SUSTAINABILITY REPORT 2017 GROWING OUR BUSINESS RESPONSIBLY CONTENTS INTRODUCTION 1 As our name implies, Imperial Brands is a company Chief Executive’s Introduction 2 dedicated to providing consumers with great brand At a glance 3 experiences. But it’s not just brands that have been key Performance highlights 4 to our success over the years, it’s also down to the Material issues 6 Stakeholder engagement 7 contribution of our people. Our strategy 8 It’s their passion, commitment and focus on doing things RESPONSIBLE WITH PRODUCTS 11 the right way that keeps our business moving. Our people Product science 12 recognise the importance of operating responsibly and Illicit trade 14 encourage each other to live our values and follow our Adult choice 17 Code of Conduct at all times. Innovation and portfolio 19 Product quality 21 Find out more in this report and see how we are growing our business responsibly. REWARDING WORKPLACE 22 Health, safety and wellbeing 23 Development and reward 27 REPORTING APPROACH Recruitment and retention 29 This report covers our management approach and economic, social and environmental Diversity 30 performance for the financial year 1 October 2016 to 30 September 2017 (FY17). Employee voice 32 In our sustainability reporting, we seek to be in general alignment with the Global Reporting Initiative (GRI) Standards. The GRI is a global, multi-stakeholder organisation RESPECTING NATURAL that has developed guidelines for sustainability reporting. Whilst we have not sought RESOURCES 33 specific GRI assurance, we provide an Index of disclosures in Appendix 1. Forestry 34 The report also contains additional indicators, based on our most recent Water 36 materiality assessment. Climate and energy 37 We define our approach to reporting in our Reporting Criteria Document, which Emissions and waste 39 provides further information on our reporting principles, how indicators have been Biodiversity 41 selected for reporting, scope of reporting, reporting period and whether they have been independently assured. REINVESTING IN SOCIETY 42 Our environmental performance is measured against the amount of tobacco net Shared wealth 43 revenue we generate, and we report one year in arrears to allow for data collection, Regulation 46 validation and external assurance. 2016 data has been assured by Pricewaterhouse Farmer livelihoods 48 Coopers LLP (PwC). We track our progress against our 2009 baseline year which was restated in FY17 to incorporate our Greensboro site in the US and following Human rights 50 improvements to our internal reporting system. Business conduct 53 Selected additional indicators have also been independently assured and further details ABOUT THE REPORT are provided in the 2017 Assurance Report and Approach Document from PwC. Appendix 1: GRI content index 55 We also report the progress we have made with our Corporate Responsibility (CR) Appendix 2: CR Performance Indicators 59 strategy in our Annual Report and Accounts 2017 and in the Responsibility section of our corporate website, www.imperialbrandsplc.com/Responsibility Appendix 3: Environmental Performance Tables 61 Any queries related to this report can be emailed to [email protected] For progress against our 2017 Responsibility objectives click here. www.imperialbrandsplc.com Explore our Responsibility website: www.imperialbrandsplc.com/Responsibility Sustainability Report 2017 1 INTRODUCTION RESPECTING NATURAL RESOURCES RESPONSIBLE WITH PRODUCTS REINVESTING IN SOCIETY CHIEF EXECUTIVE’S INTRODUCTION REWARDING WORKPLACE ABOUT THE REPORT MESSAGE FROM THE CHIEF EXECUTIVE “ Operating responsibly OUR VALUES AND OUR PEOPLE OUR VALUES matters to our We take pride in what we do and how we do it. Acting responsibly and with long-term success; integrity has helped us create and sustain how we act today a successful business. Underpinning this are our values. These are the essence of impacts our business what Imperial is about and define who we are. They provide us with a common tomorrow.” bond, guiding the way we do business and influencing the way we behave. Our values ALISON COOPER are about working together, continually Chief Executive improving, taking ownership and making the most of every opportunity. Welcome to our 2017 Sustainability Report. This was a year of important progress for Imperial Brands, one in which we delivered share gains in many of our priority markets following our Our values and Code of Conduct are decision to significantly increase investments in our Growth and Specialist Brands. an essential part of our Responsibility Framework. Our values reflect the Behaving responsibly and running the business the right way are key to achieving these behaviours we expect from everyone market share gains. Our tobacco products are controversial but the way we behave is not. who works for us and with us. We take great pride in operating responsibly, not just because it’s the right thing to do, but because it matters to our long-term success: how we act today impacts our business tomorrow. We can There is global demand for our products and this demand is best met by responsible companies like Imperial, which is focused on maintaining momentum in tobacco while driving significant growth in e-vapour. We apply high and internationally recognised standards for the manufacture, sale and marketing of our products, and adhere to legislation and our own stringent International Marketing Standard at all times. I engage We also respect the natural resources we use and are focused on reducing our Work out why environmental impact. This year we achieved our highest ever rating from the CDP Climate and try again Change Programme in recognition of the action we’ve taken to manage climate change. The responsible approach we take is integral to the success of our sales growth strategy and is underpinned by our values and Code of Conduct. Our policies, internal controls and risk management processes further govern the way we operate. I own Share ideas We track our Corporate Responsibility (CR) performance against our progress in four key areas: being responsible with products, providing a rewarding workplace, respecting natural resources and reinvesting in society. These form the basis of our Responsibility Framework and are the priorities for our business, our people and our stakeholders. make it happen We surprise In 2017 we reviewed and re-focused our framework to drive even closer alignment with quickly our strategy. And as always, we continued to focus on improving our performance in all areas of the framework to further strengthen our sustainability. I’m proud of the many positive contributions we make to society, not just in terms of wealth creation and employment, but by being an active and responsible member of the communities in which we operate. I am new and better solutions Our employees are incredibly supportive of our responsibility agenda and I’ve been delighted to see a growing number getting involved in projects linked to our Responsibility Framework. Through our global volunteering drive, Mobilise for May, employees supported more than 86 projects in 38 locations worldwide this year. We enjoy My thanks to all our people for their continued support and I hope you enjoy finding out saying what more about our CR credentials in this report. I think thrive on challenge, make it fun ALISON COOPER Chief Executive Sustainability Report 2017 2 INTRODUCTION RESPECTING NATURAL RESOURCES RESPONSIBLE WITH PRODUCTS REINVESTING IN SOCIETY AT A GLANCE REWARDING WORKPLACE ABOUT THE REPORT RESPONSIBLE BUSINESS Responsibility is central to our sustainable growth strategy – how we behave today impacts our business tomorrow. In 2016, the Board and the senior leadership team conducted a The six focus areas are: review of our business strategy to refine our priorities for growth – Portfolio and Innovation over the next decade in tobacco and other consumer offerings, including e-vapour products. – Health, Safety and Wellbeing – Diversity Similarly, following on from the 2016 revised CR materiality assessment, in 2017 we reviewed and re-focused our – Environment and Forestry Responsibility Framework to better align with and support our – Human Rights business strategy. Based on materiality and mapping against the – Farmer Livelihoods UN Sustainable Development Goals, we have six focus areas that we will target towards the year 2025. OUR CORPORATE BRANDS Our business is built around powerful corporate brands: Imperial Tobacco, home to most of our tobacco subsidiaries around the world, manufacturing a range of cigarettes, fine cut and smokeless tobacco products, mass market cigars and papers and tubes; Tabacalera, our international premium cigar business; ITG Brands, the third largest tobacco company in the USA; Fontem Ventures, focused on developing a portfolio of next generation products including the blu e-vapour franchise; and Logista, which is one of the largest logistics businesses in Europe. PEOPLE GLOBALLY MARKETS WORLDWIDE NET TOBACCO REVENUE Our tobacco brands are sold in 33,800 160 £7.8 billion markets worldwide. DESCRIPTION OF EACH STEP IN OUR SUPPLY CHAIN MANUFACTURE SALE OF PRODUCTS OF IMPERIAL TO RETAILERS BRANDS PRODUCTS IN 160 MARKETS GLOBALLY WORLDWIDE GLOBAL STORAGE AND CONSUMER PROCUREMENT OF DISTRIBUTION PURCHASES IN TOBACCO LEAF AND OF PRODUCTS DOMESTIC AND TRAVEL NON-TOBACCO GLOBALLY RETAIL CHANNELS MATERIALS Sustainability Report 2017 3 INTRODUCTION RESPECTING NATURAL RESOURCES RESPONSIBLE WITH PRODUCTS REINVESTING IN SOCIETY PERFORMANCE HIGHLIGHTS