Value Sustainability Summary 2014 shared Investing in a sustainable future for our business and society Introduction The concept of shared value underpins our whole approach to sustainability. It is about investing in the future for our business and society. Sustainability is not a choice or something The receipt of the relevant licences from that is ‘nice to have’ – it is crucial to the UK medicines regulator for Voke, securing the future of our company and for our new nicotine inhalation product, is creating shared value for our consumers, another big step towards making available our shareholders and our stakeholders. a range of products across the risk continuum, enabling consumers to choose It is not a recent priority either – as a major the ones that are right for them. international business in a controversial sector, we have long been aware of our Yet we still have a long way to go, and responsibilities and our ability to address as much as our business has changed so issues on a global scale. has the world around us – from evolving consumer demands and emerging Indeed, in our long history of focusing on opportunities in a new generation of sustainability and corporate responsibility, products, to increasing expectations of we have made significant progress – our the role of business in society. strong market performance is delivering value for our shareholders, while we So we have now sharpened our have also embedded more effective approach further with the development sustainability practices into our day- of a new sustainability agenda, focused to-day business. These have included on the most material issues for our strengthening our approach to human business and our stakeholders in three rights, advancing sustainable agricultural key areas: harm reduction, sustainable practices among our farmers, developing agriculture and farmer livelihoods, and industry-wide security systems for our corporate behaviour. supply chain that help prevent tobacco These are not only where we face some trafficking, and achieving a 45% reduction of our biggest challenges, but also where in CO e emissions from baseline. 2 I see the greatest opportunities. As a result, we have achieved inclusion in Developing and promoting less risky the Dow Jones Sustainability Index for the products, supporting farmers’ livelihoods last 13 years, 12 of them as industry leader. and operating to the highest standards Given the serious health risks associated of corporate conduct and transparency with smoking, I am particularly proud are all absolutely the right thing to do. of the progress we have made in harm They can add value to society, as well as reduction. In just a few years, our helping to ensure we deliver our Group aspirations for this important area are strategy and BAT continues to grow and becoming a reality, with less risky nicotine thrive in the long term.” products now on the market in the UK, plans to launch in further markets and a strong pipeline of innovations for the future. Nicandro Durante, Chief Executive British American Tobacco March 2015 ILITY S SIB TRE ON NG SP TH E R F A strategic approach R H GROWTH O G M U O D R IV H MED CO E Through a detailed materiality process, T R N FO SU R IN M S M E I N R T O Y including stakeholder dialogue and IO C D P H E O E M I R A C research, we have identified the three key F H WORLD’S BEST E C AT SATISFYING areas that have the greatest significance P CONSUMER R D Y Y MOMENTS IN T O E I to our business and our stakeholders. T www.bat.com D L L I TOBACCO E I V I U B E AND BEYOND C C A R O These form our new sustainability agenda /materiality T I S N I N I V G O A E I T T N T O as covered in this Report. Y U S S T R T U E C EN S R OMMITM D P E R D I W N S IN IO IN IN NI AT G NG ORGANIS M S N P PE IR O IT Independent assurance Harm reduction p04 Sustainable agriculture p08 Ernst & Young LLP has been We are committed to researching, and farmer livelihoods engaged by British American developing and promoting a range We are committed to working to Tobacco to provide limited external of innovative tobacco and nicotine enable prosperous livelihoods for all assurance of this Report, as well products to enable adult consumers farmers who supply our tobacco leaf, as all performance information to have a choice of less risky benefiting rural communities and published at www.bat.com/ alternatives to regular cigarettes. the environment. sustainability/data. Read the full statement, including the scope of work and conclusions, and BAT’s response at Our other business priorities www.bat.com/assurance We continue to focus on other key business priorities, including retailer relationships, diversity, employee engagement, governance and stakeholder engagement. These are covered in our Annual Report and online at Get in touch www.bat.com/sustainability Simon Cleverly, Susan Jones and Verity Lawson British American Tobacco Corporate behaviour p12 Globe House, 4 Temple Place We are committed to operating to London WC2R 2PG the highest standards of corporate [email protected] conduct and transparency, benefiting +44 (0)20 7845 1000 governments, consumers, the environment and our people. www.bat.com/sustainability 01 British American Tobacco Creating shared value More than £480 million Over 100 papers on our We invest significant sums invested in R&D into research published in each year, and employ innovative tobacco and peer-reviewed journals hundreds of scientists in nicotine products over over the last five years many disciplines, in the last three years researching less risky tobacco Research and nicotine products Supply chain More than £65 million invested each year and over 1,000 BAT leaf technicians directly supporting our farmers Over 100,000 contracted farmers worldwide, mainly in countries in Africa, Asia and Latin America As a major international tobacco Over 170 million trees company, we are planted in the last seven years committed to addressing Over 400,000 tonnes of leaf the negative impacts purchased each year from contracted farmers and third of our business... party suppliers worldwide Over 70,000 non-leaf suppliers in more than 80 countries More than £30 million invested each year in environment, health and safety 24% reduction 45% reduction in 44 factories in water use CO2e emissions in 41 countries Production from 2007 baseline from 2000 baseline 02 Sustainability Summary 2014 British American Tobacco Marketing and consumers More than £50 million invested each year in fighting tobacco trafficking Over 2 million retailers reached by our youth smoking prevention activities Over 200 brands and 667 billion cigarettes sold in 2014 1st tobacco company to have a nicotine product licensed as a medicine 1st international tobacco company to launch an e-cigarette ...while continuing to work on areas where we can create shared value for our business and society Communities and economies More than £60 million Around £30 billion Over 57,000 Over £2.3 billion invested in community paid to governments employees paid to employees projects over the last each year in excise worldwide each year in wages five years and other taxes and benefits www.bat.com/sustainability 03 British American Tobacco Harm reduction ‘ I want a choice of less We are committed to risky products’ researching, developing and promoting a range of innovative tobacco and nicotine products to enable adult consumers to have a choice of less risky alternatives to regular cigarettes. Our approach Investing in world-class research, being transparent about our science and actively contributing to the evidence-base for evaluating the risk profile of different products. Developing a next generation of less risky products, including e-cigarettes, medicinal nicotine inhalers and tobacco heating products. Promoting regulation that has high consumer safety and product quality standards, while encouraging innovation, growth and availability. Responsible marketing of our products to existing adult smokers or consumers of other nicotine products. 04 Sustainability Summary 2014 British American Tobacco External viewpoint Transparent and Health effects of long-term EC [e-cigarette] use are world-class science currently not known and a degree of risk may yet emerge. However, based on the data available regarding the We understand that some people are sceptical about research conducted and toxicant content of EC [e-cigarette] liquid and aerosol, long- funded by the tobacco industry. That is term use of EC [e-cigarettes], compared to smoking, is likely why being transparent about our science to be much less, if at all, harmful to users or bystanders. is central to our approach. E-cigarette research study1 We invest significant sums each year, and employ hundreds of scientists in many disciplines, in A pragmatic public researching less risky tobacco and nicotine products. health policy The idea of harm reduction is well- We understand that this is a contentious We follow high standards established within public health. It topic. However, there is a growing weight and codes of conduct for is about minimising the impact of of peer-reviewed, independent evidence scientific collaborations and an activity that people know is risky, that suggests e-cigarettes are substantially funding and, in 2014, we but without necessarily stopping it less risky than conventional ones and that openly published them at completely. they can help people to reduce or quit www.bat-science.com/ smoking. On the other hand, there is Tobacco harm reduction is about standards. currently little evidence that they are providing a choice of viable, less risky a gateway into smoking.1,3 alternatives for the millions of smokers who find it difficult to, or do not wish We do agree that more research is We publish details of our to, stop using nicotine.