-critical areas, such as for batteries and packaging via BAT leaf via third‑party adhesives, vapour logistics, marketing materials. We’ve put in place direct contractual relationships operations in suppliers in devices, e-liquids etc. materials, facilities with these tier 2 suppliers to better manage risk and ensure 18 countries 26 countries management, travel, IT, security of supply. professional services etc. In addition, we have a vast number of tier 1 suppliers of indirect goods and services worldwide. These include a wide range of different types of suppliers in different sectors, such as production machinery, logistics, facilities management, professional services, business travel, IT and technology, and marketing materials. 90,000+ farmers 250,000+ farmers Strategic, high-risk tier 2 suppliers e.g. batteries and packaging

BAT Modern Slavery Statement 2019 Our business and Managing risk Training and Measuring effectiveness supply chain Group policies Due diligence and remediation capacity building and next steps 03

GROUP POLICIES

We have a number of policies, principles and standards strict confidence and that no one will face Compliance procedures reprisals for speaking up. Our SoBC Assurance We monitor compliance with the requirements in place relevant to human rights and modern slavery, Procedure sets out in detail how allegations of the Code through our due diligence including the core documents described below, which are of wrongdoing or breaches of the SoBC programmes outlined on pages 4–5. should be investigated and dealt with fairly signed and endorsed at Board level and apply to all BAT and objectively. While we always try to support our suppliers in ensuring compliance with the requirements Group companies worldwide. They are publicly available We investigate all suspected incidents and of the Code and improving their performance, at bat.com/principles. strong action is taken where a breach is if they are unwilling to engage with us or identified, including disciplinary action or demonstrate no material progress, persistent termination of employment and strengthening inaction and a lack of improvement, Standards of our commitments to prohibiting the use of of our internal procedures or controls. If any we reserve the right to terminate the Business Conduct recruitment fees or retention of identity papers breach is found that may have been criminal, business relationship. by any Group company or employment this is referred to the authorities for Our Standards of Business Conduct (SoBC) agencies acting on our behalf. In addition, the investigation and could result in prosecution. comprise our core global policies that SoBC Whistleblowing Policy was amended Details of all reported incidents are monitored express the high standards of integrity we are to use ‘Speak up’ terminology (including through the year by our Regional Audit and Speak up channels committed to upholding. This includes our renaming the policy) to reflect the broad CSR Committees, and quarterly by the Board Human Right Policy outlining our support range of issues it covers and the different We encourage anyone working for, Audit Committee. for the UN Guiding Principles on Business channels for how these concerns can be raised. or with, the Group to raise concerns and Human Rights (UNGPs) and detailing or grievances through our Speak up our commitments to respect freedom of The SoBC is available in 12 languages and Supplier Code of Conduct channels. These independently association and ensure no , awareness and understanding is promoted Our Supplier Code of Conduct (the Code) managed channels are available online, exploitation of labour or modern slavery. through regular training and communications. defines the minimum standards expected of by text and telephone hotlines, 24 hours Specifically, it states “we are committed Compliance procedures our suppliers and is incorporated into our a day, seven days a week and in multiple to ensuring our operations are free from contractual arrangements. It specifically local languages. They can be used in Every year, all of our people and business slavery, servitude and forced, compulsory, requires all suppliers to any BAT Group confidence (and anonymously, if they entities must formally confirm that they have bonded, involuntary, trafficked or unlawful company to ensure their operations are prefer to do so), without fear of reprisal. complied with the SoBC. Individuals must migrant labour.” free from child labour and from forced, complete our annual SoBC sign-off, in We promote Speak up through regular bonded, involuntary, trafficked or unlawful The SoBC applies to all Group companies and which they reaffirm their commitment and staff training and communications, and migrant labour. employees, including subsidiaries and joint adherence to the SoBC and declare or re- details are communicated to suppliers ventures that BAT controls. We ask contractors, declare any personal conflicts of interest. They are also expected to promote adherence via our Supplier Code of Conduct. secondees, trainees, agents and consultants Our business entities complete an annual to the requirements of the Code and conduct bat.com/speakup working with us to act consistently with our assessment against our key audit controls appropriate due diligence within their own SoBC and apply similar standards within their in which they confirm that their area of the supply chain for their new and existing own organisation. business, or market, has adequate procedures suppliers (including farmers where relevant). in place to support SoBC compliance. We regularly review the SoBC to ensure our The Code is available in local language versions and communicated to suppliers policies remain at the forefront of best practice In his introduction to our SoBC, our CEO, through our onboarding processes. and, in 2019, made revisions which took effect Jack Bowles, gives his personal assurance from 1 January 2020. This included clarifying that all concerns raised will be treated in

BAT Modern Slavery Statement 2019 Our business and Managing risk Training and Measuring effectiveness supply chain Group policies Due diligence and remediation capacity building and next steps 04

DUE DILIGENCE

We have assessed the nature and extent of exposure to The development and testing of the updated STP, with a stronger focus on impact, risk and modern slavery risks in our business and supply chain to continuous improvement, that will be piloted inform our approach and ensure we prioritise our efforts later in 2020. in the right areas. During this period of development, in 2019, suppliers continued to complete the annual STP self-assessment, but there were no on- Tobacco leaf supply chain to international standards, such as those site reviews. As a result, BAT commissioned of the ILO and the UNGPs. It replaced our Due to the nature of the agricultural sector, bespoke human rights impact assessments previous in Tobacco where there are large numbers of casual and conducted in tobacco growing areas in Production programme which, from 2000 temporary workers, use of family labour in Indonesia and India in 2019, with two more until 2015, set the standard for all our leaf small-scale farming and high levels of rural planned for 2020 in Mozambique and Mexico. suppliers worldwide. poverty, our tobacco leaf supply chain is Recognising that cross-industry action is particularly vulnerable to human rights and STP includes a comprehensive self-assessment needed to effectively address human rights modern slavery issues. that all suppliers complete each year, focused issues in the tobacco leaf supply chain, the on four key pillars: crop, environment, people assessments in India and Mozambique are in Farm monitoring For example, the International Labour and facilities. The people pillar covers a broad collaboration with the wider industry. Our own leaf operations conduct farm Organization (ILO) estimates that the range of human rights criteria including child monitoring of our 90,000+ directly contracted agricultural sector accounts for 11% of all These assessments help to identify, and and forced labour, health and safety, fair farmers, visiting them approximately once a incidents of forced labour3 and over 70% provide a deeper understanding of, treatment, freedom of association, income, month during the growing season. As well of all child labour globally4. Debt bondage salient human and labour rights, land and working hours and benefits. The forced labour as providing agronomy support, this is an can also be a particular concern if farmers environmental and socio-economic issues, criteria, include the prevention of bond, debt important way of checking conditions to borrow money to invest in growing a crop including the root causes and how they and threat, freedom to leave employment, use ensure they’re meeting our standards. but don’t have a guaranteed buyer or price, manifest. They are aligned to the UNGPs and of financial deposits, withholding of payments, leaving them vulnerable to getting trapped considerable care is also taken to engage with Our digital Farmer Sustainability Management retention of identity documents and valuables, in a cycle of debt. The ILO states that these particularly vulnerable groups in the tobacco- (FSM) system, which enables faster, more and prison and compulsory labour. risks are evident in wealthier, as well as growing communities, such as women, youth consistent and accurate reporting, is now used poorer, countries3, and so our due diligence In addition to the annual self-assessments, and the elderly. The results provide valuable for the monitoring of over 90% of our directly procedures apply to all our leaf operations and supplier on-site reviews are conducted by AB insights into the issues rights-holders face in contracted farmers. This includes ‘red flags’ suppliers, in all countries. Sustain in a three-year cycle. For the first cycle their communities from their perspective. for issues relating to child and forced labour, ending 2018, these had been completed on for which prompt action must be taken to Supplier due diligence We are in the process of analysing the findings 100% of our leaf operations and suppliers. from the assessments in Indonesia and India. investigate and remediate. It is our policy that all of our leaf operations We will report on the details in a Human and third-party suppliers participate in Since late 2018, a Steering Committee, Our third-party suppliers are responsible for Rights Focus Report, to be published later the Sustainable Tobacco Programme formed by industry members including BAT, monitoring the farmers they source from. in 2020. (STP). STP was developed collectively by has been conducting an in-depth review the tobacco industry in 2015, under the of STP to evolve and improve it. This has facilitation of the independent supply chain included engagement with suppliers and management company AB Sustain. It is an other relevant stakeholders and reviews of industry-wide programme and is aligned external standards and emerging issues.

3 ILO (2017a). ‘Global Estimates of Modern Slavery: Forced Labour and Forced Marriage’, ILO, Geneva. 4 ILO (2017b). ‘Global Estimates of Child Labour: Results and trends, 2012-2016’, ILO, Geneva.

BAT Modern Slavery Statement 2019 Our business and Managing risk Training and Measuring effectiveness supply chain Group policies Due diligence and remediation capacity building and next steps 05

Other materials and goods Supplier due diligence Once suppliers are appointed, we then follow-up audit within 3–6 months for more and services We have an integrated human rights supply continue to maintain a rigorous focus serious issues. on human rights in the supply chain by chain due diligence programme in place, We continue to take a risk-based approach to Our direct product materials suppliers operate conducting an annual risk assessment on overseen by a cross-functional governance further expand our audit programme beyond in the manufacturing sector, which the ILO 100% of our existing supplier base. This uses 5 committee, including the Group Head of tier 1 direct suppliers. By the end of 2019, estimates accounts for 15% of forced labour independent indices developed by Verisk 6 Procurement, Heads of Direct, Indirect and the audits had been successfully expanded and 11.9% of global child labour , with the Maplecroft, including the Modern Slavery New Categories Procurement, Head of to include tier 2 direct materials suppliers in majority of cases documented in lower-income Index, and assesses inherent risk exposure Sustainability, Head of Environment, Health high-risk, business-critical areas, such as for countries. The key forced labour risks identified based on the type of supplier and country and Safety, Head of Trade Compliance and packaging materials and electronic products, by the ILO relate to excessive working hours where it operates. and production targets, payment of high Senior Legal Counsel. and to strategic indirect goods and services recruitment fees, illegal retention of passports Before any supplier of product materials suppliers in the higher-risk categories of and, in some cases, illegal imprisonment and can even be appointed as a new supplier to production machinery, marketing materials beatings of workers6. BAT, they have to undergo an independent and facilities management. For our suppliers of indirect goods and on-site audit, for which they must achieve 100% In 2019, a total of 94 supplier audits in a minimum score of 70% to be approved. 7 services, the risks of modern slavery depend of all our direct materials 31 countries were conducted by Intertek, Conducted by the global firm Intertek, the on the sector and country of operation. and indirect goods and including 65 audits of tier 1 materials audit is aligned to ILO conventions and For example, 10% of forced labour5 and services suppliers suppliers, 20 audits of tier 2 materials suppliers covers forced labour, child labour, wages and 17.2% of child labour6 is estimated to be in are subject to a human and nine audits of indirect goods and hours, health and safety, environment and low-skilled service sectors, whereas the risks in rights risk assessment services suppliers. management systems. professional services are likely to be lower. every year

Conflict minerals With the growth of our electronic Suppliers identified as high-risk in the vapour and tobacco heating products, assessment are prioritised for Intertek audits. we recognise the human rights risks Performance in the suppliers’ last audit also associated with conflict minerals – the informs the frequency – for example, those term used to describe some of the that have achieved a ‘gold-class’ score of 95% raw materials (tin, tantalum, tungsten or more have demonstrated they have strong and gold) used throughout the global practices and procedures in place to manage electronics industry. and mitigate the inherent human rights risks, In 2019, we implemented new conflict and so are re-audited at least every four years. minerals due diligence procedures, However, those with a ‘bronze class’ score aligned to internationally recognised between 70%–84% are re-audited every guidelines by the Organisation two years. for Economic Co-operation and If any issues are identified in the audits, Development (OECD). We will publish we work collaboratively with suppliers to details of this in our first Conflict implement corrective actions. These are Minerals Report, a separate statutory tracked centrally and Intertek verifies they disclosure to the US Securities and have been completed either through a Exchange Commission, later in 2020. desktop review, for moderate issues, or a

5 ILO (2017a) op. cit. 6 ILO (2017b) op. cit. 7 Bangladesh, Brazil, China, El Salvador, France, Germany, India, Indonesia, Italy, Kenya, Malaysia, Mexico, Netherlands, Nigeria, Pakistan, Philippines, Poland, Portugal, Russia, Singapore, South Africa, South Korea, Sri Lanka, Sweden, Thailand, Turkey, UK, Ukraine, United Arab Emirates, US and Vietnam.

BAT Modern Slavery Statement 2019 Our business and Managing risk Training and Measuring effectiveness supply chain Group policies Due diligence and remediation capacity building and next steps 06

BAT subsidiary operations Following this Board review, the next stage is a requirement for our Legal and External As detailed on pages 1 and 3, the Group Affairs teams in each high-risk country to policies and procedures we have in place help conduct an in-depth assessment against key to substantially mitigate the risks of modern human rights issues, including modern slavery. slavery in our subsidiary operations. For each human rights issue, they confirm It is also a specific requirement in our key compliance with Group policies, standards and business controls for human rights risk controls, and provide details of any additional assessments and risk mitigation action plans local measures in place to enhance human to be in place in high-risk countries where we rights management. operate, and for processes to be in place to The final stage of the annual cycle is a demonstrate that human rights are managed review of the results of the assessments by our effectively in the workplace and supply chain. Audit Committee. This includes a dashboard All BAT operations are required to report of the compliance status for each country and compliance against the controls annually. details of action plans, with defined timescales, Human rights due diligence for any areas for improvement identified. We recognise that circumstances in some In 2019, our operations in 25 countries8 were countries present a higher risk for human identified as high risk and underwent the rights issues, such as where regulation or assessment and Board reviews. enforcement is weak, or there are high levels of corruption, criminality or unrest. So, in addition to Group-wide procedures and controls, we have a defined process in place to identify and carefully monitor BAT operations in high-risk countries. The starting point is an annual risk assessment of all countries worldwide, using Verisk Maplecroft’s human rights indices (including the Modern Slavery Index) to identify BAT operations in countries with higher risks for human rights issues. Our Board Audit Committee reviews the list of high- risk countries identified and also has the opportunity to add further countries to the review, in the event of new developments in human rights or business circumstances.

8 Bangladesh, Cameroon, China, Colombia, Democratic Republic of Congo, Egypt, Eritrea, Indonesia, Iran, Iraq, Lebanon, Mali, Mozambique, Myanmar, Niger, Nigeria, Pakistan, Papua New Guinea, Russia, Saudi Arabia, Sudan, Turkey, Uzbekistan, Venezuela and Zimbabwe.

BAT Modern Slavery Statement 2019 Our business and Managing risk Training and Measuring effectiveness supply chain Group policies Due diligence and remediation capacity building and next steps 07

MANAGING RISK AND REMEDIATION

We are committed to fully investigating and remediating new tobacco seed varieties, developed by our investments. Since 2011, 99.9% have been Leaf Science & Research, that increase yields fully repaid within the agreed time period. any modern slavery issues identified, and to working and, therefore, their productivity. Our third-party suppliers use a similar collaboratively to raise standards and mitigate longer-term The services our field technicians provide extension services model to provide guidance, risks and root causes. range from agreeing contracts to providing technical assistance and capacity building for guidance, support and technical assistance the farmers they contract. throughout the growing season. They also run Thrive programme Tobacco leaf supply chain address these are underway and we continue regular farmer training programmes focused to track progress and review our approach to Our Thrive programme takes a holistic In 2019, ‘red flags’ relating to forced labour on raising awareness of key issues, including identify further areas for improvement. approach to identifying and addressing root were triggered in our FSM system through child labour, forced labour and health and causes and longer-term risks for our farmers farm monitoring conducted by our leaf safety, and regularly engage and consult with Extension Services and their communities. It is based on the operations in Bangladesh, Kenya, Mexico farmers’ associations and collectives. We recognise that rural poverty is one of internationally recognised ‘five Capitals’ and Sri Lanka. These were promptly referred the primary root causes of human rights The field technicians play an active and framework, which works on the premise that to our Legal and External Affairs function issues in agriculture and so enhancing farmer important role in rural communities, acting as to be sustainable, farming communities must to conduct detailed investigations, which livelihoods is central to our strategy and the a direct link between our contracted farmers be ‘in credit’ across five types of ‘Capital’: included a total of 644 interviews with the work of our Extension Services. These consist and BAT, building trusted relationships and financial, natural, physical, human and farmers and workers flagged in the original of a global network of expert field technicians gaining unique insights into the challenges social. Strength in all five creates resilience farm monitoring. who provide on-the-ground support, farmers face. Their regular farm visits mean and enables farmers and rural communities While no evidence of forced labour was technical assistance and capacity building for that, as well as providing agronomy support, to prosper. found, some issues were identified relating all 90,000+ farmers who we contract with they are also able to check conditions on the We have defined a set of indicators to measure to procedures and controls for our farm directly. They work with all our contracted ground and help provide a further safeguard strength in each Capital, including for our monitoring system and the need for further farmers to help them optimise the profitability against forced or bonded labour being used global priorities to increase farmer income, training for our field technicians. Actions to of their farms, such as by providing them with within our tobacco leaf supply chain. prevent child and forced labour, and protect The work of our Extension Services also farmers’ health and safety. helps to mitigate key risks. For example, to help mitigate the risks of debt bondage, our In 2019, over 250,000 farmers were assessed contracts with farmers are negotiated each through our Thrive programme, covering year – guaranteeing to buy their tobacco crop over 80% of our total tobacco leaf purchases. at a fair and agreed price, as well as detailing We use the results to define priority actions the support and training they’ll receive from for our leaf operations focused on addressing our Extension Services. We also give them the our global priorities and the locally relevant option to access financial advances to pay for issues identified. crop inputs, such as seeds and fertilisers, which they repay at the end of the season. In some cases, farmers also choose to take out low-interest loans from us for larger farm investments, such as new equipment or technology, which they repay over a longer time period. This works in the same way as a bank loan, with a clearly defined interest rate and repayment period. In Brazil, for example, 25% of our contracted farmers have chosen to take advantage of these loans for inputs and

BAT Modern Slavery Statement 2019 Our business and Managing risk Training and Measuring effectiveness supply chain Group policies Due diligence and remediation capacity building and next steps 08

External allegations two international leaf suppliers that, in turn, By the end of the year, 71% of corrective In 2019, newspaper in the contract directly with farmers. These suppliers actions had been fully completed and Independent research are subject to our Supplier Code of Conduct verified by Intertek, in desktop reviews for UK published allegations relating to illegal In 2019, IMC Worldwide, one of and due diligence procedures described on the moderate issues and 11 on-site follow-up migrants working in tobacco growing in the world’s leading international page 4. audits for the major issues. All outstanding the Campania region of southern Italy. development consultancies published actions are in progress and being These included allegations of low wages, child Overall, the total amount of leaf we currently research, commissioned by BAT, into closely monitored. labour, long working hours and health and purchase from Malawi accounts for less than the impacts of tobacco growing on safety breeches. Approximately 0.05% of the 1% of the total tobacco we source in a year. We are strongly encouraged by the high level rural communities. This included field total tobacco leaf we purchased in 2019 was The annual tobacco crop in Malawi is around of supplier engagement and willingness to research in three contrasting countries from a third-party supplier in this region. 160 million kilograms, of which we currently work together to improve performance and – Bangladesh, Brazil and Kenya – In response to the allegations, we engaged buy around three million kilograms – less than raise standards. On average, suppliers that involving a total of 257 interviews, with the supplier and reviewed detailed the amount purchased by a number of other required a follow-up audit improved their as well as a critical review of existing evidence of their policies and application of international tobacco manufacturers. overall scores by 73%. published literature relating to the social and environmental impacts of human rights and health and safety standards, In 2019, we were pleased to see the resolution BAT subsidiary operations tobacco growing. including details of audits and unannounced of a complaint made in 2016 regarding visits, prompt actions and training. While the tobacco growing in the US, which found In 2019, no issues relating to modern slavery IMC found no evidence of entrapment supplier has documented migrant workers on that BAT had not breached its obligations were identified through our due diligence or indicators of debt bondage among their contracted farms, we found that practices under the OECD Guidelines for Multinational for BAT operations in high-risk countries. the tobacco farmers interviewed. are in place to ensure that the migrant Enterprises relating to human rights and due There were also no incidents of improper Farmers reported choosing to grow farm labourers are working legally and that diligence. The complaint was made by the business conduct relating specifically to tobacco due to its high value and consistent standards for their employment are IUF union and the Farm Labor Organizing modern slavery, identified through our reliable income, and movement in applied across the contracted farms. Committee to the UK National Contact Speak up channels, whistleblowing and and out of tobacco growing did not grievance procedures. Our supplier is confident that there are Point (UK NCP) for the OECD Guidelines indicate any picture of entrapment no illegal migrant workers employed on – full details can be found in the UK NCP’s Details of all reported incidents contrary to our Human through debt. 9 contracted farms they source tobacco from final statement . Rights Policy can be found on page 32 of our ESG Report at bat.com/sustainabilityreport. Overall, IMC concluded that tobacco in the Campania region. However, given growing plays an important and the seriousness of the allegations, they have Other materials and goods positive role the livelihoods of tobacco committed to continued unannounced visits and services farmers and labourers interviewed, to farms, further expanding their training Of the audits conducted in 2019, the vast and found no evidence to suggest a programme and conducting worker interviews majority of issues identified were categorised causal link between tobacco cultivation from the next crop season. We continue to by Intertek as ‘moderate’, relating to hours and and poverty. monitor the situation closely. wages, poor record keeping, and health and IMC’s research report, including our In addition, the law firm Leigh Day sent a pre- safety procedures. response to the findings, can be found at: action letter to certain BAT Group companies In total, 11 suppliers had issues identified bat.com/farmers/research. in October 2019, which included allegations that were categorised as ‘major’ by Intertek. concerning child and forced labour on tobacco These related to preventing worker interviews, farms in Malawi. A response was provided in excessive working hours, wages below December 2019. the legal minimum, fire and emergency BAT does not contract farmers directly in preparedness, lack of required permits or Malawi – all the tobacco leaf we source licenses, poor record keeping and, in one case, from there is currently purchased through retention of workers’ original documents.

9 https://www.gov.uk/government/publications/uk-ncp-final-statement-complaint-from-iuf-and-floc-against-bat

BAT Modern Slavery Statement 2019 Our business and Managing risk Training and Measuring effectiveness supply chain Group policies Due diligence and remediation capacity building and next steps 09

TRAINING AND CAPACITY BUILDING

In 2019, over 25,000 employees completed our In 2019, we also launched a new SoBC app, annual SoBC sign-off and e-learning through available in 12 languages, which provides Slave-Free Alliance gap analysis the online SoBC portal. Other employees (over easy access to our SoBC, Speak up channels, 30,000) who do not have easy online access procedures and related guidance for anyone, completed the SoBC sign-off in face-to-face any time and anywhere. We have ambassadors 100% sessions that included training. for the app across the Group who work to employees completed our promote it in their business areas and to help annual Standards of The 2019 SoBC training focused on raising shape how it evolves. Business Conduct training In 2018, we became members of the awareness of the requirements of the SoBC and compliance Slave-Free Alliance, a multi- and the responsibilities of all employees to In our tobacco leaf supply chain, our leaf sign-off procedure initiative, owned by the anti-slavery act with integrity and speak up when they operations and third-party suppliers run formal charity Hope for Justice. This enables think something isn’t right. The e-learning training and awareness sessions on human us to engage with other like-minded through the SoBC online portal resulted rights issues for farmers and community companies and gain access to unique in over 10,800 training hours. For the first members through the year. In 2019, they resources provided by the Hope for time, employees were also asked to make reported via our Thrive assessments running Justice investigators, trainers and other an ‘integrity pledge’ – a positive personal over 5,000 training sessions with more than frontline specialists. commitment for the year ahead. 350,000 attendances, including farmers who attend several sessions in the year. 5,000 As part of our membership, we training sessions for underwent an in-depth gap analysis of farmers on human rights our approach to tackling modern slavery were held in 2019 by our in 2019. Through a self-assessment, leaf operations and followed by interviews with managers third-party suppliers from key areas of our business, experts from the Alliance investigated and explored our strengths and potential risks, tested our assumptions and assisted with prioritising where to focus our efforts going forward. For example, we were pleased to be reassured regarding the robustness of our policies, compliance and recruitment procedures, which help to substantially mitigate risks of modern slavery in our own business operations. Some opportunities for strengthening and enhancing our approach to tackling modern slavery, particularly in our supply chain, were also identified, for which we are now developing a comprehensive action plan.

Find out more about the Slave‑Free Alliance at slavefreealliance.org.

BAT Modern Slavery Statement 2019 Our business and Managing risk Training and Measuring effectiveness supply chain Group policies Due diligence and remediation capacity building and next steps 10

MEASURING EFFECTIVENESS Our key performance indicators (KPIs) AND NEXT STEPS KPI 2019 Performance

Reported incidents and results of investigations into No incidents relating specifically to modern slavery suspected improper conduct contrary were identified. Details of all types of reported We are committed to measuring the effectiveness of, to our Standards. incidents can be found at bat.com/sobc. and continually working to further strengthen and Number, and results, of reviews and audits conducted See pages 4–6 for details of our due diligence enhance, our approach to tackling modern slavery. as part of our due diligence processes for our suppliers processes, and pages 7–8 for details of the results and and business operations. actions taken.

Measuring effectiveness Next steps Percentage of issues identified in Intertek audits that 71% of corrective actions had been fully completed We always aim to go beyond minimum legal Building on our strong foundations, and in the have been resolved through corrective action plans. and verified by Intertek by end 2019. See page 8 requirements. We review our policies and context of our overall Sustainability Agenda, in for details. procedures on an ongoing basis to ensure they 2020 we plan to: Number of employees who have completed our annual This was completed by 100% of all employees in 2019. remain effective and identify opportunities compliance sign-off procedures for our SoBC. See page 9 for details. to further enhance and strengthen our – Continue working with the industry approach. This includes regular monitoring to develop and evolve the Sustainable Number of training sessions for tobacco farmers Over 5,000 sessions with more than 350,000 by our Board Audit Committee and Regional Tobacco Programme; on human rights that have been run by our leaf attendances were held in 2019. See page 9 for details. Audit and CSR Committees, as well as our operations and third-party suppliers. Operations Sustainability Forum, chaired by – Develop an action plan in response to our Operations Director, and our Supply Chain areas for improvement identified in the Due Diligence Governance Committee. Slave-Free Alliance gap analysis; Progress against commitments in our 2018 statement In 2019, our global ‘Your Voice’ survey was – Publish our first Conflict Minerals Report; completed by 90% of all our employees and – Publish a Human Rights Focus Report, Commitment 2019 Performance found that 79% strongly agreed they “can including details of human rights impact report concerns about actual or suspected assessments in Indonesia and India; and Commission an independent human rights Completed – see page 4 for details. wrongdoing at work without fear of reprisal”, impact assessment in one of our tobacco leaf – Conduct two further human rights 8% higher than the benchmark of similar sourcing countries. consumer goods companies. This level of impact assessments in Mozambique confidence is reflected in a 40% increase, and Mexico. Review and strengthen our due diligence procedures Completed – see page 5 for details. compared to 2018, of Speak up contacts made for other types of higher-risk suppliers of indirect to our SoBC portal. Out of these contacts, goods and services. the number relating to SoBC allegations and Approval reported to our Audit Committee, represented Establish a new conflict minerals due diligence This statement has been approved by the Completed – see page 5 for details. a 35% increase on 2018 SoBC allegations. Board of Directors of BAT plc and the Board procedure for our suppliers for electronic vapour and of Directors of all relevant Group subsidiary tobacco heating products. companies listed in footnote 1 on page 1. Work with Hope for Justice, as part of our new Completed – see page 9 for details. membership of its Slave-Free Alliance, to conduct an in-depth review of our approach to tackling modern slavery.

Publish a Human Rights Focus Report. In progress – the report will be published later Jack Bowles in 2020. Chief Executive Officer

BAT Modern Slavery Statement 2019 Get in touch bat.com/humanrights Jennie Galbraith and Verity Lawson More detailed information on our British American Tobacco broader management of human rights. Globe House, 4 Temple Place WC2R 2PG [email protected] +44 (0)20 7845 1000

CORPORATE BEHAVIOUR

Sustainability Focus Report 2016 ENABLING THE FARMERS WE WORK WITH to thrive

SUSTAINABLE AGRICULTURE AND FARMER LIVELIHOODS FOCUS REPORT 2017

13/11/2017 12:14

55305 BAT SAFL report AW2_v2.indd 1

Annual Report Sustainability ESG Report Focus Reports Details of our Group strategy, Strategy Report Comprehensive details for all our More in-depth information on a specific business model, strategic Details of our Sustainability Agenda, ESG priorities, including policies, topic, including our most recent reports management and performance, including our principal focus area , management approach, on Harm Reduction and Sustainable principal Group risk factors, to reduce the health impact of our targets and performance for each topic. Agriculture and Farmer Livelihoods. corporate governance and business and other environmental, bat.com/sustainabilityreport bat.com/sustainabilityfocus financial statements. social and governance (ESG) priorities. bat.com/annualreport bat.com/sustainabilityreport

@BATPress youtube.com/ flickr.com/ @BAT_Sci welcometobat welcometobat

References in this statement to ‘British American Tobacco’, ‘BAT’, ‘we’, ‘us’ and ‘our’ when denoting opinion refer to British American Tobacco p.l.c. and when denoting tobacco business activity refer to British American Tobacco Group operating companies, collectively or individually as the case may be. The statement contains forward-looking statements that are subject to risk factors associated with, among other things, the economic and business circumstances occurring from time to time in the countries and markets in which the Group operates. It is believed that the expectations reflected in these statements are reasonable but they may be affected by a wide range of variables www.bat.com/msa that could cause actual results to differ materially from those currently anticipated.