OUR OUR WAY OF OUR PEOPLE OUR PLANET OUR CONTRIBUTIONS OUR TOBACCO BUSINESS OUR PHARMACEUTICAL OUR PROCESSED FOOD SUSTAINABILITY DOING BUSINESS TO SOCIETY BUSINESS BUSINESS JOURNEY
JT Group Sustainability Report FY2015
CEO STATEMENT 04 OUR TOBACCO BUSINESS OUR Q&A WITH SENIOR VICE 06 58 PRESIDENT FOR CSR SUSTAINABILITY CORPORATE PROFILE 08 JOURNEY ABOUT THIS REPORT 82
14
OUR PEOPLE In focus In focus 30 RESPECTING EMERGING HUMAN RIGHTS PRODUCTS 70
OUR WAY OF DOING BUSINESS 22 50
OUR CONTRIBUTIONS OUR PHARMACEUTICAL TO SOCIETY 46 BUSINESS
74
OUR PROCESSED FOOD BUSINESS OUR PLANET 38 78 OUR OUR WAY OF OUR PEOPLE OUR PLANET OUR CONTRIBUTIONS OUR TOBACCO BUSINESS OUR PHARMACEUTICAL OUR PROCESSED FOOD SUSTAINABILITY DOING BUSINESS TO SOCIETY BUSINESS BUSINESS JOURNEY
Contents
CEO STATEMENT 04 Q&A WITH SENIOR VICE 06 PRESIDENT FOR CSR CORPORATE PROFILE 08 ABOUT THIS REPORT 82
Our Group 12
OUR SUSTAINABILITY JOURNEY 14
OUR WAY OF DOING BUSINESS 22
OUR PEOPLE 30
OUR PLANET 38
OUR CONTRIBUTIONS TO SOCIETY 46
In focus: Respecting Human Rights 50
Our Businesses 56
SCOPE OF DATA AND INFORMATION PRESENTED IN THIS REPORT OUR TOBACCO BUSINESS 58 IN FOCUS: EMERGING PRODUCTS 70 Unless the context indicates otherwise, references in this *A = the entire JT Group including subsidiaries report to ‘we’, ‘us’, ‘our’, and ‘JT Group’ are to Japan Tobacco (i.e. international tobacco, Japanese domestic tobacco, OUR PHARMACEUTICAL BUSINESS 74 Inc. and its consolidated subsidiaries. References to ‘Torii pharmaceutical, and processed food businesses) Pharmaceutical’ are to Torii Pharmaceutical Co., Ltd., our OUR PROCESSED FOOD BUSINESS 78 pharmaceutical subsidiary. References to ‘TableMark’ are to *B = solely Japan Tobacco Inc. (JT) TableMark Holdings Co., Ltd., our processed food subsidiary, (includes Japanese domestic tobacco and pharmaceutical and its consolidated subsidiaries. businesses, and excludes international tobacco business, processed food business, and subsidiaries of all businesses) This report contains Standard Disclosures from the Global Reporting Initiative (GRI) G4 Sustainability Reporting *C = Japan Tobacco Inc. (JT) and Japanese domestic Guidelines. Group companies (includes subsidiaries of Japanese domestic businesses, We report data for the entire JT Group including subsidiaries, excludes international tobacco business) wherever possible. In the middle of 2015 the JT Group withdrew from the beverage business. As a result, we *D = Japan Tobacco Inc. (JT) and Japan Tobacco excluded this business from reported data for 2015, or stated International (JTI) otherwise where that was not possible or appropriate, such as cases reported via our Reporting Concerns Mechanism, *E = solely Japan Tobacco International (JTI) and data on Code of Conduct training and compliance survey (our international tobacco business) uptake. In addition, some of the historical data presented in this report has been restated to reflect the changes in the Any data without annotated scope in this report covers the organization retrospectively. entire JT Group including subsidiaries – *A. For data prior to 2015, scopes *A, *B, *C, and *D include the beverage In this report we used the following scope notations: business, or restatements are indicated. See our Basis of Reporting document for further detail.
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CEO statement
Worldwide economic and geopolitical conditions in 2015 of HR practices and employee offerings across the globe. continued to be challenging, but the JT Group delivered We still have a considerable way to travel on our sustainability another year of solid profit growth and our focus on journey. There are many continuing challenges, not least sustainability remained. During the year we made significant in the area of occupational health and safety, where, progress in a number of areas, in particular on laying even tragically, there were two fatalities in 2015. In the field of stronger foundations on which to build our sustainability tobacco regulation we face some new laws that, if not strategy. We also carried out our first materiality assessment carefully considered, have the potential to be ineffective and across the entire JT Group, which will inform our strategic disproportionate to our society. We also need to redouble our and operational plans in line with and balancing stakeholder efforts on addressing societal issues in tobacco communities expectations, as underpinned by our “4S” model. such as child labor, despite having made good progress in that area over recent years. We worked on a series of overarching policies and frameworks that will guide our sustainability performance in I am convinced that the solid building blocks we have put in the future. We launched and published the JT Group Supplier place during 2015 leave us in a stronger position to address Standards as well as the JT Group Anti-Bribery Policy and such challenges, and will help us make even more significant the JT Group HR Management Philosophy. We also began strides in the coming years. drafting a JT Group Human Rights Policy in consultation with stakeholders.
Our international tobacco business began work on developing a supplier life cycle management system for non-leaf suppliers that will lead to a better understanding of the sustainability risks they face. For tobacco leaf suppliers we began to put in place measures for a 2016 rollout of our Agricultural Labor Practices to third-party merchants. Mitsuomi Koizumi In the area of emerging products, which are assuming President and Chief Executive Officer increasing importance within our business strategy, our Japan Tobacco Inc. global team continued to innovate in a way that will produce new products, such as e-vapors and t-vapors, which fulfill consumer expectations and fall within regulatory parameters.
We also made strides in other areas such as continuing to increase our focus on talent development. As a result, our international tobacco business now has the highest level of certification from the Top Employers Institute, which is given to organizations that have demonstrated the high standards
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RYOKO NAGATA, SENIOR VICE PRESIDENT CSR, JAPAN TOBACCO INC. “As we make progress, we will make our business practices more responsible and open up opportunities to capitalize on our many strengths”
our product stewardship strategy, this confidential, online tool is the doing this. The work we have carried and to strengthen the visibility of risks assessment of individual health status out so far on creating a human rights in our supply chains. Our greatest against location health risk. In terms policy has highlighted our potential challenge continues to be the regulatory of traffic accidents, we have now to make a positive impact on wider landscape across the globe, which often made road safety awareness a priority society. limits us from making bigger strides throughout the JT Group, especially for on the development and marketing of sales employees. We will continue to 7. There was increased global emerging products. Therefore, we need focus not only on reducing the number interest in environmental, social, to continue to make the case for better of accidents involving employees and governance investment during regulation that is both proportionate or contractors, but on eliminating 2015. How did the JT Group and effective. occupational injuries entirely. That will respond to this? be a hard task in some of the regions We engage with investors who are 3. The JT Group takes pride in its in which we operate, where safety interested in our sustainability initiatives employee development programs culture is weak; but the only acceptable through a number of channels. In 2015 and believes employees are the accident rate is zero, and that is what we had one-to-one meetings with cornerstone of its business growth. we work toward. analysts, we talked to investors via our Why is this, and what were the key participation in various responsible developments in this area in 2015? 5. How did your tobacco leaf investment index evaluation processes, A highly motivated and competent strategy create value both for the and we also spoke to investors as workforce is key to sustainable business and tobacco farming part of our Group-wide materiality business growth. The launch of our JT communities in 2015? assessment. Although the number of Group HR Management Philosophy During 2015 we extended the reach such meetings is still small, investor in February 2016 will allow us to of our various initiatives to cover even interest in sustainability issues has make our commitments in this area more countries from which we source increased over the past five years, and much clearer. Among other things, tobacco leaf. We also extended our each engagement helps us to better the Philosophy sets out our belief Agricultural Labor Practices to non- understand what is expected of us. that diversity in the workforce is an directly contracted farmers, which accelerator of innovation. This is an area was an important step that will help One of the questions we are frequently I am personally keen to focus on in the address social and environmental issues asked is on the management of our future. in those farmers’ communities and supply chain, especially in terms therefore improve the sustainability of of leaf procurement. We also Of course, our pride in our employees our leaf supply. We also implemented often field questions on product means we have to make sure that any our farmer profit model across innovation, corporate governance, and Q& operational changes – such as our countries where we directly source environmental management. I anticipate planned factory closures in Northern tobacco – this will allow farmers and that we will get further interest in Ireland, Belgium, Russia, and South their local communities to make the responsible investment in the coming & Africa, and the withdrawal from our most of their agricultural activity. I am years, partly fueled by global regulatory A with Ryoko Nagata beverage operations in Japan – are also proud of what we have achieved trends that will require companies to Q managed responsibly. With the through our ARISE program, which improve their transparency on non- help of trade unions and worker in 2015 has taken approximately 26 financial performance. SENIOR VICE PRESIDENT | CSR representatives, we have been able children out of child labor every day, to make these changes in a fair and provided 32,160 people with education 8. What is next on your responsible way. about child labor, and given 1,859 sustainability journey? households an improved income. One of our main tasks is to work on the 4. There were two reported integration of key issues in our strategic 1. This is your third year as Senior management, occupational health and 2. The JT Group has paid more fatalities within the JT Group during 6. With the adoption of the Modern and operational plans. That will mean Vice President for Corporate Social safety, and compliance has increased attention to emerging products over 2015 – an employee contracted Slavery Act in the U.K. in 2015, having conversations with various Responsibility (CSR). How would awareness of sustainability internally, the past few years. What were the malaria while on a business trip to businesses are now under greater parts of the business on how to take a you describe the sustainability and we are now in a position to set our key achievements in this area in Africa, the complications of which pressure to ensure human rights are leading role in the industry. It will also journey so far under your direction for the future. Without strong 2015 and what are the challenges contributed to his subsequent upheld in their supply chains. What require us to address some of the gaps leadership? commitment from business functions that remain? death, and a contractor was is the JT Group doing to address in our management approach – and that Although we still have a long way to on these issues, we would not have In 2015 we completed the formation of electrocuted in Sudan. In addition, human rights, and what are the key work has already begun. As we make go, our journey so far has been very been able to make the progress that a Group function to work on emerging one third-party death occurred in insights you’ve gained so far into progress, we will make our business much about laying the foundations of we have. One of my priorities over the products, which was a big step forward, Tanzania, where a company vehicle this area? practices more responsible and open sustainability and, as part of our “4S” past three years has been to improve and has allowed us to commit to a collided with a cyclist. What is We are now committed to developing up opportunities to capitalize on our model, understanding the expectations the way we collect and communicate clearer strategy and focus. Buying Logic the JT Group doing to address an overarching policy on human rights many strengths. We have lots to do, but of our stakeholders. As part of this sustainability information, and I am Technology Development LLC, which safety issues in these areas? by seeking input from our stakeholders. I believe we are in a strong position to process, we conducted a materiality proud of the advances we have made. is the third largest manufacturer of It is a matter of deep personal regret We have begun the process of drawing make further progress. assessment for the first time at Group One clear result of all the effort we e-cigarettes in North America, further that these deaths have occurred. up the policy and, when finalized, we level in 2015. The results gave us have put in is that our Sustainability enhances our ability to innovate in this Following the malaria fatality in 2015, will conduct human rights due diligence interesting insights into where we need Report FY2015 has, for the first time, field and to expand our market reach. we identified and developed a global across the JT Group. I know there is to focus our efforts. Talking to business been compiled in accordance with the I was pleased that we could begin pre-travel health assessment process a real need to collaborate with other functions about key sustainability ‘Core’ level of the GRI G4 Sustainability initiatives to address the disposal of that will be implemented and rolled stakeholder groups on this, and I am topics such as human rights, talent Reporting Guidelines. e-cigarette components in line with out in 2016-2017. The principle of glad that we are now committed to
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NORTHERN RUSSIA IRELAND Corporate CANADA SWEDEN POLAND BELGIUM GERMANY KAZAKHSTAN SWITZERLAND UKRAINE ROMANIA SERBIA profile SPAIN TURKEY U.S.A. ANDORRA IRAN JORDAN EGYPT MYANMAR
REPUBLIC OF We are a leading international tobacco company, with offices SUDAN
and factories in more than 70 countries. Our products are SOUTH SUDAN sold in more than 120 countries, and we own three of the MALAYSIA JAPAN top ten global cigarette brands by sales volume: Winston, TANZANIA Mevius, and Camel. Headquartered in Tokyo, Japan ZAMBIA Tobacco Inc. (TSE: 2914) is listed on the Tokyo Stock BRAZIL MALAWI Exchange. SOUTH AFRICA We operate a pharmaceutical business that researches, develops, produces, and sells prescription drugs, focusing on glucose and lipid metabolism, anti-virus research, and immune disorders and inflammation. We also have a CIGARETTE AND TOBACCO-RELATED FACTORIES* processed food business that manufactures and sells goods INTERNATIONAL 31 such as frozen noodles, frozen and packed cooked rice, and JAPANESE DOMESTIC 7 TOTAL 38 frozen baked bread and pastries. Both of these businesses *Includes the factory of Leaf Services West-Japan and the Hiratsuka factory in cater mainly for the Japanese market. Japan. The latter completed a planned closure on March 31, 2016. COUNTRIES IN WHICH WE DIRECTLY SOURCE TOBACCO
7 All figures as of the end of 2015.
TOTAL EMPLOYEES 3% INTERNATIONAL TOBACCO BUSINESS
JAPANESE DOMESTIC TOBACCO 2% BUSINESS
13% PHARMACEUTICAL BUSINESS REVENUE (BILLION YEN) FY2013 2014 2015 12% BEVERAGE BUSINESS* INTERNATIONAL TOBACCO BUSINESS 1,270.0 1,328.0 1,317.2 4% 10% PROCESSED FOOD BUSINESS End of FY2013 2% End of 2015 JAPANESE DOMESTIC TOBACCO BUSINESS 710.3 687.4 677.3 3% 51,563 52% OTHERS PHARMACEUTICAL BUSINESS 64.4 65.8 75.6 44,485 *In the middle of 2015 the JT Group withdrew from 59% the beverage business. 21% 12% 21% BEVERAGE BUSINESS* 184.5 - -
PROCESSED FOOD BUSINESS 156.9 161.2 165.8 10% End of 2014 OTHER BUSINESS 13.6 16.9 17.0
4% 51,341 TOTAL 2,399.8 2,259.2 2,252.9 50% *In the middle of 2015 the JT Group withdrew from the beverage business. For comparability, 2014 figures in the above table do not include the beverage business. 23%
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CORPORATE PROFILE Our value chains
OUR SUPPLY CHAINS OUR COMPANY OUR CUSTOMERS & CONSUMERS We are a global company and each of our three businesses has a distinct value chain. To make a real difference on sustainability we need to focus BUSINESS on tackling the biggest issues DISTRIBUTION 8 LEAF 4 LEAF 42,000+ THRESHING AND STORAGE SALES IN 120+ across these value chains, from 500+ WAREHOUSES DIRECTLY PROCESSING WAREHOUSES COUNTRIES 1 the starting point where our raw CONTRACTED FACTORIES1 30 FACTORIES FARMERS MERCHANTS materials are sourced, through AND THEIR TOBACCO FARMER BASE to the way we manufacture and distribute our products, to the OTHER SUPPLIERS end point where our products are sold.
100+ PACKAGING For more detailed information MATERIAL BUSINESS PROCESSED SUPPLIERS DISTRIBUTION on our value chains, see pages 2 31 FACTORIES FOOD (THE TABLEMARK GROUP) 59 (tobacco business), 300+ WHOLESALE TRADING 75 (pharmaceutical business), RAW COMPANIES MATERIAL and 79 (processed food SUPPLIERS
business). 50+ SUBCONTRACT FACTORIES
LICENSERS AND LICENSEES
2 RESEARCH & HOSPITAL PHARMACEUTICAL DEVELOPMENT MARKETING & SALES 1 FACTORY PROMOTION (TORII PHARMACEUTICAL) 2 WAREHOUSES (TORII PHARMACEUTICAL) 5 PHARMACEUTICAL INGREDIENTS SUPPLIERS
PARTNERS OF JOINT RESEARCH (UNIVERSITIES AND MEDICAL INSTITUTES) WHOLESALE 1 We also own and operate four non-tobacco material PARTICIPANTS OF processing factories in Japan. CLINICAL TRIALS & TRIAL INSTITUTES 2 The pharmaceutical and processed food business value chains represent JT (*B) and TableMark only and 3 SUBCONTRACT exclude other subsidiaries. FACTORIES
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Our Group Our sustainability journey Our management principles Material issues covered: Collaborations and partnerships 18 Our management principles, and our approach to sustainability, are governed by our “4S” model, under which we balance the interests of four stakeholder groups – consumers, shareholders, employees, and wider society. We aim to fulfill our responsibilities toward each group while also striving to exceed their expectations.
We take pride in the strong relationships we have built with the four stakeholder groups, and through our engagement we are able to reflect stakeholder views in our business activities. We believe the “4S” Our way of doing business model is helping us to achieve sustainable growth by continually delivering value to our stakeholders. THE “4S” MODEL
Material issues covered: Corporate governance and transparency 23 Tax practices 26 Information security 27 Anti-competitive behavior 27 Anti-bribery and corruption 28
Our people
Material issues covered: Employee development and talent management 31 Being a responsible employer 33 Equality and diversity at the workplace 34 Workplace health and safety 36
Our planet
Material issues covered: Environment 38
OUR VISION OUR MISSION THE JT GROUP WAY is to become a company is to create, develop, and nurture • Fulfill the expectations of our committed to global growth by our unique brands to meet consumers and behave responsibly Our contributions to society providing diversified value that is consumers' needs while • Strive for quality in everything we uniquely available from the JT Group. understanding and respecting the do through continuous improvement environment and the diversity of societies and individuals. • Leverage diversity across the JT Group Material issues covered: Contributions to society 46
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OUR GROUP Laying the foundations
In the past years we have concentrated on analyzing stakeholder perspectives so that we can better understand the sustainability opportunities and challenges we face.
2015 was a pivotal year in this process, as we completed a Group-wide materiality assessment. We now Although we have been tackling have a good foundation to build our Group-wide strategic sustainability plans. Once these plans are Our finalized, we can move on, in a more concerted way, to monitoring and reporting on performance. sustainability issues in our business for a number of years, we recognize there is We also achieved our commitment to ensure that our sustainability reporting meets the Global Reporting sustainability much more for us to do, and that many Initiative’s (GRI) G4 ‘Core’ Guidelines. challenges lie ahead. In recent years, and in particular during 2015, we have focused 1. ENGAGING OUR SUSTAINABILITY JOURNEY journey on identifying all material issues for the STAKEHOLDERS JT Group. This gives us a clearer view While continuing to work with stakeholders on a day-to-day basis, COMMUNICATING ENGAGING of the challenges we face, and shows us in 2015 we engaged in dialogue with STAKEHOLDERS 17 Group-wide external stakeholders how we can respond to them in a more and 15 members of top management. structured and targeted manner. We also visited 16 countries to speak to more than 100 managers about the specific challenges that exist within A good understanding of our material the market in which they operate. This exercise gave us a wealth of information issues also helps us develop relevant policies, that we are using to develop our plans. MONITORING PRIORITIZING PERFORMANCE ISSUES plans, and targets to better monitor the It will also help us to ensure that whatever is decided at corporate level progress we are making on sustainability. will actually work in the diverse markets To implement these, we need to work closely that we serve. with our stakeholders and collaborate with IMPLEMENTING 2. PRIORITIZING ISSUES PLANS other organizations. Through stakeholder engagement, we clarified which issues are the most important both to the JT Group and our external stakeholders. See page 2015 highlights 21 for the outcomes of our materiality As an initial step in our policy 4. MONITORING assessment. development, in September 2015 we PERFORMANCE hosted a roundtable with a range of external stakeholders to seek feedback In 2015 we began gathering baseline 3. IMPLEMENTING PLANS on our current practices, and on how data on all key material issues, We now have a robust foundation on we can devise an effective human rights complementing data that has already which to build our strategic plans, and approach in the future. In 2016 we will been gathered for some time on areas Completed our first Joined a in GROUP-LEVEL CSR TASK FORCE will focus on developing these in 2016. continue seeking stakeholder feedback such as environment, occupational Switzerland to provide input into government plans to health and safety, HR, and compliance. . to the Policy through various means, MATERIALITY ASSESSMENT develop binding rules on CSR. During 2015 we had a particular focus including hosting a dialogue between JT This will provide more insights, helping on human rights. Since the acquisition top management and external human us to better monitor our performance of our tobacco procurement operations rights experts. on material issues and showing us what in 2009, we have been working toward progress we are making against our improving labor and social conditions in Outside of human rights, the CSR management plans. our tobacco farming communities (see Division began to engage with key pages 60-63). However, we also need business functions on strategic 5. COMMUNICATING to ensure that we respect human rights issues such as talent management, This is the third report we have Engaged our business to ensure we Hosted our first Became a across our entire value chain. In 2015 compliance, and health and safety. published using the GRI G4 Guidelines we began to work on creating a Group- We also completed the formation of a and the first to be in accordance with met GRI G4 ’CORE’ HUMAN RIGHTS MEMBER OF LBG and wide human rights policy that will global team on emerging products. ‘Core’ level. In 2015 we revamped the Guidelines within our sustainability started implementing its measurement formalize our commitment to identifying CSR section of www.jt.com to provide reporting. ROUNDTABLE model on community investment and addressing human rights issues in further, and clearer, information for with external experts as part of our programs. all areas of our business. users. We also participated in a number Group Policy development. of external platforms on topics such as child labor and business ethics.
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Stakeholder engagement OUR STAKEHOLDERS ACROSS OUR VALUE CHAIN OUR SUPPLY CHAIN OUR COMPANY OUR CUSTOMERS & CONSUMERS Under our “4S” model we talk to stakeholders across the JT Group on a daily basis, but also engage with them in special forums. Building on the engagement program conducted by our international tobacco business with 60 external stakeholders in 2014, we carried out 17 further interviews in 2015 at SUPPLIERS Group level, using the results to shape our future sustainability strategy and to develop this report.
GOVERNMENTS AND REGULATORS SOCIETY COMMUNITIES SUPPLIERS GOVERNMENTS AND employees, retailers, consumers, and In Japan we work with the Tobacco REGULATORS public sector specialists. Our holistic partnership approach ensures that our NGOs Growers Association of Japan to We seek an open dialogue with help us talk to farmers about quality community investment programs are governments and regulators so that tailored to the needs of local people, management and contract compliance. we can get across our point of view on We also employ around 100 farming and that contributions made provide regulations that affect our business and demonstrable outputs addressing experts who visit farmers during the society. RETAILERS crop season to discuss these issues. In social and environmental challenges in communities where we operate. 2015 we held workshops for farmers When consulted by governments, in Japan to explain how their contracts we are respectful of each country’s now incorporate the JT Group Principles decision-making process, offer NON-GOVERNMENTAL SHAREHOLDERS in Leaf Tobacco Production. alternative solutions that meet the ORGANIZATIONS (NGOS) principles of better regulation, and We work with a number of NGOs in In our international tobacco business, provide credible evidence substantiating various countries - including with the we regularly visit farmers to offer our position. International Labour Organisation (ILO) EMPLOYEES advice and to support them in and Winrock International, a U.S.A.- improving toward our standards and We believe that open and honest based organization specializing in requirements. Farming experts build engagement results in better and more agriculture - on our ARISE program and maintain strong relationships with informed regulation and is in the best aimed at eradicating child labor in CONSUMERS directly contracted farmers to help interests of all parties. Unfortunately, tobacco. We also foster partnerships them improve tobacco production and there has been an increasing risk in with NGOs that implement social increase their profitability. recent years by governments and programs in the communities where regulators to restrict the input of the we buy tobacco, as well as others that Our tobacco businesses hold an annual tobacco industry into discussions support us in delivering our community Partnership Day for suppliers of non- about regulation – or even to exclude investment programs. tobacco materials, such as cigarette EMPLOYEES it altogether. This is not a sensible or papers, acetate tow for filters, and equitable approach and ignores the RETAILERS packaging, at which we discuss how benefits of full stakeholder participation. The key channel for communicating In our Japanese domestic tobacco the pace of change and the vision of the We communicate with retailers in a we can enhance our partnerships We will continue to argue strongly with employees is in their everyday business, the 2015 EES scores Group for the future. number of ways, covering a range of and collaborate more efficiently. This against any moves to do so. work, including through performance exceeded the Japanese company topics from preventing youth access has resulted in increased awareness appraisals and face-to-face meetings standard score in all categories, but Key issues for employees, identified to cigarettes to dealing with litter of sustainability issues among our Areas on which we engage with line managers. But we also gather revealed that employees had some through discussions with stakeholders associated with tobacco products. suppliers. governments and regulators include staff opinions via the intranet and concerns about the way workloads and in 2015, include leadership
illicit trade, youth access to tobacco through our Employee Engagement responsibilities are allocated. development, equality and diversity, Our retail engagement programs Issues of importance for us to work with products, and the health risks of Survey (EES). Additionally, employees health and well-being programs, and include seminars for retailers that look suppliers on are labor practices, bribery smoking. For details on how we have can report concerns about potential In our international tobacco business, safety at the workplace. at the problems of youth smoking, and corruption, health and safety, and responded to such concerns, see pages violations of our Codes of Conduct scores in our 2015 EES improved in and provide advice on how to cope illegal trade. For details on how we have 64-73. through our Reporting Concern ten out of 12 categories. Compared to For further details on how we have with conflict situations that arise when responded to these concerns, see pages Mechanism (RCM). the prior survey, our employees were responded to some of these issues, see refusing to sell cigarettes to minors. 54-55, 59-63, and 68-69. somewhat more critical with regards to pages 30-37. COMMUNITIES For details on how we have responded to concerns about youth access to We engage with various stakeholders tobacco products, see page 67. throughout our value chain, including CONSUMERS
We communicate with consumers on a The key areas of interest of our tobacco high quality, and the provision of value- SHAREHOLDERS daily basis through our sales force and business consumers are the health risks added foods. For details on how we call centers, and often make product of smoking, responsible marketing, have responded to these concerns, see improvements based on consumer product innovation, illegal trade, and pages 64-69, and 80-81. One of the main forums for at regular and ad hoc meetings with including tobacco product innovation, comments. We also receive feedback the environmental impact of products. engagement with shareholders is our institutional investors. During 2015 we supply chain management, and via our websites. In our processed food business, key General Meeting of Shareholders, but dealt with a number of requests from corporate governance. consumer concerns are food safety, we also discuss sustainability issues investors wanting to talk about issues
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LAWS AND REGULATIONS Collaborations, memberships, Our international tobacco business is In 2015 our international tobacco a member of BusinessEurope, a group business became a full member of the that campaigns on issues affecting International Chamber of Commerce businesses in Europe. We sit on (ICC). We now sit on two of ICC’s policy and endorsements multiple working groups, including commissions – one on intellectual one on the European Union’s Tobacco property and another on marketing and Products Directive and another on plain advertising. Through ICC we exchange Collaborating with others helps us to address our sustainability challenges. It also fosters innovation and packaging of tobacco products. ideas with other businesses that may be bridges any differences in opinion there may be between us and our stakeholders. faced with similar regulatory challenges.
PRODUCT SAFETY CORPORATE AND PRODUCT GOVERNANCE AND ENVIRONMENT RESPONSIBILITY TRANSPARENCY The JT Group has been reporting its Group-wide greenhouse gas (GHG) In Japan we have formed Youth We are a member of the U.K.-based emissions and climate change Smoking Prevention Councils with Institute of Business Ethics and CEB information to CDP since 2012, and representatives of local government, Compliance & Ethics Leadership water information to CDP since 2015. police, the Tobacco Retailers Council. We are also a member of In 2015 our international tobacco Association, and other tobacco the Business Ethics Research Center business invited 30 suppliers to disclose companies. in Japan, which helps corporations information through the CDP supply consider ethical issues in the workplace. chain initiative.
EMPLOYEE RESPONSIBLE WORKPLACE RESPECTING HUMAN RIGHTS DEVELOPMENT MARKETING HEALTH AND We are a member of the Industrial AND TALENT Our Japanese domestic tobacco SAFETY Federation for Human Rights, Tokyo. business is a key member of the Members of our human resources MANAGEMENT Tobacco Institute of Japan and complies Our international tobacco business is department participate in discussions with the institute’s self-regulatory a member of the European Council on and training sessions on human rights Our international tobacco business marketing standard. Health and Safety and the Network held by the federation. The JT Group is a now has the highest level certification of Employers for Traffic Safety member of the Eliminating Child Labour from the Top Employers Institute. The (NETS). During 2015 our international in Tobacco Growing (ECLT) Foundation, Global Top Employer status is given tobacco business received the NETS and in 2014 signed the ECLT to organizations that demonstrate the Road Safety Achievement Award in Foundation’s Pledge of Commitment high standards of HR practices and recognition of ‘advancing road safety.’ and Minimum Requirements on employee offerings across the globe. combating child labor. Our international tobacco business is also a member of the UN’s Child Labour Platform, a multi-sector, multi-stakeholder forum for sharing experiences and lessons learned in eliminating child labor. We support Human Rights Watch in its efforts to improve legislation and bring higher standards of protection to farm workers in the U.S.A. We are also a member of the U.S.A.-based Farm Labor Practices Group, a multi-stakeholder organization that focuses on improving conditions for farm workers in the U.S.A.
OTHER SUSTAINABILITY-RELATED MEMBERSHIPS
In 2015 our international tobacco represent members of Groupement des business development, sustainability, business became a member of a Entreprises Multinationales (GEM), a and employment. The task force aims CSR task force in Switzerland led Geneva-based association that brings to have an input into Swiss government jointly by two business federations, together more than 85 multinationals proposals to develop action plans and Economiesuisse and SwissHoldings. to present their views to governments binding rules on CSR. Our role on the task force is to and authorities on topics such as tax,
18 19 OUR OUR GROUP OUR WAY OF OUR PEOPLE OUR PLANET OUR CONTRIBUTIONS OUR TOBACCO BUSINESS OUR PHARMACEUTICAL OUR PROCESSED FOOD OUR GROUP SUSTAINABILITYOUR DOING BUSINESS TO SOCIETY BUSINESS BUSINESS JOURNEYSUSTAINABILITY OUR SUSTAINABILITY JOURNEY OUR SUSTAINABILITY JOURNEY JOURNEY
Sustainability governance Our material issues
Our sustainability performance is discussed regularly by a group of Board members and Executive In 2015 we carried out our first materiality assessment covering the entire JT Group, building on the Officers, along with the CEO and the Senior Vice President for CSR, assisted by our CSR Division. work done by our international tobacco business in 2014. The process began by conducting a media and However, businesses and corporate functions have ultimate responsibility for planning and implementing peer review, which generated 31 sustainability topics of relevance. These were then calibrated through their own sustainability initiatives. discussions with operational managers in the business.
We then carried out interviews with 15 of the top executives of the JT Group, including our CEO, SUSTAINABILITY GOVERNANCE followed by talks with 17 external stakeholders who included suppliers, investors, trade unions, NGOs, and industry organizations. Finally, we held a workshop with our 15 top executives to validate the materiality assessment results.
This process allowed us to arrive at a final list of 22 material issues, which stakeholders ranked as medium and high level of importance to the JT Group and our external stakeholders – see matrix below.
In future we will regularly carry out a materiality assessment with stakeholders. This will help us to TOP MANAGEMENT COMMITTEE monitor any changes in materiality and to update the list if necessary. Consisting of Executive O cers, including our CEO and Senior Vice President for CSR, this body regularly discusses Group-wide sustainability issues. JT GROUP MATERIALITY MATRIX
Corporate governance Laws and and transparency regulations
Product safety and Supply chain product responsibility management
HIGH Product innovation and Respecting intellectual property human rights
Environmental Information security Responsible Litigation impacts of marketing CSR DIVISION BUSINESSES AND products CORPORATE FUNCTIONS Anti-bribery and Illegal trade This unit develops an understanding of global CSR Anti-competitive Being a responsible corruption trends, conducts gap analyses on approach and behavior employer With help from the CSR Division when necessary, performance, makes recommendations to the Top each business and corporate function plans and Employee Equality and Management Committee, and helps di erent parts of Workplace Collaborations
conducts sustainability-related initiatives based on its MEDIUM development and diversity in the the business incorporate sustainability practices into own strategies and priorities. health and safety and partnerships talent management workplace their day-to-day activities. It is also responsible for sustainability reporting and communications. Political and IMPORTANCE TO EXTERNAL STAKEHOLDERS TO IMPORTANCE Environment Contributions to regulatory decision- society making processes
Tax practices
+ MEDIUM HIGH IMPORTANCE TO THE JT GROUP
VALUE CHAIN BOUNDARIES
OUR CUSTOMERS SUPPLY CHAIN OUR COMPANY AND CONSUMERS
20 21 OUR OUR WAY OF OUR PEOPLE OUR PLANET OUR CONTRIBUTIONS OUR TOBACCO BUSINESS OUR PHARMACEUTICAL OUR PROCESSED FOOD OUR GROUP OUR WAY OF OUR GROUP SUSTAINABILITY DOING BUSINESS TO SOCIETY BUSINESS BUSINESS JOURNEY DOING BUSINESS OUR SUSTAINABILITY JOURNEY OUROUR SUSTAINABILITYWAY OF DOING BUSINESSJOURNEY
OUR GROUP Corporate governance and transparency
The JT Board of Directors holds ultimate responsibility for administration and supervision of our Our way activities, and is supported by a governance structure that includes bodies such as the JT Group Compliance Committee and the Compensation Advisory Panel. In 2015 our Board of Directors consisted of eight Directors, two of whom were independent. Five members of the Board also served as Executive Officers and three were non-executive, including the JT Group Chairman. The separate Audit & of doing Supervisory Board consisted of four members, two of whom were independent. Results of audit and risk management exercises are reported regularly to the Board. Our Annual Report provides further details on our governance structures. business In February 2016 we established the JT Corporate Governance Policy to take account of Japan’s Corporate Governance Code. As part of the rules of the Tokyo Stock Exchange, listed companies must comply with the new Code, which came into force in June 2015, or explain why they have not done so. All operations and employees within the JT Group must comply with the high standards of integrity laid down in RISK MANAGEMENT our Codes of Conduct, which underpin how we do business. Our approach to addressing key Our Codes also outline our responsibilities to stakeholders, financial and business risks is detailed in our Annual Report. These risks are which include preventing bribery and corruption, avoiding reported to, and discussed with, the discrimination, respecting human rights, environmental Board of Directors at least every three months. Internal audits are conducted protection, data privacy, and fair competition. by a division independent from the business and other operational functions, reporting directly to the Employees are trained on our Codes, and there are President of JT. We also have crisis communication channels for them to report concerns about management and disaster control systems in place. Identification and potential breaches or violations. mitigation of sustainability risks is incorporated into our Group risk management approach. Key Group- 2015 highlights wide sustainability risks include instability in the procurement of key materials, pressure from illegal trade, and natural disasters. 2015 2015 The JT GROUP (*c) ANTI-BRIBERY 3.9% 99.7% POLICY was made public on our website in 2015. of reported concerns were related to of employees trained on the bribery and corruption. JT Group Code of Conduct.
2014 2014
(*c) In 2015 we launched 1.7 % 99.5% JT GROUP SUPPLIER STANDARDS that set out the behavior we expect from all suppliers, globally. 22 23 OUR OUR WAY OF OUR PEOPLE OUR PLANET OUR CONTRIBUTIONS OUR TOBACCO BUSINESS OUR PHARMACEUTICAL OUR PROCESSED FOOD OUR GROUP OUR WAY OF OUR GROUP SUSTAINABILITY DOING BUSINESS TO SOCIETY BUSINESS BUSINESS JOURNEY DOING BUSINESS OUR WAY OF DOING BUSINESS OUR WAY OF DOING BUSINESS
CODE OF CONDUCT REPORTING CONCERNS
The JT Group Code of Conduct internal communications campaigns If an employee is concerned about a the RCM. In our international tobacco outlines our responsibilities toward where senior executives reinforce our potential violation of our Codes, he or business, new employees are given a consumers, shareholders, employees, company’s strong commitment to the she can contact their line manager, copy of the Code of Conduct in which and society, and defines our principles and values laid out within the human resources lead, a member of the clear reference is made to the RCM legal and ethical obligations. Our Codes. Compliance team, or use our RCM. process. In addition, in certain locations/ international tobacco business and entities, employees receive an induction our pharmaceutical subsidiary have All the Codes are reviewed and updated We follow up on all reports across program that incorporates compliance their own Codes of Conduct, based on as necessary, and the latest revision of the JT Group and, where necessary, issues including the RCM. In all of the the JT Group Code but reflecting their the JT Group Code took place in 2015. launch investigations that may lead to JT Group, RCM contact persons go respective operational circumstances. It now features a refreshed section corrective action. In 2015 we received through regular refresher training to highlighting our “4S” model, and 408 reports across the JT Group, up ensure they have the skills to respond to We view these Codes as essential to new sections on fair and appropriate from 402 in 2014. RCM reports in an appropriate manner. achieving our business goals while accounting, respect for diversity, and acting with integrity and in compliance prohibition of bribery. Employees are informed on how to use Aside from employees, customers, with the law. They cover key material the RCM through various channels, distributors, and suppliers are also issues in our business (see page 21). Compliance training for employees including a leaflet distributed to all able to report violations of our Codes They also reflect the high standards of on the JT Group Code of Conduct is employees that explains how to use of Conduct via our Reporting Concern ethical behavior we aspire to in all our provided face-to-face, online, or on the RCM and a JT Group intranet for Business Partners website. In business dealings, and which we expect the job. During 2015, 99.7% (*C) of Compliance site that has links to the addition, in our international tobacco from all our business partners. employees who are required to adhere RCM. In 2015 we issued a DVD of case business, business partners may to the JT Group Code of Conduct studies illustrating different sections contact Corporate Compliance directly Copies of our Codes of Conduct are participated in compliance training. of the Code of Conduct and explaining through jti.com, and our suppliers may provided to all employees, while RCM procedures. contact Corporate Compliance through shareholders and other interested 1 Visit www.jt.com and www.jti.com to access our an e-mail link [email protected] as parties can access them via our Codes of Conduct. All new employees and anyone who has published in our Supplier Standards websites.1 Annual training on the Codes been newly promoted to a managerial brochure. is given to employees, supported by position in JT and Japanese domestic Group companies (*C) receive face-to- face training on compliance including
COMPLIANCE WITH THE CODE OF CONDUCT BREAKDOWN OF REPORTED CASES EMPLOYEES RESPONDED 3.9% TO THE 2015 COMPLIANCE SURVEY
19.9%
(*C) 2015 94.0% 50.5% 1.7% 408 In our Japanese domestic tobacco, Concern Mechanism (RCM), which of Conduct, and we make it clear that pharmaceutical and processed food allows employees and business anyone who reports concerns will be 25.7% businesses, each division assesses partners to report possible breaches protected from any form of retaliation. 21.6% the risk of employees failing to comply of our Codes. We will therefore This is fundamental to building a fair with our Codes, and submits plans provide additional material for line environment where we address any to address those risks. An annual managers about RCM and will devise wrongdoing with integrity. In 2015 2014 compliance survey feeds into each a new campaign targeted at overseas our international tobacco business 0.2% division’s action plans for addressing subsidiaries in our processed food produced a video as part of its annual 50.5% CASES RELATED TO CORRUPTION compliance risks, and each division business. communication campaign on the Code 402 CASES RELATED TO HUMAN RIGHTS must hold an employee meeting at of Conduct that featured messages least once a year. Approximately 24,500 We reported the outcomes of the 2015 from its CEO and senior executives, CASES RELATED TO ANTI- (*C) employees (94.0%, ) responded to survey to Executive Officers, who were aimed at reassuring employees of the 25.9% COMPETITIVE BEHAVIOR the compliance survey. As a result encouraged to deliver compliance- company’s commitment to supporting of the survey, we are looking into related messages to employees and to those who speak up about misconduct. CASES RELATED TO LABOR strengthening our various initiatives participate in employee meetings. PRACTICES (EXCLUDING HUMAN RIGHTS) that will reduce long working hours. CASES NOT RELATED TO ABOVE The survey also showed that we need We encourage employees to speak up CATEGORIES to do more to publicize our Reporting about potential violations of our Codes
24 25 OUR OUR WAY OF OUR PEOPLE OUR PLANET OUR CONTRIBUTIONS OUR TOBACCO BUSINESS OUR PHARMACEUTICAL OUR PROCESSED FOOD OUR GROUP OUR WAY OF OUR GROUP SUSTAINABILITY DOING BUSINESS TO SOCIETY BUSINESS BUSINESS JOURNEY DOING BUSINESS OUR WAY OF DOING BUSINESS OUR WAY OF DOING BUSINESS
PROCUREMENT PRACTICES INFORMATION SECURITY
Tens of thousands of suppliers provide we expect from suppliers, globally. The JT Group’s information security possible incidents, detect breaches, Attacks on information security often us with the products, services, and These Standards build on the ones we risks lie in the damage or leakage of and, if necessary, recover data as swiftly occur because of carelessness, so we materials needed for our tobacco, have been applying in our international three types of key information: as possible. periodically conduct training to refresh pharmaceutical, and processed food tobacco business and, in conjunction information security knowledge defined businesses. We expect all suppliers to with our Responsible Procurement 1. Information we hold on customers, We have laid down policies and in policies and procedures. And we uphold the high standards of integrity, Policy, will help us to work with consumers, suppliers, and procedures, including manuals, update employees with advice on good quality, and safety that are referred to in suppliers to identify and resolve any employees. guidelines, and incident response practice so that we are able to prevent the JT Group Responsible Procurement issues that may occur. 2. Information on our business strategy. processes, that help employees reduce information security violations. Policy. risk, protect information, and respond We are also considering the 3. Engineering and experimental data, to any attacks. And we regularly update In addition, we make use of the latest In 2015 we launched JT Group Supplier implications of the 2015 U.K. Modern including results from our research. and enhance our information security technology, including monitoring and Standards that set out the behavior Slavery Act. policies and procedures to take account alert systems, to prevent and detect To prevent confidentiality breaches, of the rapidly changing landscape in information security breaches. We we must deter those who might want this area. also carry out periodic reviews of our to compromise confidentiality, prevent information security technologies.
OUR TAX PRACTICES INFORMATION SECURITY We believe that taxes are both compliance process in which business REGULATORY LANDSCAPE necessary and desirable, and we are units must issue a detailed report, An important topic for the JT Group committed to paying levels of taxation signed off by the Finance Director, to over the next few years will be the that are not only firmly within the show they are meeting their local tax OECD’s Base Erosion and Profit Shifting letter and spirit of local laws but are in obligations. (BEPS) Project, which aims to clamp accordance with our responsibilities down on tax planning strategies that to all stakeholders in our “4S” model. We aim to be as transparent as artificially shift profits to low-tax or We do not engage in aggressive and possible on taxation, and to foster no-tax locations and reduce taxable DETERRENCE PREVENTION artificial tax planning or tax avoidance good relationships with tax authorities base. Because we earn income only in schemes, and never use legal entities in order to reduce uncertainty or countries where we have substantive for tax purposes only. misunderstanding on both sides. business operations, we are confident that the JT Group is paying its fair share INFORMATION In 2015 we paid a total of 132,027 One of our key challenges is that of taxes. However, we are still digesting million Yen in corporate tax across the tax legislation and practice in some the latest recommendations of the ASSETS JT Group. territories, particularly in emerging BEPS Project in order to understand the markets, is often less clear than we potential implications on the JT Group. Our approach to tax is guided by would like it to be. This can easily an integrated Global Tax function translate into differences of opinion with that works across the JT Group to authorities over the interpretation of provide advice on tax issues and tax regulations. We always try to solve ensure appropriate payment of taxes. these disagreements through active This function also manages a yearly engagement. RECOVERY DETECTION
ANTI-COMPETITIVE BEHAVIOR
Fair competition is covered by our business are required to attend annual Codes of Conduct, which forbid training on anti-competitive behavior. employees from discussing business We have no cases pending for alleged operations with competitors. In our anti-competitive behavior. international tobacco business, if an employee is in a conversation with a In 2015, following an out-of-court competitor and sensitive commercial settlement, the Tanzanian Fair information is discussed, they must end Competition Commission withdrew all the conversation, express disagreement claims against one of our subsidiaries with discussing such topics, leave relating to a complaint of alleged anti- immediately, and report the matter competitive behavior filed in 2008. Both to our legal department. We have parties agreed to refrain from pursuing employee guidelines on anti-trust any future claims against each other and competition law policy, and all and to keep the terms of the agreement employees in our international tobacco confidential.
26 27 OUR OUR WAY OF OUR PEOPLE OUR PLANET OUR CONTRIBUTIONS OUR TOBACCO BUSINESS OUR PHARMACEUTICAL OUR PROCESSED FOOD OUR GROUP OUR WAY OF OUR GROUP SUSTAINABILITY DOING BUSINESS TO SOCIETY BUSINESS BUSINESS JOURNEY DOING BUSINESS OUR WAY OF DOING BUSINESS OUR WAY OF DOING BUSINESS
GIFTS, HOSPITALITY, AND ENTERTAINMENT
Anti-bribery and corruption We do not proactively encourage a In our international tobacco business, all culture of exchanging gifts, hospitality, GHE exchanges with non-governmental GHE REQUESTS Our Codes of Conduct set out a zero tolerance approach to corruption in our operations. The JT and entertainment (GHE). The giving third parties above US$250 must IN 2015 and receiving of GHE must always be receive prior approval. For government Group has an anti-bribery and corruption policy that takes into account legislation such as the Unfair reasonable, proportionate, transparent, and public officials, all requests, Competition Prevention Act of Japan, the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act, and and in line with local legislation. If not, regardless of amount, must be anti-bribery laws in China. this may damage our reputation. We approved. The number of GHE requests believe the purpose of GHE should be to in 2015 fell to 738 (*E), from 772 in 2014. In 2015 this policy was made available 1,500 employees working in functions including due diligence of third-party promote healthy business relationships, publicly for the first time on our website. where bribery and corruption is a key agents, are being implemented as and while not to seek preferential treatment Users of the GHE software must take when necessary. in return. As a rule, approval must be part in specialized online training Our top management has issued clear issue were provided with e-learning. We (*E) messages to the employees that bribery also held a face-to-face seminar for 27 sought for all GHE exchanges for any on GHE. In 2015, 927 employees (*E) and corruption are unacceptable and Compliance Committee members and Our international tobacco business JT Group company, including those underwent such training, compared the adherence to the JT Group Anti- Executive Officers, delivered by a legal will deploy their own full anti-bribery with government and public officials. with 304 in 2014. Bribery Policy is mandatory. expert in the field, which included a and corruption policy in 2016, which Based on our Gifts and Entertainment 738 focus on anti-bribery practices outside will be supported by appropriate Guidelines, each department sets In 2015, 99.7% (*C) of employees of Japan. On-site interviews with communication and training. thresholds on the amount of each completed Code of Conduct training employees were also conducted in high- exchange. that included modules on anti-bribery risk functions. Based on the findings of and corruption. In addition, around these conversations, additional controls,
COMMUNICATION OF GHE POLICIES AND EMPLOYEE CATEGORY NUMBER OF % OF EMPLOYEES TRAINED ON THE JT GROUP CODE OF EMPLOYEE CATEGORY NUMBER OF % OF (*E) CONDUCT, INCLUDING ANTI-BRIBERY, IN 2015 (*C) EMPLOYEES EMPLOYEES PROCEDURES TO EMPLOYEES IN 2015 EMPLOYEES EMPLOYEES
EXECUTIVE OFFICER 17 100% MANAGEMENT 2,482 99.9%
MANAGEMENT (EXCLUDING NON-MANAGEMENT 10,647 99.6% 1,019 100% EXECUTIVE OFFICERS) TOTAL 13,129 99.7% EMPLOYEES (EXCLUDING MANAGEMENT AND 19,052 76% EXECUTIVE OFFICERS)
EMPLOYEES UNDERWENT GHE TRAINING IN 2015
927 (*E)
28 29 OUR OUR WAY OF OUR PEOPLE OUR PLANET OUR CONTRIBUTIONS OUR TOBACCO BUSINESS OUR PHARMACEUTICAL OUR PROCESSED FOOD OUR GROUP SUSTAINABILITY DOING BUSINESS OUR PEOPLE TO SOCIETY BUSINESS BUSINESS JOURNEY OUR PEOPLE
OUR GROUP Employee development and talent management
A highly motivated and competent workforce is key to sustainable business growth. We therefore need to create and maintain a work environment that motivates people and nurtures excellent performers.
We continuously review and redesign our HR strategies and programs so that we can match the aspirations of our employees with the needs of our business, and so that we can prepare our workforce Our people for future challenges. While we believe that on-the-job learning is central to the development of our employees, we also invest in training, and each of our companies runs its own employee development and training programs.
Our employees are critical to the success of our business, and ATTRACTING TALENT are a key stakeholder group in our “4S” model. To provide global guidance across the JT Group, we defined the following Across the JT Group we have a clear a set of key attributes that makes us idea of what ‘talent’ means for us: most unique as an employer. These are JT Group HR Management Philosophy: of all we value positive attitudes and Long-term Success, Care and Respect, behaviors, and we search for people and our commitment to Invest in who exhibit our values. People. Along with this Employer Value “In order to contribute to the Company’s sustainable growth, Proposition, key qualities that make Our international tobacco business people successful in the company have and with the recognition that highly skilled, talented and has a global internship program, called been streamlined, and targeted talent diverse people are the foundation of its success, JT Group JUMP, which aims to attract high- profiles have been shaped. From 2016 potential students to join the company we will make sure the new ‘Employer Management strives for the highest level of employee and help them gain experience and Value Proposition’ is spread globally satisfaction with a long-term view. realize their potential. In addition, and is an integral part of the DNA of the there are several regional graduate company. 1. Treat all employees fairly and respectfully programs in place, focusing on high- profile graduates with the potential to We made 3,848 hires in 2015 across 2. Ensure transparency of rules and standards become future leaders. This has been a the globe – by leveraging modern ways particular focus in Japan. of talent attraction, including social 3. Provide all JT Group employees with growth opportunities” media such as LinkedIn, Glassdoor, To attract the best, we offer good and Facebook. The number of followers career development opportunities, on LinkedIn rose by more than 50% in 2015 highlights various training, and highly competitive 2015, from 30,000 to more than 70,000, salaries and benefits. In 2015 our making ours the fastest-growing international tobacco business outlined LinkedIn company profile in the tobacco a new Employer Value Proposition: sector. 2015 2014 2015
(*D) 5 NEW HIRES BY 2 11.4% GENDER, 2015 fatalities of management positions were held by women. CERTIFIED EXCELLENCE IN EMPLOYEE CONDITIONS
For 2015 our international tobacco FEMALE business was once again certified as Global Top Employer for our consistent 2,584 1,264 2015 2014 2015 high-quality work environment as one of only eight employers worldwide. (*D) We were recognized by the Top 8 Employers Institute in 35 countries MALE 5 98.4% around the world, and we were the number one employer in Asia Pacific alleged cases of of management positions and number two in Europe. workplace discrimination. were filled by internal hires.
30 31 OUR OUR GROUP OUR WAY OF OUR PEOPLE OUR PLANET OUR CONTRIBUTIONS OUR TOBACCO BUSINESS OUR PHARMACEUTICAL OUR PROCESSED FOOD OUR GROUP SUSTAINABILITY DOING BUSINESS OUR PEOPLE TO SOCIETY BUSINESS BUSINESS JOURNEY OUR PEOPLE OUR PEOPLE
DEVELOPING AND RETAINING TALENT
We aim to offer a work environment Being a responsible employer that allows employees to express their potential and provides them We regard good communication as a vital part of our commitment to being a responsible employer. with the most effective development opportunities. Across our businesses we have an open dialogue with employees, making use of everything from notice boards and face-to-face meetings to web-based channels and electronic communications. All such Our development programs take engagement takes place whether or not a trade union is in place. account of employees’ needs and future career opportunities, as well as requirements of the business. These WORKING WITH TRADE UNIONS programs include training, assignments, international experience, special We aim for open and constructive announced in 2014. The closures are factory in South Africa. Eighty-four projects, coaching, and mentoring. relations with trade unions and works scheduled to take place between 2016 employees will potentially be affected We have a global training catalog that councils, and are supportive of freedom and 2018, affecting around 1,100 jobs. by this decision. We consulted with covers key competences required of association and the right to collective employee and union representatives to be a successful JT Group leader, Employees set their own targets, with talent. In 2015 it expanded its employee bargaining. Even in territories where In February 2015 we decided to cease in accordance with South African such as effective communication and progress confirmed periodically and a share purchase plan offer to 11 new there are no legal requirements, the manufacture and sale of JT brand employment law to discuss all strategic thinking. Partnering with formal evaluation at the end of the fiscal countries, following the pilot program we view freedom of association beverages and this was completed alternative solutions to best support the eight business schools and executive year. Each stage is performed with that was introduced in Switzerland one and the fostering of good relations by the end of September 2015. workforce. education institutes, we also provide line managers; in this way we can help year earlier. with employee representatives as a Following discussions with trade top-class development opportunities. In employees meet both their personal minimum. unions, affected employees – with the In general, employees affected by 2015 about 250 employees took part in objectives and those of the business. Across our businesses, according to exception of those in our beverage closures are given as much notice as executive education programs. geographical location, we offer benefits Fifty-six companies have a union in vending operation subsidiary, which possible, which exceeds minimum We believe employees should have such as healthcare, defined contribution our Group and 92.3%(*C) of eligible was acquired by another company – notice periods required by law, so We also run the JT/JTI Talent ownership of and manage their career pension plans, life and disability employees are covered by collective could remain within the JT Group if they that meaningful discussions with staff Partnership Program that allows development, and in JT, for example, insurance, and parental or nursing bargaining agreements. Trade unions wished. This offer was taken up by 119 representatives can take place and people to move between our Japanese we provide training at specific points of care leave. In JT we have a parental or local works councils represent our people. arrangements can be made to help domestic and international tobacco each employee’s working life. scheme that provides for up to two workforce in 23 countries. people move internally or find jobs businesses. As of December 31, 2015, Developing talent not only helps years of leave for all employees – above In July 2015 we announced that elsewhere. 205 employees took part in these retain employees, but it also helps our the Japanese legal requirement of 18 Our European Works Council, which our Moscow factory will close exchanges. Partly as a result, half of our succession planning by filling open months. consists of employees and managers, in mid-2016, affecting 573 jobs. managers in the corporate and tobacco management positions with internal operates as an employee information Following discussions with employee business headquarters in Tokyo have candidates whenever possible - We run our Employee Engagement and consultation body and meets representatives, staff members international experience. 98.4% (*D) in 2015. Survey to understand what is important several times a year. The council has who lose their jobs will receive for our employees, how to better been at the heart of discussions with compensation significantly above that As part of the Program, we run an Providing competitive compensation engage with them, and identify areas employees over planned closures required by Russian legislation. Exchange Academy that helps young is also key to attracting and retaining where we need to do better. The of our factories in Wervik, Belgium, In October 2015 we announced that we employees learn and network together, talent. As part of the JT Group HR 2015 Employee Engagement Survey and Lisnafillan, Northern Ireland, were considering closing our Wadeville turning them into better future global Management Philosophy, we commit in our international tobacco business leaders. to treat all employees fairly and showed improved scores in 10 out of 12 respectfully, and based on this each categories compared with 2012, when Performance appraisals are an of our businesses designs its own the survey was last carried out. The NON DISCRIMINATION important way of developing employee compensation policy. For example, one area in which scores declined by potential. In 2015, 76% of our our international tobacco business 1% was on organizational direction and Our Codes of Conduct guide the way compensation and benefits, or workforce had appraisals that checked strategically positions its compensation change, where employees had some REPORTED CASES OF we deal with discrimination in the succession planning. on their performance and made levels at 75th percentile versus premier concerns about the pace of change and DISCRIMINATION workplace. recommendations for improvement. companies with which we compete for the Group’s vision for the future. IN 2015 Despite this, there may be incidents of We are determined to foster work alleged workplace discrimination that environments that are free from all need addressing. In 2015 five such forms of unfair discrimination. We do alleged incidents were reported by not allow age, gender, disability, ethnic employees. We reviewed all cases, of MAKING THE MOST OF OUR TALENT PARTNERSHIP PROGRAM origin, marital status, nationality, race, which three required corrective action religion, beliefs, or sexual orientation and were closed in 2015, and the Shigetaro Suzuki joined JT in 1997 as a Shigetaro’s two-year spell in New “The Talent Partnership Program was a to influence decisions about the career other two were closed in 2016 with no tobacco sales representative in Tokyo, Jersey allowed him to work on pricing great way to develop my international 5 progression of employees, nor to be corrective action required. rising to become a brand manager strategy and portfolio development, career.” says Shigetaro, who now works a factor in areas such as recruitment, for Caster cigarettes in 2002. As part as well as on brand management for as a brand manager for Mevius and of our Talent Partnership Program, he our Mild Seven cigarettes brand. After Sobranie in Geneva. “It allowed me to participated in our Exchange Academy his assignment, he returned to Japan, get to know so many people, functions, LOCAL LABOR PRACTICES in 2007 to gain international experience, where he took his newly learned skills and ways of doing international then from 2008 to 2010 he undertook into our Tobacco Business Planning business. I also learned lots of new The hiring of local talent contributes local employees, and our approach is to All our businesses conform with legally an assignment in the U.S.A. as a Division as an emerging product skills along the way, especially in the to the economies of countries and recruit and assign ‘the right person in set local minimum wage levels, and in portfolio development and performance manager. In 2012 he moved to the Mild area of marketing. And on a personal regions in which we operate, and is the right position at the right time’, we many cases are well above these levels manager in our international tobacco Seven brand group, where, as senior level it helped me to improve my a part of our corporate responsibility are mindful of our responsibilities in this due to our policy of offering pay and business. brand manager, he led its rebranding English, to get a better understanding to those communities. While we have area. benefits that are highly competitive. This under the new name of Mevius. of different cultures, and to enhance my no Group-wide policy on the hiring of also applies to part-time employees. presentation skills.”
32 33 OUR OUR GROUP OUR WAY OF OUR PEOPLE OUR PLANET OUR CONTRIBUTIONS OUR TOBACCO BUSINESS OUR PHARMACEUTICAL OUR PROCESSED FOOD OUR GROUP SUSTAINABILITY DOING BUSINESS OUR PEOPLE TO SOCIETY BUSINESS BUSINESS JOURNEY OUR PEOPLE OUR PEOPLE
GENERATIONAL DIVERSITY AND WORK–LIFE BALANCE Equality and diversity We believe that generational diversity One way of doing this is to ensure employees to pay for nursery schools is as important as gender diversity, as a good work–life balance. To help or care for elderly relatives. In 2015 it ensures that different perspectives achieve this, each of our companies we also piloted telework and early bird and experiences feed into our run their own initiatives that take into working schemes in the JT head office at the workplace business. We promote a culture that account local regulations, cultures, as part of a ‘Work Style Reinvention’ values intergenerational learning and work environments. program aimed at determining Having a diverse workforce provides us with different perspectives and outlooks that feed positively into and experience sharing. We do not whether flexible working routines can our business, suggesting new ways of doing things and making us more competitive in the marketplace. discriminate on the basis of employee For example, in JT during 2015 we have a positive effect on employee age or generation and adopt ways expanded childcare and family care effectiveness. We will continue to run In 2015 we employed people from more than 100 countries. Beyond national diversity we value diversity of working that are appropriate to programs that allow employees to and assess this program during 2016. of opinion, allow people to express their own personalities, and create a work environment that fosters all generations represented in our work in more flexible ways, and equality, creativity, and innovation. Our commitment to equal opportunity and anti-discrimination is workforce. we enhanced schemes that help reflected in our Codes of Conduct and in the JT Group HR Management Philosophy.
BREAKDOWN OF EMPLOYEES BY GENDER AND AGE GROUP FEMALE MALE TOTAL GENDER DIVERSITY UNDER 30 2,425 4,597 7,022 managers to discuss ways to create an environment that encourages work–life 30-50 7,268 19,171 26,439 balance for all employees. OVER 50 1,591 6,265 7,856 Female representation within management in JT increased from 2.6% at the end of 2014 to 4.0% at the end of 2015, against our aim of reaching 10% by 2023.
Our international tobacco business is aiming to have 30% female Directors by 2020, with longer-term aspirations to have equal representation at Vice President and Executive Committee level. At the end of 2015, 27.6% of Directors were women, up from 27.0% in 2014. We adopt a gender-neutral approach to In JT we have a Diversity Development recruitment and to create workplaces Department that promotes respect for In 2015 our international tobacco that are attractive to, and supportive diversity of employees and opinions, as business launched a talent development of, women. We are also committed to well as equal opportunities for men and program aimed at preparing 20 raising awareness among employees women. We provide gender diversity employees for senior leadership roles of the importance of gender diversity to awareness-raising workshops for all with significantly higher accountability the health of our business. While 27.3% managerial employees, hold seminars and complexity. Fifty percent of the pilot of our employees are women, only on female empowerment in the group were women. 11.4% of our management (excluding workplace, and have a section on our Executive Officers) is female. We have intranet site that focuses on promoting therefore set targets to increase this diversity. In 2015 additional gender EQUAL REMUNERATION FOR WOMEN AND MEN proportion. diversity workshops were held for all We are committed to gender diversity EMPLOYEES BY POSITION AND GENDER AT THE END OF 2015 and equality, and we do not make decisions about our employees’ pay 3.1% 11.4% on the basis of diversity characteristics 28.8% such as gender. Salary structures in most of our operations across the JT Group are set up to take into account only a position’s significance and responsibilities. This system is designed to ensure equal pay for equal positions, 3,501 37,796 allowing some variability driven only by 65 merit and performance over time but not gender.
96.9% 88.6% 71.2%
EXECUTIVE OFFICER MANAGEMENT (EXCLUDING EMPLOYEES (EXCLUDING FEMALE MALE EXECUTIVE OFFICERS) MANAGEMENT AND FEMALE MALE EXECUTIVE OFFICERS) FEMALE MALE 34 35 OUR OUR GROUP OUR WAY OF OUR PEOPLE OUR PLANET OUR CONTRIBUTIONS OUR TOBACCO BUSINESS OUR PHARMACEUTICAL OUR PROCESSED FOOD OUR GROUP SUSTAINABILITY DOING BUSINESS OUR PEOPLE TO SOCIETY BUSINESS BUSINESS JOURNEY OUR PEOPLE OUR PEOPLE
Workplace health and safety HELPING BIKERS RIDE SAFER Providing a safe and healthy workplace environment for our employees is fundamental to our business. It is also an important way to support sustainable growth, not least because a healthier workforce However, riding a motorcycle can be “Before this training I didn't know contributes more fully to our business. dangerous, especially in areas where roads are bad and weather conditions about cornering; I didn’t know about Our standards on health and safety usually exceed legal requirements and their scope extends beyond are unpredictable. To address this proper braking techniques. With the issue we provide a specially designed new skills I’ve learned I’m going to our employees to cover contractors and visitors in our operations. Well-being programs often also motorcycle risk management program. include family members of employees. teach my colleagues what I know, The program is designed to reduce and at the same time I’m going to risks by riding defensively, and also focuses on the proper maintenance keep practicing what I’ve learned, to WORKPLACE HEALTH AND SAFETY DATA* FY2011 FY2012 FY2013 2014 2015 TARGET and inspection of a motorcycle. It improve myself even further.” emphasizes the necessity to wear proper protective equipment, such GREENWELL MBEWE NUMBER OF EMPLOYEE FATALITIES 1 1 1 2 1 0 For many of our tobacco farming as helmet, gloves, and high-visibility AGROFORESTRY TECHNICIAN NUMBER OF EMPLOYEE LOST-TIME INCIDENTS (LTIs) N/A N/A N/A 113 154 N/A experts, a motorcycle is the only jackets. vehicle enabling visits to remote EMPLOYEE LTI RATE (NUMBER OF LTIs PER 200,000 HOURS tobacco leaf farms. In 2015 more than Selected motorcycle operators also 0.31 0.28 0.26 0.32 0.36 N/A WORKED) 500 motorcycles were in use in our undertake specialized train-the-trainer international tobacco business. sessions that enable them to deliver NUMBER OF CONTRACTOR FATALITIES (*E) 0 0 0 3 1 0 training to other motorcycle users.
NUMBER OF CONTRACTOR LTIs (*E) N/A N/A N/A 12 17 N/A
% OF CIGARETTE AND TOBACCO-RELATED FACTORIES CERTIFIED TO 90.0% 89.7% 85.4% 81.0% 78.9% 100% OHSAS 18001 (*D) NUMBER OF VEHICLE ACCIDENTS (*E) 1,757 1,508 1,362 1,341 1,108 N/A EMPLOYEES’ HEALTH VEHICLE ACCIDENT FREQUENCY RATE (ACCIDENT PER MILLION 8.4 7.1 6.1 5.9 4.8 N/A KILOMETERS) (*E) In JT during 2015 we updated our occupational health and safety policy *Unless otherwise specified, 2015 safety data covers the entire JT Group, while previous years cover scope *D. and established a dedicated site on our intranet to enhance awareness of health issues among employees. We have medical staff of 14 doctors and 36 public health nurses across 11 office SAFETY locations in Japan, offering a health promotion program for the prevention We aim to create safe workplaces production site was surveyed in order to Safety policies, standards, training, of diseases and consultations on by building upon three interlinked address any areas of non-compliance. and focused campaigns are all key to lifestyle issues. They undertake face- components: safety culture, safe instilling a strong and sustainable safety to-face interviews with all full-time workplaces, and safety competence. We regret to say that in 2015 there culture. In our international tobacco employees based on the result of each were two occupational fatalities in our business in 2015, we: medical examination, providing advice There is a uniform understanding of international tobacco business. One on exercise and diet. the importance of safety throughout of our employees contracted malaria 1. Revised our Global Fleet Safety the JT Group, and we maintain robust while on a business trip to Africa, the Policy, extended our Fleet Safety We provide all employees in Japan management systems and assessment complications of which contributed to Program and road traffic safety with annual mental health checks. procedures that identify workplace his subsequent death, and a contractor awareness to motorcycle riders, Anyone found to have high stress levels risks. Of our tobacco-related factories, was electrocuted in Sudan. In addition, and continued running driver safety is offered a consultation with one of 78.9% are certified to the OHSAS 18001 one third-party death occurred in training. In our international tobacco business, our operations with a system for our doctors. We also run seminars for safety management standard, and our Tanzania, where a company vehicle 2. Ran training sessions and awareness in 2015 we finalized a framework that assessment, avoidance, or control of managers on the prevention of stress. target is 100%. collided with a cyclist. workshops for managers and will provide us with a more consistent musculoskeletal problems, which are employees to help them better way to assess employee exposure to one of the main causes of absence from Employees in Japan who have had The highest safety risks across the JT Our lost-time incident (LTI) rate understand all safety risks and their health hazards such as noise and dust. work. We created a bespoke system long periods of sick leave can take Group are associated with operating increased in 2015 from 0.32 to 0.36, role in managing safety. We ran site-based workshops during to help manage data, communication, advantage of a program designed to vehicles for company-related activities, partly due to an increased number 2015 to validate the global application and storage of potentially dangerous help them get back to work, including working at height, and with slips, trips, of incidents within our tobacco 3. Introduced additional training of the framework, and data gathering substances. We also identified and by working shorter hours. and falls. procurement operations, and we will programs for our contractors. will begin in 2016. Once results are in, developed a global pre-travel health target resources to address these we will target sites shown to have the assessment process that will be Working with machinery is also issues. There was a significant reduction greatest risks and will set targets for implemented and rolled out in 2016- a concern, and in 2015, in our in the vehicle accident frequency rate, exposure reduction. 2017. The principle of this confidential, international tobacco business, we from 5.9 (*E) to 4.8 accidents per million online tool is the assessment of developed a set of global standards km. In 2015 we developed an ergonomic individual health status against location for safe operations on machines risk assessment tool that will provide health risk. and equipment, against which each
36 37 OUR OUR WAY OF OUR PEOPLE OUR PLANET OUR CONTRIBUTIONS OUR TOBACCO BUSINESS OUR PHARMACEUTICAL OUR PROCESSED FOOD OUR GROUP SUSTAINABILITY DOING BUSINESS OUR PLANET TO SOCIETY BUSINESS BUSINESS JOURNEY OUR PLANET
OUR GROUP Environmental management
The three main drivers behind our commitment to reducing environmental impacts are our responsibility as a corporate citizen, our business performance, and regulatory requirements.
As a responsible business we recognize that we have an obligation to protect the environment so that future generations can have the same opportunities that we benefit from today. But by reducing our environmental impacts, we can also reduce costs, conserve resources that we are reliant upon, improve our overall performance, and enhance our reputation.
Our company standards always that wherever practicable we reduce objectives and targets. Responsibility Our planet Protecting the environment is a crucial part of our responsibility conform with, and often exceed, our environmental impacts in all the for environmental management rests relevant regulatory requirements. countries in which we operate, with our Executive Deputy President to society, and key to the sustainability of our business. We work to and across our entire value chain. The and with the Group Executive body reduce environmental impacts because it is the right thing to do, Our environmental management Charter is supported by the JT Group monitoring performance. approach is laid out in our Long-term Environment Plan 2020, but also because it delivers benefits such as cost reductions and an Environment Charter, which requires which sets out our environmental enhanced reputation. For our Environment Charter visit: www.jt.com/csr/environ/management/index.html and for historical data on our environmental performance, please visit www.jt.com/csr/environ/data/index.html. We actively identify opportunities to reduce environmental impacts across our value chain, from procurement of raw materials to ENVIRONMENTAL production, distribution, and sales. We aim to make progress MANAGEMENT in four areas: greenhouse gas (GHG) emissions reduction, JT GROUP LONG-TERM ENVIRONMENT PLAN 2020 sustainable water use, waste reduction and recycling, and SYSTEM We strive to harmonize our corporate activities with the conserving biodiversity. We have a formal environmental environment by focusing on four areas: management system (EMS), based on the ISO 14001 standard, that ensures One new challenge for us is to identify and manage a consistent approach across the environmental issues in our supply chain relating to emerging business. All our manufacturing sites are encouraged to obtain ISO 14001 MINIMIZE OUR CONTRIBUTION TO products. certification, while other facilities, such GLOBAL WARMING as distribution centers, can either seek TARGET FOR 20% REDUCTION OF GHG certification or customize their own EMISSIONS AND INTENSITY BY 2020 ISO 14001-based EMS. Smaller sites and offices can also do this on a more 2015 highlights simplified level, allowing them to take account of the nature and scale of PROTECT WATER RESOURCES their operations. In 2015, 100% of our THROUGH SUSTAINABLE USE OF WATER Japanese domestic tobacco business factories and 77% of our international tobacco business factories were ISO 2015 2014 2015 2014 2015 2014 14001 certified. PREVENT WASTE, PROMOTE In 2015 ISO 14001 was revised, and RECYCLING, AND OPTIMIZE 719 756 119 118 9,753 10,234 we are in the process of ensuring RESOURCE USE our systems align with this revised thousand tons of CO e in Scope thousand tons of waste generated thousand m3 of water withdrawn 2 ISO 14001:2015 standard. Where we 1 and 2 identify gaps between our EMS and the revised standard, we will address these CONSERVE BIODIVERSITY THROUGH to ensure continued compliance. PROMOTING SUSTAINABLE STEWARDSHIP OF THE NATURAL ENVIRONMENT We are also making sure that environmental impacts, resulting from 2015 2014 2015 2014 2015 2014 our development of emerging products, are managed in line with the JT Group expectations and are captured within 0.65 0.70 77% 76% 83% 83% our EMS. We are collecting information in this area relating to carbon emissions, tons of CO e per million cigarettes waste recycled ISO 14001-certified cigarette and 2 waste management, and raw materials equivalent for tobacco business tobacco-related factories procurement and use. (including Group factories)
38 39 OUR OUR GROUP OUR WAY OF OUR PEOPLE OUR PLANET OUR CONTRIBUTIONS OUR TOBACCO BUSINESS OUR PHARMACEUTICAL OUR PROCESSED FOOD OUR GROUP SUSTAINABILITY DOING BUSINESS OUR PLANET TO SOCIETY BUSINESS BUSINESS JOURNEY OUR PLANET OUR PLANET
GHG emissions INITIATIVES TO REDUCE OUR OWN GHG EMISSIONS
Climate change is one of the biggest environmental challenges the world faces today. It can have a In Japan during 2015 we replaced the saving energy, generated over 70 changes, factories in our international negative impact on growing patterns and crop yields, as well as on the production of many of the non- use of heavy oil with city gas for a energy saving opportunities during tobacco business made significant boiler in the production of frozen foods 2015, leading to a reduction of around reductions in compressed air use. tobacco materials found in products and packaging across our supply chain. at our factory in Iipingshang Foods 27,700,000 MJ of energy over the year For example, through a combination Corporation, reducing GHG emissions – with an associated carbon reduction of compressor replacement, system Given the close links between climate change, GHG emissions, and energy use, it is in our interest – as by about 600 tons per year. of approximately 2,820 tons of CO2e. improvement, and leak elimination, our well as part of our corporate responsibility – to reduce fossil fuel energy use and GHG emissions. As we Turkey factory reduced its energy use by expand existing operations and develop into new business areas, this is sometimes challenging – for In our international tobacco business The use of compressed air was one approximately 6,560,000 MJ per year, we extended our Energy Opportunities energy-intensive area on which we with an associated CO e reduction of instance because local energy generation is heavily reliant on fossil fuels. 2 Scheme across all of our factories. particularly focused during 2015. around 875 tons per year. The Scheme, which helps to identify Through effective capital investment MANAGING OUR OWN GHG EMISSIONS and implement low-cost ways of as well as behavioral and process
Our sites with significant GHG (Scope 1) and those resulting from our which can have a significant impact on emissions are required to develop consumption of third party-produced GHG emission levels. quantified emission reduction targets energy such as electricity (Scope 2) – by and action plans. This helps us to focus 20% between FY2009 and 2020. We In 2015 we reduced Scope 1 emissions MANAGING GHG EMISSIONS IN OUR VALUE CHAIN on GHG performance and to identify aim to deliver on this target through by 4.5% and Scope 2 by 5.3% over opportunities for improvements. efficiency programs, including those 2014. Savings were largely achieved by As well as our own emissions, we our main raw material. In 2015 we In our international tobacco business identified by ongoing energy surveys continued site-level implementation of address Scope 3 GHG emissions that collected more detailed life cycle data, we are working with logistics partners We have a target of reducing our in our production facilities. We are also energy action plans, which focus mainly are outside our immediate control. which gives us a clearer picture of how to look at ways of reducing emissions absolute GHG emissions – both those examining ways to replace existing on energy efficiency improvements. leaf growing, processing, selection, associated with transportation of that we are directly responsible for energy sources with renewable energy, Since 2011 the JT Group has been and specification can be used to materials and products, and with non- using life cycle assessments to influence and potentially reduce Scope tobacco material suppliers on how to better understand and assess carbon 3 emissions. We are also seeking to reduce emissions from the production emissions associated with the better understand Scope 3 emissions in of materials such as paper and production of tobacco leaf, which is our supply chain for emerging products. cardboard. GHG EMISSIONS IN OUR COMBINED SCOPE 1 AND 2 GHG VALUE CHAIN IN 2015 EMISSIONS (CO2e 1,000 tons) (CO2e 1,000 tons) 1,000 CDP UPDATE
20% REDUCTION 11% 394 ON FY2009 The JT Group has been reporting its 391 385 371 Group-wide GHG emissions and climate 719 356 340 8% 500 change information to CDP since 2012. In 2015 our disclosure score was 100 6% 519 475 out of 100, while our performance score 419 421 382 407 400 379 was B. These scores put us in the top quartile of CDP reporters worldwide.
11% FY FY FY FY 2014 2015 2020 697 2009 2011 2012 2013 TARGET BASE 6,340 YEAR SCOPE 1
SCOPE 2 REDUCING 63% SCOPE 3 GHG EMISSIONS INTENSITY FOR TOBACCO 4,023 (CO e tons/million cigarettes equivalent) EMISSIONS BUSINESS 2
1.00 In Japan we have replaced 0.77 0.72 0.72 wrapping paper of bundling 0.71 0.70 SCOPE 1 AND 2 0.65 20% REDUCTION tobacco products with film. ON FY2009 This would reduce GHG SCOPE 3 0.50 emissions by about 1,200 tons PURCHASED GOODS AND SERVICES per year, mainly because the wrap film that we source from TRANSPORTATION AND DISTRIBUTION suppliers needs less energy to CAPITAL GOODS produce. OTHERS FY FY FY FY 2014 2015 2020 2009 2011 2012 2013 TARGET BASE YEAR
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Resource efficiency – REDUCING WATER water and waste CONSUMPTION In 2015 our CRES Neva factory Overconsumption of resources – leading to the creation of waste and excessive use of water – can be a in Russia began to use recycled cost to business that reduces earnings and shareholder returns. It also has impacts on the environment wastewater in its emissions and can have a negative effect on the communities within which we operate. It therefore has the scrubbers, which filter out potential to damage both our reputation and our relationships with stakeholders. particulates and odor from manufacturing operations. Allied to the installation of additional MANAGING WATER filtration devices at its wastewater treatment plant, this move helped to reduce overall water consumption at CRES Neva by almost 10% per year.
MANAGING WASTE
Our Long-term Environment Plan Waste is also created throughout our 2020 prioritizes waste management value chain, including by producers according to the ‘Reduce, Reuse, of raw materials and by consumers Recycle’ waste hierarchy. By taking when they dispose of our products. We steps to reduce waste we conserve work with farmers to help them reduce Many of our operations, in particular In 2015 our international tobacco Our water risk assessment methodology natural resources, reduce our their waste, and we have schemes to those in our processed food business, business invited 30 suppliers to will take account of physical water environmental impacts, and cut waste educate consumers about the recycling are water intensive. Although our disclose information relating to water risks such as flood and drought, disposal costs. of e-cigarette components (see page factories are located in relatively water- management through the CDP supply which can be exacerbated by climate 73). rich areas, we nonetheless implement chain initiative. This data allows us to change, and will also look at water We have been recording waste data measures to use water efficiently. build up a better picture of water use quality and availability. Physical water since 1995 and have programs aimed Our total waste generation in 2015 This mitigates water risks both for our among our suppliers. risks can have impacts at key stages at improving our waste management increased by 0.8% over 2014. business and for the communities of tobacco cultivation, as the wrong practices, particularly in our factories, within which we operate. We continued the piloting of water quantity of water at the wrong time where most of our waste is generated. risk assessments, which we began can significantly affect crop quality We recycled 77% of the waste we We record and report water withdrawal in 2014, at more than 10 sites across and yield. They can also impact on our generated in 2015, compared with 76% and wastewater discharge at our the JT Group. We will use feedback ability to bring materials and products in in 2014. sites and locations, and take into from the pilots to develop a water risk and out of sites. consideration the framework on water assessment methodology that will be reporting set out by CDP. Our Long- rolled out across our businesses in the term Environment Plan 2020 prioritizes following years. efficient use of water. In 2015 overall water withdrawal decreased by 4.7% from 2014.
WASTE GENERATION (1,000 tons) BREAKDOWN OF WASTE GENERATED IN 2015 (%) WATER WITHDRAWAL (1,000 m3)
15,000 200 RECYCLING 12,113 16% 11,859 145 RECOVERY 11,354 127 124 117 118 119 10,457 10,234 DISPOSAL 10,000 9,753 100 8% 119 1,000 tons
FY FY FY FY 2014 2015 FY FY FY FY 2014 2015 77% 2009 2011 2012 2013 2009 2011 2012 2013
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Biodiversity MIOMBO Biodiversity plays a key role in the provision of ecosystem services. It reflects on the availability WOODLAND and quality of natural resources that are fundamental for environmental conservation and also for enhanced agricultural productivity. For instance, our farmers need a healthy and balanced environment NATURAL to produce tobacco, which is usually grown in biologically diverse areas. We work with farmers to REGENERATION maintain this diversity and to help them understand the importance of efficiently managing natural resources and the environment. PROJECT
In Western Zambia we are starting to promote the rehabilitation of degraded Miombo woodland areas by engaging with national stakeholders and local communities in a specific project. We are pursuing the introduction of sustainable management practices and harvesting regimes that will contribute to maintain and/ or enhance the conservation of the Miombo woodland in areas where we have tobacco growing communities.
MANAGING BIODIVERSITY
Our Long-term Environment Plan 2020 Our international tobacco business They also pay particular attention to outlines our commitment to assess the has programs to encourage farmers complying with all environmental laws impact of our worldwide operations on to maintain biodiversity through the on protected areas and natural reserves. biodiversity. In 2015, in conjunction with adoption of environmentally responsible Engagement with farmers on these the Society for Wildlife Research and farming practices, including soil topics is crucial to achieving success Environmental Education in Brazil, we conservation and water-use reduction. in managing the environment and developed an approach to assessing Our agronomy experts see biodiversity conserving biodiversity. biodiversity on tobacco farms that we as a fundamental aspect of tobacco are currently piloting with small-scale production, which they build into a crop We also work with universities and tobacco farmers in the state of Paraná. management approach that considers, NGOs to help us with research on the Once the results of this pilot have been among other things, the environmental fauna and flora in tobacco growing analyzed, we will consider extending and ecosystem services provided by areas and to provide advice on the model to other tobacco growing biodiversity (i.e. water quality and soil restoration and conservation projects, areas. condition, pollination, pest control, for example in Brazil and Zambia. climate balance, and wood resources).
BIODIVERSITY INITIATIVES
Our international tobacco business is carrying out a variety of biodiversity projects around the world.
In our Agronomy, Development, Extension, and Training (ADET) center in Brazil, for example, we are preserving 68.5 hectares of remnants of the Atlantic Forest in Santa Cruz, and have been carrying out studies of fauna and flora in conjunction with a local university. We are also looking at alternative biological pest control methods in Brazil, and at promoting a wider diversity of beneficial insects through organic farming.
44 45 OUR OUR WAY OF OUR PEOPLE OUR PLANET OUR CONTRIBUTIONS OUR TOBACCO BUSINESS OUR PHARMACEUTICAL OUR PROCESSED FOOD OUR GROUP SUSTAINABILITY DOING BUSINESS OURTO SOCIETY CONTRIBUTIONS BUSINESS BUSINESS JOURNEY TO SOCIETY OUR CONTRIBUTIONS TO SOCIETY
OUR GROUP Refining our approach
It is our choice as a corporate citizen to contribute to the communities in which we operate. We do this through financial investments, employee volunteering, and the endowment of a charity, the JTI Our Foundation (www.jtifoundation.org). We are guided in this area by the JT Group Corporate Citizenship Activity Policy, which focuses on four areas: social welfare, arts and culture, environmental protection, and disaster management.
contributions In 2015 we increased our focus on measuring the impact and value of our contributions to society, and on how to manage our programs more effectively. To help us do this, we became a member of LBG (www.lbg-online.net), the global standard for measuring corporate community investment. As part of a phased approach, in 2015 we initially supplied figures to LBG only for our international tobacco to society business, covering contributions made during 2014. But within the next five years we expect to have captured the full picture of our global contributions to society.
Photo: K. Miura
2015 highlights EXTERNAL RECOGNITION
2015 2015 2015 We received national awards for our community projects in Belarus, where we support Japanese cultural heritage, art programs, and programs aiming to improve adult education, and in Kyrgyzstan, for our support of the Equal 8,967 64 Opportunities social rehabilitation center for people with disabilities. In South million Yen contributed to society, countries in which we have Africa we won awards for our backing of the Building Blocks Foundation, representing 1.6% of our profit community investment programs. In the U.K. we were awarded the before income taxes. which improves public sanitation in the CommunityMark for city of Alexandra, and for our support excellence in community investment of the Johannesburg Philharmonic by Business in the Community. We Orchestra. are one of only 36 current holders.
46 47 OUR OUR GROUP OUR WAY OF OUR PEOPLE OUR PLANET OUR CONTRIBUTIONS OUR TOBACCO BUSINESS OUR PHARMACEUTICAL OUR PROCESSED FOOD OUR GROUP SUSTAINABILITY DOING BUSINESS OURTO SOCIETY CONTRIBUTIONS BUSINESS BUSINESS JOURNEY TO SOCIETY OUR CONTRIBUTIONS TO SOCIETY OUR CONTRIBUTIONS TO SOCIETY
EMPOWERING WOMEN IN TURKEY RECOGNITION FOR OUR COMMUNITY WORK IN RUSSIA
In 2015 we were recognized to be its six-year-long charitable program. Russia’s Leaders of Corporate Charity providing the best projects for socially This has enabled 120,000 elderly organization in recognition of the robust disadvantaged groups in Russia – for people to take part in activities such way we evaluate the effectiveness the second year running. The Best as attending the theater, learning of our social programs. The prize Social Projects in Russia award – run computer skills, and learning first aid. was awarded by PwC alongside the by the government of Moscow, the More than 35,000 people have been Vedomosti business newspaper and the Agency for Strategic Initiatives, and the provided with home appliances and Russian association of grant-making Moscow Department for Environmental groceries, and 600 have been provided organizations, Forum Donorov. Management and Protection – praised with accommodation. In 2015 we our international tobacco business for also received a special prize from
SUPPORTING FLOOD VICTIMS IN SERBIA
The scale of flooding that swept through the Balkans in 2014 was extremely high, and the damage was so extensive that clean-up efforts continued for many months.
In Serbia, the JTI Foundation initially supported these efforts by providing dewatering pumps and protective suits for emergency workers. Then, in the As part of our efforts to support equal A total of 90 women, from economically “It gave me inspiration and it helped city of Sabac, it supported a program opportunities, in 2015 our international disadvantaged communities in me build up the courage to start out implemented by Covekoljublje to tobacco business developed a program Gaziantep, Izmir, and Kastamonu, took on my own,” she says. “As a result, I help 40 farming families restart food in Turkey to help women set up their part in the first year of the program, think I’ve set a good example for other production, by providing seeds and own small businesses. and each will be provided with follow- women around me, and some of my greenhouses. In partnership with up support as their new companies friends have now started to set up their the Belgrade-based NGO Housing The initiative, called My Inspiration Is develop. entrepreneurial projects.” The Women Center and the city of Sabac, the JTI My Future, is based around a 12-day Entrepreneurs Council of the Foundation also helped to rebuild training provided by Bogazici University The program will be expanded to other Union of Chambers and Commodity a soup kitchen that had been badly Life Long Learning Center, with support cities in Turkey in the following years. Exchanges of Turkey selected My damaged by the floods, benefiting from the endorsement of the Turkish Inspiration Is My Future as one of the more than 1,000 vulnerable residents government. The training concentrates Pelin Pelis, a graduate of the initiative six best programs implemented in by securing them one hot meal on five not just on developing business who subsequently set up a training and Turkey. days of the week. knowledge but also on building up activity center for children, stated that interpersonal skills. she would not have been able to do The Foundation’s programs in Serbia so without the support she received. were all completed by June 2015.
© TANJUG
48 49 OUR OUR WAY OF OUR PEOPLE OUR PLANET OUR CONTRIBUTIONS OUR TOBACCO BUSINESS OUR PHARMACEUTICAL OUR PROCESSED FOOD SUSTAINABILITY DOING BUSINESS TO SOCIETY BUSINESS BUSINESS JOURNEY
Bruno Klara Duguay Skrivankova
SENIOR VICE PRESIDENT EUROPE PROGRAMME AND COMPLIANCE AND CSR ADVOCACY CO-ORDINATOR JT INTERNATIONAL ANTI-SLAVERY INTERNATIONAL
“The JT Group often operates rights of our stakeholders, and “Complex globalized greatest, no industry or a in areas of the world where can make a positive impact economy with value chains company can safely say that human rights may be at risk. on the communities within stretching across countries their supply chains are slavery- We can make a difference in which we operate. At the same In focus and continents brings with free, wherever in the world they these regions by making sure time we hope to reduce risks it human rights challenges. operate. Recent legislation, that the highest standards of to the company that can occur Under the UN Guiding such as the California behavior are upheld within through exposure to human RESPECTING Principles on Business and Transparency in Supply our value chain. rights violations. Human Rights, businesses Chains Act, the U.K. Modern have the duty to respect human Slavery Act 2015 and the We have made significant We know, however, that there rights. When it comes to grave amendment to the US Tariff progress on some specific areas is still much to do. While the HUMAN violations like slavery, the duty Act in February 2016, reflect of human rights, including human rights policy will be goes beyond. If a risk of slavery that slavery is a serious issue by working to prevent child an important foundation for is identified within a supply in supply chains. labor in tobacco farming our activities in this area, we chain, businesses need to act communities. But more know that only by applying to remedy the situation and Transparency and open generally we have aimed to an appropriate level of due prevent it from occurring in acknowledgement by businesses send out a strong message by diligence will we take the RIGHTS future. The risk here is more that these challenges exist in recognizing the importance of next steps to implementing it than just human suffering their supply chains is becoming human rights in our Codes of thoroughly.” and brand reputation – no a benchmark of leadership. Conduct, and, by developing law abiding business can First step to achieving this a human rights policy with condone serious crimes, such is working with others to input from external subject as forced labor and human reach greater visibility along ABOUT matter experts, that expresses trafficking, within their supply chains and address KLARA SKRIVANKOVA our commitment to the UN business operation. the salient human rights Klara leads the Programme and Guiding Principles on Advocacy work of Anti-Slavery risks to those working within Business and Human Rights International in Europe. She Modern slavery is one of these chains or affected by a that we plan to launch in specializes in business accountability, the most serious issues that company’s operations. Working migrant rights, labor rights, anti- 2016. By taking these steps we trafficking responses and addressing concerns global businesses with others – including with believe we can reduce the risk forced labor in supply chains. She has today. It is estimated that over civil society organizations – of infringing on the human held various advisory posts at the UN, 21 million people in the world should be fundamental to the EU and the Council of Europe. She are affected, with most people business model of any modern, is also a Programme Adviser to the Joseph Rowntree Foundation and a in slavery being in Asia. While responsible business. Having co-founder of the UK Trafficking Law industries such as agriculture, embraced this collaborative and Policy Forum. fishing or garment production model of working, tobacco are most commonly cited as businesses are on course to those where the risk is the demonstrate this leadership.”
50 51 OUR OUR WAY OF OUR PEOPLE OUR PLANET OUR CONTRIBUTIONS OUR TOBACCO BUSINESS OUR PHARMACEUTICAL OUR PROCESSED FOOD SUSTAINABILITY DOING BUSINESS TO SOCIETY BUSINESS BUSINESS JOURNEY STRENGTHENING OUR FOUNDATIONS DEVELOPING DUE AGRICULTURAL LABOR PRACTICES – ARISE: OUR CONTRIBUTION TO HOW WE ARE SETTING THE STANDARD AND IMPLEMENTING IT IN A MEANINGFUL WAY We already focus on addressing human rights DILIGENCE PREVENTING CHILD LABOR issues in several areas, for instance within our TAKING RESPONSIBILITY own workforce and in terms of good labor FOR OUR SUPPLY practices among our farmers. But to broaden our As part of our business strategy we occasionally buy CHAIN – CREATING TRANSPARENCY DEVELOPMENT IMPLEMENTATION Community members Children off other companies or set up joint ventures, often in AROUND THE ISSUES understanding of where risks might lie elsewhere educated in child labor farms and into emerging economies. To be able to better assess any across our Group and in our supply chain, in elimination schools 2015 we interviewed more than 100 executives human rights issues related to such arrangements, in our international tobacco business across 16 in 2015 our international tobacco business began formalizing a more detailed set of human rights criteria % of our farming experts trained on ALP countries, asking them about what they perceived 30% 94% 100% to be the biggest human rights risks and how within the due diligence process for joint ventures and BRAZIL Developing a clear our business might prevent and mitigate such acquisitions, and the resulting criteria will gradually standard together with 2015 2015 risks. We carried out a similar exercise in Japan, expand to cover all of our relevant transactions in the farmers and the ILO where we engaged with 20 different parts of the future. Localizing the business to better understand potential human standard and defining 5,244 1,074 TOGETHER WITH IMPROVING OUR what its implementation % farmers with ALP observations FARMERS 7% 100% rights risks. means for each country 1% 2014 2014 SUPPLY CHAIN Making the standard a In 2015 we began work on drafting a JT Group contractual requirement Human Rights Policy that will align with the for each of our farmers 4,199 998
UN Guiding Principles on Business and Human Making it publicly Rights. The Policy, which is being developed in Given that we work with so many suppliers in so many available Investment through Improvement social programs measures through consultation with stakeholders, will formalize and different countries, it is important that we are aware targeted investment in social programs detail our commitment to respect human rights of all the human rights risks in our supply chain. This 2015 MALAWI 2015 within our operations and in our value chain and allows us to manage our supply chain responsibly. will be launched in 2016. Our work on human rights risks associated with 15,346 3,041 In 2015 we carried out research on potential directly contracted farmers, who make up 50% of SETTING CLEAR Adapting our approach, our Target to have ALP implemented with 2014 2014 human rights risks related to our stakeholders. The our tobacco leaf supply chain, has been carried out EXPECTATIONS FOR training materials, and our 100% of our leaf suppliers by 2019 In focus THE COMPANIES WE contracts to make ALP work for results of this work will guide the development primarily through our Agricultural Labor Practices (ALP) BUY TOBACCO FROM the merchants from whom we buy of our human rights due diligence process, program run by our international tobacco business. around 50% of our tobacco 3,342 2,697 which includes the identification, management, This program provides transparency around the issues monitoring, and reporting of key issues. within our supply chain and allows us to better target RESPECTING 2013 2014 2015 2016 2017 2018 2019 our improvement investments in social programs ZAMBIA such as health and safety trainings, Grower Support 2015 2015 Programs (see page 62), and the activities of the ARISE established across generations, requires a culturally program (see page 55). In 2015 we began to expand sensitive and rigorous approach. ALP to the leaf merchants from whom we buy the 11,570 5,322 Our ALP clearly defines the standards expected of HUMAN other 50% of our tobacco leaf supply. our directly contracted farmers in terms of preventing 2014 2014 We also built on this work by developing a draft child labor, respecting workers’ rights, and maintaining PREVENTING CHILD LABOR framework for screening all key non-leaf suppliers adequate health and safety measures. The way we 10,449 1,817 in our international tobacco business against define child labor, and our approach to dealing with In addition to our work with all directly contracted fewer, more stubborn, cases. While progress is being sustainability criteria that include a number of human it, was developed together with the ILO. Our practices farmers through ALP, we have the ARISE program, made through ARISE, the job of changing cultural rights issues (see page 59). Beyond this initiative, follow ILO Conventions C138, C182, C184, and R190. which aims to address root causes of child labor in perceptions that underpin child labor in remote rural human rights impacts in the wider supply chain will tobacco growing. This was developed in partnership communities is long-term. be a key element of our due diligence process as it is All directly contracted farmers have signed up to ALP with Winrock International (an NGO that specializes clauses in their contracts with us. To make sure that RIGHTS in agricultural development) and the ILO. ARISE also provides wider support to communities extended to each country in which we operate. ALP standards meet local circumstances in which the where child labor may be prevalent, including farmers operate, we have localized versions in each The program, which covers Brazil, Malawi, through nutrition programs and water irrigation RESPECTING WORKPLACE IMPLEMENTING OUR AGRICULTURAL country from which we directly source tobacco leaf. Zambia, and, from 2015, Tanzania, tackles social systems. As a direct result, more than 20,000 RIGHTS LABOR PRACTICES and economic factors that tempt farmers to children were benefiting from three or more meals We participate in the Social Responsibility in Tobacco One of our main focus areas to date has been on employ children. ARISE engages with agricultural per week by the end of 2015, and irrigation systems Production (SRTP) program, an industry initiative that training our farming experts on ALP so that they communities through the distribution of educational had been established across 80 hectares of land. BRINGING CHILDREN BACK TO Our Codes of Conduct lay out our responsibilities aims to address good agricultural practices and social can adequately observe labor practices during farm materials, after-school tutoring, and mentoring or visits and provide advice on making the necessary vocational training for older children. In this way SCHOOL BY DRILLING BOREHOLES toward respecting human rights in the workplace. and environmental issues associated with growing and IN TANZANIA We respect the rights of our employees to processing tobacco. improvements. We have now managed to train 100% we aim to improve understanding of the value of of our farming experts, who have started to observe education as well as the prospects and prosperity freedom of association and collective bargaining, OUR ARISE PROGRAM 7% of our directly contracted farmers in the crop it can bring. When children move from working for One of the key aspects of fighting child labor in and we do not tolerate discrimination in any form In 2013 we decided that the SRTP program, which HAS IMPROVED THE (see page 33). is based on self-assessment by leaf suppliers, does seasons ending in 2015. Based on these observations their family into education, ARISE enables parents the tobacco farming communities is to tackle the not in itself provide enough data or transparency. we will be able to develop tailored improvement or guardians to replace any lost income through our LIVELIHOODS OF circumstances that prevent children from going to Family Support Scholarships. In 2015 we received 81 alleged cases of human We therefore created our ALP program, which has programs for farmers in the near future. We also expect school, thereby making them more vulnerable to the number of observations to increase over the next rights violations in the workplace, six less than complemented SRTP and has helped us make progress being used as workers in the fields. In the few years and remain on track to achieve our target of In 2015 ARISE took approximately 26 children out 2014. We have reviewed and closed 74 of towards understanding and addressing human rights semiarid Tabora Region of Tanzania, some children them, with 48 requiring the implementation risks associated with our directly contracted farmers. covering 100% of our farmers by 2019. of child labor every day, provided 32,160 people with education about child labor, and gave 1,859 are unable to get to school because they spend of a remediation plan, such as termination of many hours of the day collecting water for their employment, written and verbal warnings, In 2015 we asked merchants who supply us with households an improved income. Results in Malawi While we are encouraged by the increased families. Water is scarce in most villages, and wells training, and general messages issued in the tobacco leaf to begin to implement ALP among were particularly improved as we extended the reach 1,859 transparency we have brought about through ALP, we can be miles away. To help with this problem, our workplace to prevent similar cases occurring. recognize that effecting serious change is a long-term the farmers they source from. We expect this of ARISE during 2015, and in Zambia we began HOUSEHOLDS IN BRAZIL, implementation also to be complete by 2019. to realize the cumulative benefits of entering into international tobacco business has drilled seven The remaining seven are still in the process of journey – one we remain fully committed to. However, ZAMBIA AND MALAWI IN 2015 investigation. There were no pending cases from bringing about even a gradual shift in cultural norms, the third year of the program. As more children are boreholes in five Tabora villages, supporting 4,672 2014. taken out of child labor, the focus tends to switch to households. This will cut down journey times and enable children to get back to their education.
52 53 55 OUR OUR WAY OF OUR PEOPLE OUR PLANET OUR CONTRIBUTIONS OUR TOBACCO BUSINESS OUR PHARMACEUTICAL OUR PROCESSED FOOD SUSTAINABILITY DOING BUSINESS TO SOCIETY BUSINESS BUSINESS JOURNEY OUR BUSINESSES
OUR BUSINESSES Our tobacco business INTERNATIONAL TOBACCO BUSINESS IN 2015 THE MATERIAL ISSUES FOR SALES EMPLOYEES OUR TOBACCO BUSINESS ARE:
SUPPLY CHAIN MANAGEMENT 59 Our tobacco business manufactures Our global flagship cigarette brands 1,317.2 6,642 16,435 and sells cigarettes, cigars, cigarillos, include Winston, Camel, Mevius, LD, BILLION YEN FEMALES MALES snus, roll your own, pipe and water Benson & Hedges, Glamour, Silk Cut, PRODUCT SAFETY AND 64 pipe tobacco, e-cigarettes, and other and Sobranie, while our Japanese PRODUCT RESPONSIBILITY SALES VOLUME CIGARETTE tobacco-based products. We sell these key brands include Seven Stars and AND TOBACCO- products in over 120 countries, and our Pianissimo. RELATED LAWS AND REGULATIONS 66 main markets are France, Italy, Japan, 393.9 FACTORIES Russia, Spain, Taiwan, Turkey, and the Total sales volume across our tobacco BILLION CIGARETTES 31 POLITICAL AND REGULATORY 66 U.K. business amounted to 503.1 billion DECISION-MAKING PROCESSES cigarettes in 2015, with a turnover of JAPANESE DOMESTIC TOBACCO BUSINESS IN 2015 At the end of 2015 we had 38 cigarette 1,994.5 billion Yen. and tobacco-related manufacturing SALES EMPLOYEES RESPONSIBLE MARKETING 67 facilities around the world – seven in Japan and 31 elsewhere. Tobacco leaf 677.3 1,267 8,203 ILLEGAL TRADE 68 is sourced directly from about 42,000 BILLION YEN FEMALES MALES farmers in seven countries. PRODUCT INNOVATION AND 70 SALES VOLUME CIGARETTE INTELLECTUAL PROPERTY AND TOBACCO- RELATED 109.2 FACTORIES BILLION CIGARETTES 7
Our pharmaceutical business PHARMACEUTICAL BUSINESS IN 2015 THE MATERIAL ISSUES FOR OUR PHARMACEUTICAL BUSINESS ARE: SALES EMPLOYEES Our pharmaceutical business conducts for sales of our products, including PRODUCT SAFETY AND 76 research and development (R&D) Riona Tablets (hyperphosphatemia), PRODUCT RESPONSIBILITY through the Central Pharmaceutical Remitch Capsules (anti-pruritus), and 75.6 347 1,492 BILLION YEN FEMALES MALES Research Institute (three sites in Japan) Truvada Combination Tablets and and our subsidiary, Akros Pharma Inc. Stribild Combination Tablets (anti-HIV). PRODUCT INNOVATION AND 76 (one site in the U.S.A). We largely focus Outside Japan, we license our products PRODUCTION INTELLECTUAL PROPERTY on three therapeutic areas: glucose to other pharmaceutical companies SITES and lipid metabolism, anti-virus, and and thus have no sales force. Annual RESPONSIBLE MARKETING 77 immune disorders and inflammation. turnover in 2015 was 75.6 billion Yen. In Japan, our subsidiary Torii 1 Pharmaceutical Co., Ltd. is responsible
Our processed food business PROCESSED FOOD BUSINESS IN 2015 THE MATERIAL ISSUES FOR OUR PROCESSED FOOD BUSINESS ARE: SALES EMPLOYEES Our processed food business focuses and pastries). We produce our goods SUPPLY CHAIN 79 primarily on the Japanese market in 31 of our own factories and in over MANAGEMENT and is operated by TableMark group 50 subcontracted factories around the 165.8 2,674 3,124 BILLION YEN FEMALES MALES of companies. Key brands are Sanuki world. Turnover in 2015 was 165.8 PRODUCT SAFETY AND 80 Udon (frozen noodles and frozen rice), billion Yen. PRODUCT RESPONSIBILITY Takitate Gohan (packed cooked rice), PRODUCTION and Bakers Select (frozen baked bread SITES 31 56 57 OUR OUR WAY OF OUR PEOPLE OUR PLANET OUR CONTRIBUTIONS OUR TOBACCO BUSINESS OUR PHARMACEUTICAL OUR PROCESSED FOODOUR BUSINESSES SUSTAINABILITY DOING BUSINESS TO SOCIETY OUR TOBACCO BUSINESS BUSINESS BUSINESS JOURNEY OUR TOBACCO BUSINESS
OUR BUSINESSES Supply chain management
Our tobacco supply chain is large and complex, and we recognize that we need to work with our partners within it. All suppliers to our tobacco businesses are expected to uphold the standards set out in the JT Group Responsible Procurement Policy, the JT Group Principles in Leaf Tobacco Production, and our new JT Group Supplier Standards. Our Our tobacco business has two parts. Our Japanese domestic In 2015 our international tobacco Directly contracted tobacco farmers believe this will provide us with a better tobacco business makes and sells tobacco products primarily business began work on developing an – as well as the merchants that we risk management focus while allowing in Japan, and owns brands such as Mevius and Seven Stars. IT-based supplier life cycle management buy processed tobacco from – are a us to exceed our European Union tobacco system that will enable assessment of key component of our supply chain. requirements in this area. Our international tobacco business makes and sells brands all our non-leaf suppliers for the first In our international tobacco business time, with different levels of certification we monitor these farmers through our In 2015 the JT Group Principles in Leaf such as Winston and Camel in certain parts of the world, based on supplier risk profiles. We Agricultural Labor Practices program Tobacco Production, which have been with the main markets being France, Italy, Russia, Spain, believe this system, which we expect (see page 52). in place since 2013, were incorporated business to be ready for implementation in 2017, into all contracts with tobacco farmers Taiwan, Turkey, and the U.K. Together, these businesses will lead to a better understanding of In 2015 we conducted a review of in Japan. This commits farmers, and manufacture and sell cigarettes, cigars, cigarillos, snus, roll the risks and challenges our suppliers our Know Your Supplier policy in our the JT Group, to abide by the Principles face, and will allow us to help them to international tobacco business and and to take remedial steps if non- your own, pipe and water pipe tobacco, e-cigarettes, and other increase their capacity to uphold our adjusted its scope to focus on logistics compliance is found during visits by one tobacco-based products. standards. suppliers, including transportation and of our 100 farming experts. warehousing service providers. We
Regulatory landscapes are challenging, and we must respond quickly to new consumer trends and demands.
Our sustainability issues include product safety and responsibility, responsible marketing, and the need to develop innovative and reduced-risk products. We must also combat TOBACCO BUSINESS VALUE CHAIN the illegal trade, work with governments and society, and
manage social and environmental supply chain issues. OUR SUPPLIERS
2015 highlights TOBACCO LEAF OTHER PRODUCTS AND SERVICES OTHER MATERIALS ABOUT ABOUT ABOUT
42,000 29,500 SUPPLIERS 450 SUPPLIERS DIRECTLY CONTRACTED FARMERS AND 12+ MERCHANTS AND THEIR FARMER BASE (EACH PROVIDING APPROXIMATELY HALF OF OUR LEAF)
In 2015 we ran our test purchases program in around 2015 In Japan we have OUR COMPANY responded to more than 3,500 U.K. shops TO CHECK IF ID IS BEING (*E)
REQUESTED BY RETAILERS. The program won 8 LEAF THRESHING 4 LEAF STORAGE Retail Newsagent magazine’s Supplier Initiative of the Year AND PROCESSING WAREHOUSES 30 FACTORIES OFFICES FACTORIES Award. 7% 16,000 of our directly contracted requests for advice and farmers are observed and assistance, and have on implementing our helped set up more than OUR CUSTOMERS & CONSUMERS OUR ANTI-ILLICIT WE LAUNCHED A NEW Agricultural Labor TRADE TEAM GAVE BRAND of E-Lites – E-Lites Practices. BUSINESS 709 TIP-OFFS to law Curv – in the U.K. and Ireland, 6,000 DISTRIBUTION enforcement agencies bought Logic Technology smoking facilities to create 500+ WAREHOUSES SALES IN 120+ (down from 850 in 2014), Development LLC, the third a better environment for COUNTRIES leading to the seizure largest maker of e-cigarettes in smokers and non-smokers of more than 1 billion North America, and acquired since 2004. illegal cigarettes. full rights to market Ploom worldwide. 58 59 OUR BUSINESSESOUR OUR WAY OF OUR PEOPLE OUR PLANET OUR CONTRIBUTIONS OUR TOBACCO BUSINESS OUR PHARMACEUTICAL OUR PROCESSED FOODOUR BUSINESSES SUSTAINABILITY DOING BUSINESS TO SOCIETY OUR TOBACCO BUSINESS BUSINESS BUSINESS OUR TOBACCO BUSINESSJOURNEY OUR TOBACCO BUSINESS
Tobacco supply chain PRESERVATION OF TOBACCO FARMING strategy and approach
The foundation of our tobacco supply chain strategy is to maintain a supply of quality tobacco leaf over Inpu ts the long term, thereby creating value both for the JT Group and for tobacco farming communities. Our e m c an vision for sustainable international tobacco procurement is to ‘lead in sustainable leaf supply’ and is i a r g P e underpinned by four key strategic goals: m
e n
1. Preservation of tobacco farming t 2. Social and environmental leadership 3. Operational excellence Long-term 4. Secured leaf access farmer profits
B LEAF STRATEGY es s E t e n n fa ic g a r ct si b ming pra e le d d r re la in sustaina la du ing ble tio mo ead lea ns d L f hips , an n: su , innovation io p is p V ly
Our business will not succeed unless we had 382 farming experts in place. Preservation Social and INNOVATION AND BETTER the farmers who supply us make a profit During 2015 we began to buy tobacco FARMING PRACTICES of tobacco environmental and can continue to grow the tobacco leaf directly from farmers in Tanzania, farming leadership we need. Some factors that feed into and had 44 farming experts in operation Our Agronomy, Development, profitability – such as the weather – are there. Extension, and Training (ADET) centers 2 outside of our control. However, we in Brazil and Zambia explore ways of 1 improving quality and productivity in Operational Secured can influence areas such as cost of MODELING SUSTAINABLE tobacco farming. Both carry out trials M production, yield, quality, and price. exellence leaf access t i s FARMER RETURNS on topics such as crop management, s To do this, we take a ‘modular design s o soil fertility, improvements in curing- i c approach’ rather than a one size fits all In Brazil, Malawi, Serbia, the U.S.A, o t barn efficiency, production cost savings, n s solution, adapting our methods to local and Zambia, we have a farmer returns : e S situations. tool that helps us to settle on a price mechanization, and agroforestry. The e b c e that we agree with farmers each year. results of research are passed on to u th farmers, including through training – re 3 4 t We have implemented a farmer profits The tool – which takes into account l a factors such as local conditions, costs, with the aim of continually working on af model in all countries where we directly g- le source tobacco leaf outside of Japan. risks, and quality of tobacco – also toward best farming practices. In our ter lity Brazil ADET center during 2015 we set m sup f qua Under this model, we work with farmers allows us to check that average prices ply o to ensure they have access to the right paid over multiple crop cycles provide up a laboratory to examine the DNA growing materials and that they use the a sustainable profit for farmers and do of tobacco plants, which we hope will best methods to maximize the quality not expose them to wild fluctuations in help us to better predict which kind and yield of leaf. We also encourage income from year to year. The farmer of varieties are likely to show the best crop rotation to provide an alternative returns tool will be introduced into growing characteristics. Outside of our income, improve food security, and Tanzania in 2016. ADET program, our farming experts promote soil preservation. also hold training days at farms where a local farmer has been recognized SUPPORTING PRODUCTION for particular skill and commitment – MANAGING DIRECT COST SAVINGS allowing other farmers to learn from RELATIONSHIPS WITH We help farmers save money and their example. For example, by the end FARMERS increase profits by enabling them to of 2015 we had 189 such ‘model farms’ in Zambia, up from 108 in 2014. Our local farming experts build and become more efficient in the way they maintain strong relationships with grow, harvest, and cure tobacco leaf – We developed comprehensive minimum our directly contracted farmers in for instance through more efficient use agronomic standards in 2010, and since order to help them improve tobacco of fertilizers and agrochemicals. We then have worked with all our farming production techniques and increase also buy many input materials in bulk experts to ensure they are adopted. their profitability. Across Brazil, Malawi, and pass the savings onto our farmers. Supporting materials have been tailored Serbia, Tanzania, and Zambia, in 2015 to the needs of different countries.
60 61 OUR BUSINESSESOUR OUR WAY OF OUR PEOPLE OUR PLANET OUR CONTRIBUTIONS OUR TOBACCO BUSINESS OUR PHARMACEUTICAL OUR PROCESSED FOODOUR BUSINESSES SUSTAINABILITY DOING BUSINESS TO SOCIETY OUR TOBACCO BUSINESS BUSINESS BUSINESS OUR TOBACCO BUSINESSJOURNEY OUR TOBACCO BUSINESS
SOCIAL AND ENVIRONMENTAL LEADERSHIP OPERATIONAL EXCELLENCE
We need to make sure our operations are well equipped to support our supply chain. To help us do this, we have a set of key performance indicators covering product quality and yield, cost, capital, and employees’ health and safety. These indicators give us a real-time overview of our performance and provide a way to manage the unexpected, allowing us to deliver on our business commitments. We use custom-made enterprise resource planning (ERP) software to help us collect and interpret tobacco growing and processing data that are essential to determining yields and quality. ERP software also allows us to monitor health and safety performance in our leaf threshing and processing plants and labor practices in the fields. This in turn enables us to ensure an uninterrupted supply of quality tobacco.
We can contribute to improvements in In 2015 we carried out impact consumption compared to conventional social conditions in tobacco farming assessments of the benefits of GSPs barns. SECURED LEAF ACCESS communities not just by helping in Malawi and Zambia. These found farmers to maintain profitability in that the GSPs had significant positive Barn construction techniques By working in close partnership with our farmers, we put ourselves in a the long term but by making targeted impacts on local communities, Wood is often used to build barns for better position to address the economic, social investments that enhance the especially in terms of improved curing. We encourage farmers to build social, and environmental factors quality of life in their communities. education and access to water. We ‘live barns’ by planting trees that grow that influence the long-term supply of We can also help them improve the are now developing a formal three- to form the main structure of a curing tobacco leaf. We therefore build up natural environment in which they year framework for monitoring and barn within three years. This avoids the direct relationships with farmers and, live and work, notably by supporting evaluation of GSPs. need for maintenance and a continuous wherever possible, purchase tobacco initiatives that move toward providing a supply of wood for construction, directly from them, rather than from sustainable supply of wood. reducing wood consumption by 70%. ENVIRONMENTAL – traders on auction floors. This helps New live barns are being planted every SUSTAINABLE WOOD secure access to high-quality tobacco year in Malawi and Zambia, in areas SOCIAL leaf in a responsible manner. We also Wood is used for tobacco curing in where we grow Burley tobacco. Through our Agricultural Labor many regions, both as a fuel and for form partnerships with NGOs, leaf Practices program (see page 52), we merchants, governments, and other building barns. A sustainable supply We will achieve 100% cumulative work to promote the rights and safety stakeholders to help us responsibly of wood is therefore key to ensuring live barn coverage by 2016 in Eastern of tobacco farmers and those who tackle potential issues in our tobacco a long-term supply of tobacco leaf. Province of Zambia, meaning that when work on their farms. In addition, our supply chain. We work with tobacco farmers to the trees planted reach maturity stage, social programs strive to enhance living educate them on the environmental and conditions and livelihoods through there will be one operational live barn economic value of wood, helping them per each hectare of tobacco grown. our Grower Support Programs, and to to use less of it and to replenish forestry eliminate child labor through our ARISE stocks. program (see pages 54-55). In 2015 our Reforestation The JT Group has invested in social programs reached around a third We encourage our farmers to establish reforestation and community support of directly contracted farmers in Brazil, woodlots to fulfill their needs of a programs in Malawi, Tanzania, and Malawi, Tanzania and Zambia. sustainable supply of wood resources. Zambia. From 2011 to 2014, in a Through dedicated agroforestry partnership with Washington State Grower Support Programs programs, we also provide inputs, University and the NGO Total LandCare, Our Grower Support Programs (GSPs) training, and extension services we supported the planting and deliver community projects focused to farmers seeking to achieve the regeneration of nearly 28 million trees. on school, education, water, and establishment of good-quality woodlots, From 2015 onwards, the focus has been community well-being. In 2015 we which will help them maintain a on reforestation elements (tree planting, ran 132 programs benefiting 207 sustainable supply of wood. In 2015, natural regeneration, and optimization communities: 16 in Brazil, 8 in Malawi, 1.6 million trees were planted in Brazil of wood usage for domestic 13 in Tanzania (with a special focus on and Zambia. In Zambia we developed consumption), aiming at minimizing water), and 95 in Zambia. and are implementing the Matope deforestation impact by improving the curing barn, a new design that is four economic use and management of times more efficient in terms of wood natural resources.
62 63 OUR BUSINESSESOUR OUR WAY OF OUR PEOPLE OUR PLANET OUR CONTRIBUTIONS OUR TOBACCO BUSINESS OUR PHARMACEUTICAL OUR PROCESSED FOODOUR BUSINESSES SUSTAINABILITY DOING BUSINESS TO SOCIETY OUR TOBACCO BUSINESS BUSINESS BUSINESS OUR TOBACCO BUSINESSJOURNEY OUR TOBACCO BUSINESS
GOING FORWARD Smoking and health Our main priority is always to maintain We will be closely monitoring the Products Directive. This will require compliance with arising tobacco developments at the next FCTC planning in some countries (such product regulation on the production, Conference of the Parties in 2016 as Norway) where the same legal People smoke for pleasure, but there are real risks that come with that pleasure. Smoking is a cause of labelling, and packaging. and beyond, and will continuously framework will be enacted. serious diseases, including lung cancer, coronary heart disease, emphysema, and chronic bronchitis. seek opportunities to engage in a These risks distinguish tobacco from most consumer goods and place a particular responsibility upon One of our key global focuses in constructive and transparent dialogue Our third priority area for planning will us, our industry, and public authorities. the medium term will be on the with governments and other relevant be around tobacco product regulations further evolution of the World Health parties, to provide the necessary adopted by the Eurasian Customs Organization’s Framework Convention expertise, and to offer evidence-based Union (incorporating Armenia, Belarus, on Tobacco Control (FCTC), notably solutions on tobacco regulation. Kazakhstan, Kyrgyzstan, and Russia) on the development of the policy that will become effective in May 2016. recommendation on product regulation In Europe we will be preparing for and disclosure, including e-cigarettes. implementation of the new EU Tobacco
INNOVATION IN OUR TRADITIONAL PRODUCTS
Innovations in brands, blends, and consumers. We monitor market trends analysis, market data, and changes in packaging are important to the JT so we can spot new technologies the regulatory landscape to help define Group, as they underpin growth and and concepts that meet consumer the focus of our product research and profitability. The driving force behind demand and may give us a competitive development. innovation in traditional products is to advantage with existing adult smokers. respond to the evolving demands of We also take account of industry
OUR APPROACH Our tobacco business principles commit We constantly monitor scientific PRODUCT TRANSPARENCY us to being open about the health risks publications, and other information, on The JT Group believes everyone should of smoking and transparent about the health effects of tobacco products, be informed about the health risks of our products. This is what consumers and look into new issues or claims once smoking. We explain our positions on demand, and by providing them with they appear. smoking and health on our websites, the necessary information, we help and respond to consumer demands to them to make informed decisions on ASSESSING THE HEALTH know about product ingredients. The whether to smoke or not. IMPACTS OF TOBACCO number of countries in which the JT Group provides voluntary disclosure A SCIENTIFIC APPROACH PRODUCTS of ingredients has risen from 30 in We take a scientific approach to Public health authorities in many 2010 to 54 in 2015. The scope of understanding the quality, health risks, countries independently assess the products includes cigarettes, roll your and development of our products. health risks associated with tobacco own tobacco, and snus. We provide To help us do this, we apply global products by reviewing long-term information on a dedicated website ENVIRONMENTAL TOBACCO SMOKE standards developed by ISO and/ epidemiological research published by by tobacco product type, brand, and scientists working in the field. or by scientific societies such as the location, including materials and Environmental tobacco smoke (ETS), cause of diseases such as lung cancer, in some municipalities, we support industry-supported Cooperation Centre ingredients such as cigarette papers, also known as second-hand smoke, is coronary heart disease, emphysema, the equipment of smoking facilities All ingredients go through toxicological for Scientific Research Relative to filtration materials, adhesives, inks, and a mixture of smoke from the burning and chronic bronchitis. that create a better environment for assessments with a view to ensuring Tobacco (CORESTA). Where relevant flavorings. end of a cigarette and exhaled smoke smokers and nonsmokers alike. We that they do not increase the inherent standards do not exist, we follow from smokers nearby. Compared to We promote ways of avoiding ETS, such have responded to more than 16,000 toxicity of any of our tobacco products. common industry practice that is based the smoke that a smoker inhales, ETS as properly ventilated smoking facilities requests for advice and assistance from Regulation in various countries requires on validated and robust methodology. is aged and highly diluted. In poorly in public spaces, and our international municipalities and private businesses us to submit details of ingredients to We also review emerging science ventilated areas, ETS can irritate eyes, tobacco business has worked with on providing such facilities, and have the authorities, sometimes on an annual to ensure all standards we apply are noses, and throats. It may also worsen airport authorities to develop more helped set up more than 6,000 in Japan basis or occasionally before a product updated and adapted to new findings respiratory tract infections, as well as than 205 smoking facilities in 13 since 2004. launch. and techniques. asthma. However, based on scientific international airports. In Japan, where evidence, we do not believe it is a outdoor smoking is banned by law
64 65 OUR BUSINESSESOUR OUR WAY OF OUR PEOPLE OUR PLANET OUR CONTRIBUTIONS OUR TOBACCO BUSINESS OUR PHARMACEUTICAL OUR PROCESSED FOODOUR BUSINESSES SUSTAINABILITY DOING BUSINESS TO SOCIETY OUR TOBACCO BUSINESS BUSINESS BUSINESS OUR TOBACCO BUSINESSJOURNEY OUR TOBACCO BUSINESS
Political and regulatory Responsible marketing
We market our tobacco products to adult smokers in order to maintain brand loyalty and to encourage landscape smokers of competitor brands to switch to our products. We do not market tobacco products to minors, nor do we encourage anyone to take up or discourage anyone to quit smoking. We support regulation on the responsible marketing of tobacco products, providing it is evidence-based, practical, effective, Due to the health risks associated with tobacco products, we firmly believe that regulation of the and proportionate – and that it allows us to communicate with adults who use our products. We are tobacco sector is both necessary and right. opposed to regulatory proposals that would affect our ability to differentiate our products by restricting the use of brand names, or would reduce our ability to communicate distinctions and attributes of However, we argue that regulation should be framed in a way that does not lead to unintended negative different products and product types to adult smokers. consequences for business and wider society, including high additional costs, damage to competition, and new barriers to entry into markets. Marketing programs have to principles that guide us in this area We are therefore supportive of the promotion of ‘better regulation’ that achieves its aims in a be reviewed and approved, and remain the same, the task force has proportionate manner and is based on full consideration of evidence gathered from all stakeholders, compliance checks are carried out been reassessing the effectiveness of internally to ensure we not only meet these programs, looking at the best including those in the tobacco industry. regulatory obligations but properly strategic approach, and examining how apply our internal marketing standards. this can be delivered globally, regionally, It is also important that all possible effects of new regulations are properly understood before If our standards are stricter than and on a country-by-country basis. implementation. In Australia, for example, plain packaging has not only failed to achieve the national laws and regulations, then we It has also reviewed the guidelines government’s objective of reducing smoking but has led to a number of negative consequences. There always follow our standards. applied to our youth access prevention has been downtrading by consumers from premium to value brands and, following the introduction programs and has re-examined the way In 2015 our international tobacco in which the programs are monitored. of plain packaging and excise tax increases, illegal trade has increased showing that consumers are business launched an internal web Actions arising out of the task force’s increasingly looking for cheaper alternatives. portal, for use by corporate affairs conclusions will be implemented employees, that contains all documents progressively from 2016 onwards. relating to marketing compliance and advice on best practice, including “We support proportionate and evidence-based regulation as OUR MARKETING in relation to our internal marketing WORKING WITH a way of addressing society’s concerns about tobacco products. STANDARDS standards. RETAILERS But we strongly believe that any new laws must be drafted with In 2015 we began to update a set of PREVENTING YOUTH We support retailers in their efforts proper consideration for their potential effects. That is why we global marketing principles, covering to prevent minors from buying both international and Japanese ACCESS tobacco, through initiatives such as welcome any opportunity to put forward our views on how to domestic tobacco businesses, which the U.K.’s No ID, No Sale! program, achieve better regulation.” will be published in 2016. The JT Group believes minors should which we initiated with other tobacco neither smoke nor be able to obtain manufacturers. In our international Our international tobacco business tobacco products. We do not market to tobacco business we focus activities on MICHIEL REERINK complies with all local laws and minors, and we support measures that Responsible Retailing programs, which GLOBAL REGULATORY STRATEGY, VICE PRESIDENT, JT INTERNATIONAL regulations affecting tobacco product prevent them from obtaining tobacco educate retailers on how to refuse marketing, and applies internal products, including fines or licensing tobacco sales to minors. Global Marketing Standards across restrictions on retailers who sell to every country in which we operate. minors. We also back the criminalization In 2015 we began to introduce a OUR APPROACH These cover all aspects of marketing, of proxy purchasing by adults, and program of test purchases in shops including print, billboards, electronic promote ‘proof of age’ programs. across the U.K. to check if ID is being We welcome any opportunity for country so far to have implemented committee about smoking in public media, promotional events, and brand requested. The program, which is run constructive dialogue with governments plain packaging. In both cases we places. sponsorship. They also cover health In our Japanese domestic tobacco by an independent organization, was to ensure that regulations are based pointed out the negative and costly warnings on packaging. In 2015 we business, we have worked with established after a pilot involving 2,500 on sound evidence, will achieve consequences of plain packaging In the interests of transparency, we updated these internal standards, which the Tobacco Institute of Japan and retailers that increased the percentage their desired effect, and will not measures to society and our business. publish our key regulatory submissions for the first time now include emerging the Japanese Vending Machine asking for ID from 48% to 54% between disproportionately affect the R&D, We also provided evidence, gleaned on our website. products. Manufacturers Association to ensure autumn 2013 and spring 2014. Around packaging, and placement of our from the implementation of plain all tobacco vending machines are 3,500 retailers were tested in 2015 and products. When we engage with packaging regulations in Australia, We have clear guidelines for political Our Japanese domestic tobacco equipped with an adult identification the program won Retail Newsagent governments, we aim to be respectful of to the consultants for Australia’s engagement in the international business is a key member of the system. In Japan we also regularly magazine’s Supplier Initiative of the Year each country’s decision-making process department of health, which is holding tobacco business and an anti-bribery Tobacco Institute of Japan and complies discuss issues around youth smoking Award. The program will be fully rolled and to provide credible evidence that a review of the effectiveness of its and corruption policy embedded within with the institute’s self-regulatory prevention with retailers, and with the out across the U.K. by mid-2017. substantiates our positions. legislation. our Codes of Conduct. We comply marketing standard, as well as all Tobacco Retailers Association have with all requirements pertaining to our national laws and regulations. formed a number of Youth Smoking The key focus of our regulatory In the U.K. we welcomed the relationships with governments, for Prevention Councils in conjunction with engagement in 2015 was on plain opportunity to give oral evidence to example with the U.K. Bribery Act and representatives of local government, packaging of tobacco products. On the Health and Sport Committee of the the EU Transparency Register. We were COMPLIANCE police, and other tobacco companies. this issue we provided a response to a Scottish Parliament regarding possible one of the first tobacco companies to The Code of Conduct in our consultation carried out by Norway’s new restrictions relating to e-cigarettes. sign up to the latter and have been in international tobacco business requires In 2015 our international tobacco Minister of Health and Care Services, compliance since signing. all employees, agencies, and suppliers business set up a task force to review and submitted our views to a Senate We were invited to do so after we to comply with its Global Marketing progress made by our youth access inquiry in Australia, which is the only submitted a written response to the Standards. prevention programs. Although the
66 67 OUR BUSINESSESOUR OUR WAY OF OUR PEOPLE OUR PLANET OUR CONTRIBUTIONS OUR TOBACCO BUSINESS OUR PHARMACEUTICAL OUR PROCESSED FOODOUR BUSINESSES SUSTAINABILITY DOING BUSINESS TO SOCIETY OUR TOBACCO BUSINESS BUSINESS BUSINESS OUR TOBACCO BUSINESSJOURNEY OUR TOBACCO BUSINESS
USING TECHNOLOGY TO FIGHT CRIME
Illegal trade We invest heavily in developing This technology has helped our AIT We feed this analysis in to law technology to combat illegal trade, Diversion and Seizure Investigations enforcement agencies, which use the The JT Group takes a stand against the illegal trade in tobacco, which undermines legitimate tobacco businesses and their including the industry’s ‘Codentify’ unit to develop a backtrack investigation information to stay on top of the latest suppliers, has an adverse impact on society, reduces excise revenue for governments, and fuels terrorism and organized crime. track and trace system, through which program that looks at patterns of illegal trends in criminality. The illegal tobacco trade is a multifaceted problem, with criminals evolving their tactics to try to stay one step ahead of industry we mark our products with a unique diversion across the tobacco industry, and regulatory controls and policing. identifying code that helps to show providing insights into weak points in whether they have been diverted from the system and allowing us to design Euromonitor estimates that more 1. To prevent genuine JT Group Our international tobacco business has their intended route by criminals. preventative measures to address them. than 500 billion illegal cigarettes were products from being diverted by signed 46 agreements with government consumed globally in 2014. The main criminals into illegal channels. authorities in 34 countries to counter drivers behind the illegal trade have illegal activity internationally. These been steep increases in taxes on 2. To prevent ‘illicit whites’ – cigarettes agreements include a 15-year European tobacco products, large tax differentials produced legally by smaller Union ‘Cooperation Agreement’ and a TRACK & TRACE between countries, and the relatively manufacturers but destined for similar deal with the federal government low risk of prosecution for those the illegal tobacco market – from and provinces of Canada. competing with our legitimate involved. MANUFACTURING DISTRIBUTION & RETAIL brands. SERIALIZATION & AGGREGATION TRACKING We work closely with law enforcement 3. To prevent the counterfeiting of our agencies and governments on three brands. main priorities: WAREHOUSE CIGARETTES STORE
November 25, 2015 an international law enforcement Serialization and aggregation of products throughout the Track the movement of the products through the agency said: manufacturing process using Codentify, to embed unique supply chain, from manufacturing, warehouse information storage to retail sales “JTI was the most helpful tobacco company
who provided more DATA DA information to [law TA enforcement authorities] than the other three tobacco GLOBAL TRACK & TRACE manufacturers combined. ... CENTRAL REPOSITORY The cooperation with JTI is
quite remarkable.” A T A D CUSTOMS AND AUTHORITIES
TRACE Y
R
OUR APPROACH E
U Our international tobacco business has The AIT team provided more than 709 stakeholders about the drivers of the Q a global Anti-Illicit Trade (AIT) team tip-offs to law enforcement agencies illegal tobacco trade, raises awareness devoted to fighting illegal tobacco. The in 2015, leading to the seizure of over of the impacts of illegal tobacco, and 50-strong team, which includes people 1 billion illegal cigarettes. In Russia, suggests new ways to stop its flow. Customs can trace the products back to their last known location by with backgrounds in police work, law, where illegal trade was a particular accessing the data in the Track &Trace central repository using the AIT customs, and intelligence, cooperates problem, we have helped to reduce Our international tobacco business portal or mobile app with governments, law enforcement seizures of genuine JT Group products also runs a legitimate market demand authorities, and the wider tobacco from 24.7 million cigarettes in 2010 to program under which we carefully industry. less than one million in 2015. calculate the legitimate demand for tobacco products in each of our Members of the team offer information We have had consistently positive markets and then sell only in amounts and evidence to law enforcement feedback from law enforcement that are commensurate with these agencies that leads to arrests and agencies about our efforts, and in 2015 calculations. This reduces the risk that prosecutions. In addition, they provide our international tobacco business was surplus product leaks out into illegal assistance with forensic examinations, publicly thanked on several occasions trade. Additionally, our sales activities Authorities work with the JT Group's AIT team analyze seizures, identify trends through by law enforcement officials for our are governed by strict Know Your to prevent smuggling studies such as empty pack surveys, support in this area. Customer and Anti-Money Laundering and help to train law enforcement programs. officials on counterfeit product Aside from investigative work, the AIT recognition. team educates governments and other
68 69 OUR BUSINESSESOUR OUR WAY OF OUR PEOPLE OUR PLANET OUR CONTRIBUTIONS OUR TOBACCO BUSINESS OUR PHARMACEUTICAL OUR PROCESSED FOODOUR BUSINESSES SUSTAINABILITY DOING BUSINESS TO SOCIETY OUR TOBACCO BUSINESS BUSINESS BUSINESS OUR TOBACCO BUSINESSJOURNEY OUR TOBACCO BUSINESS
In focus
EMERGING A battery-powered device that heats a special nicotine- E-VAPOR containing liquid, creating an inhalable vapor. The e-liquid is available in different flavors to PRODUCTS meet consumer preferences. OUR APPROACH As a reflection of the increased importance of emerging products within our business, in 2015 we brought together the JT Group’s know-how on emerging products into one global, Group-level team. This team aims to maximize our use of resources in this area and to bring emerging products to market in the best manner possible. It does this by working across four areas:
1. Strategic insights: examining Commitment to the development of DEVELOPMENTS consumer expectations and industry reduced-risk products trends in emerging products to While we continue to develop emerging IN 2015 develop a pipeline of innovative products that may reduce health future offers. risks – such as products that heat 2. Commercialization: working with our tobacco and e-cigarettes – we do not research and development teams to currently make any health claims. create new products. To determine whether the use of a particular product is less hazardous 3. Brand development: marketing and to health than smoking would require branding of emerging products once extensive scientific studies, including they have been placed on the market. obtaining long-term clinical data. We remain committed, however, to the 4. Corporate scientific and regulatory development of reduced-risk products, affairs: making sure products comply and will keep our stakeholders informed with standards and regulations, In 2015 we acquired full global as this develops further. and advocating for better regulation intellectual property rights to market Ploom worldwide. when necessary. Ploom is a battery-powered device creating vapor that is then drawn that directly heats a tobacco- through a tobacco-containing During 2015 we also bought the U.S.A.- “Emerging products are T-VAPOR containing pod, creating an capsule. Both devices provide a We work on developing emerging based company Logic Technology inhalable vapor. Ploom TECH is a distinct tobacco taste with no ash products in three categories: e-vapor becoming an increasingly Development LLC (Logic), the third battery-powered device that heats or smoke smell. (such as e-cigarettes), t-vapor (tobacco- largest (by share of value) e-cigarettes significant part of our a non-nicotine-containing e-liquid, based products such as Ploom), and company in North America. This is our ‘next generation products’ that do business. We have grown first move into the U.S.A. e-cigarettes not conform to either of the other our product portfolio in market – the largest in the world and two categories. We are committed to 2015 with the acquisition of where we intend to grow Logic’s market innovating in a way that will produce share. new products that fulfill consumer Logic, a major e-cigarettes expectations and fall within regulatory company in the U.S.A., We have also launched a new brand parameters. of E-Lites – E-Lites Curv – in the U.K. and with the launch of and Ireland. E-Lites Curv, which was We have developed internal standards our E-Lites Curv brand in developed in-house, has a new shape, for emerging products, including the U.K. and other parts a longer-lasting and quicker-charging rigorous chemical studies that examine battery, and high-quality e-liquid made not only what goes into a product but of Europe. The biggest to our own quality control requirements what comes out of it. In addition, we challenge we face in this at a third-party pharmaceutical plant in have a quality control manual that we Switzerland. In September 2015 it was use to reinforce our standards with exciting new space is to judged as the U.K.’s ‘best e-cig’ by the contract manufacturers. Aside from ‘future proof’ our portfolio Gizmodo website. requiring ingredient and materials as the EU, the U.S.A., and disclosures from suppliers, we carry The E-Lites Curv launch was supported out toxicological risk assessments other regions begin to create in the U.K. with a television advert of key materials and assess them for and implement regulatory designed to raise brand awareness and Ploom TECH was only launched in March 2016. compliance with applicable regulations. to persuade existing e-cigarette users Our product stewardship also extends frameworks for these new to migrate to our products. The advert to the later stages of a product’s life products.” conformed to the U.K.’s Committee of cycle – for instance, in terms of battery Advertising Practice Codes and was recycling. Please be reminded that this section is intended to explain the business operations of the JT Group, not to promote sales of tobacco and nicotine delivery products YASUHIRO NAKAJIMA screened after the 9 p.m. watershed or to encourage smoking by consumers. VICE PRESIDENT, with appropriate warnings. EMERGING PRODUCTS JT INTERNATIONAL 70 71 OUR BUSINESSESOUR OUR WAY OF OUR PEOPLE OUR PLANET OUR CONTRIBUTIONS OUR TOBACCO BUSINESS OUR PHARMACEUTICAL OUR PROCESSED FOODOUR BUSINESSES SUSTAINABILITY DOING BUSINESS TO SOCIETY OUR TOBACCO BUSINESS BUSINESS BUSINESS OUR TOBACCO BUSINESSJOURNEY OUR TOBACCO BUSINESS
ENVIRONMENTAL ISSUES
E-cigarettes present challenges The collected cartridges are processed around the disposal of batteries and by a specialized third company, and REGULATORY LANDSCAPE of cartridges that contain e-liquid. mixed materials are disposed through We have been working with partners a process that generates power for the and suppliers in the U.K. to improve grid and avoids any waste going into the E-Lites collection program, which landfill. We will continue to investigate provides consumers with two free if there are more efficient methods of cartridges for every 20 returned and disposal. one free battery for every 10 returned. More than 1,505 people take part in our rewards scheme, which saw the return of 5,245 batteries and 408,844 cartridges in 2015.
Our supply chain for emerging products EMERGING is complex, and involves the shipping of various materials around the world. PRODUCTS One associated risk is to security of supply, but there are other important SUPPLY CHAIN issues, including potential concerns around labor practices in China. To take account of these risks, we are developing business-continuity plans for our emerging products supply chain, allied to a robust sourcing strategy.
One of our main priorities on emerging policy recommendations may come A number of bodies have recently products is to keep up with, and out of the seventh session of the World invited us to take part in discussions OUR E-CIGARETTES SUPPLY CHAIN anticipate, consumer expectations. In Health Organization’s Framework about standards, including in addition, we look to monitor the Convention on Tobacco Control (FCTC) France, where in 2015 the national EUROPE CHINA JAPAN regulatory landscape, anticipate Conference of the Parties in 2016, standardization body, Association changes, and ensure our products where electronic nicotine delivery Française de Normalisation (AFNOR), comply with new regulations; but systems will be on the agenda. asked our international tobacco developments are often so fast-moving business to provide input to a drafting that this is extremely challenging. In some markets e-cigarettes are committee for the country’s first banned altogether and in others national standard for e-cigarettes. In particular, we are monitoring – notably Hong Kong and Macau – We were also invited in the U.K. to movements in the European Union, there is a debate as to whether bans provide views to the British Standards where a forthcoming update of the should be introduced. We will monitor Institution ahead of its publication of Tobacco Products Directive (2014/40/ developments in these territories and a specification on e-cigarettes. We EU) (TPD II) will cover e-cigarettes and advocate against such bans. provided similar input to authorities ‘novel tobacco products’ for the first in the UAE, which are developing time. We are concerned that updated We believe it is in the common interests a UAE standard on e-cigarettes, regulations may stray beyond what is of public authorities that manufacturers and to the European Committee for strictly necessary – which is to ensure continue to develop emerging products Standardization (CEN), which is looking product safety – and may severely for adult smokers who wish to try an at drafting a European standard. We impact not only on costs to consumers alternative to conventional tobacco also provided feedback to the European but also on the ability of manufacturers products. There is a legitimate debate Commission as part of the consultation to innovate and bring out new products around emerging products and their process on the draft Commission in this area. potential to provide a possibly safer Implementing Decision on technical alternative to combustible tobacco, standards for the refill mechanism of In the U.S.A. the Food and Drug and this debate needs to be balanced, e-cigarettes. Administration is looking at extending fair, and based on sound evidence. It tobacco regulations to cover is therefore important that tobacco e-cigarettes, with the possibility of companies are allowed to contribute to similar or more stringent regulatory discussions about the development of Legend limitations than in TPD II. Potential regulations and product standards. Device manufacturing and assembly Flavor Liquids Tobacco
72 73 OUR OUR WAY OF OUR PEOPLE OUR PLANET OUR CONTRIBUTIONS OUR TOBACCO BUSINESS OUR PHARMACEUTICAL OUR PROCESSED FOODOUR BUSINESSES SUSTAINABILITY DOING BUSINESS TO SOCIETY BUSINESSOUR PHARMACEUTICAL BUSINESS JOURNEY BUSINESS OUR PHARMACEUTICAL BUSINESS
OUR BUSINESSES Overview
Our pharmaceutical business has a mission to create, through world-class research and development, innovative drugs that tackle diseases in a safe and secure manner.
We carry out our research and development in-house, but also work with license and joint research Our partners to help us bring drugs to market more quickly. It is important that we observe rigorous standards across the value chain to ensure the efficacy and pharmaceutical safety of our products, which we must market in a responsible fashion. business
PHARMACEUTICAL BUSINESS VALUE CHAIN
Research and development in our pharmaceutical business is guided by a strong sense of responsibility and OUR SUPPLIERS ethics, including areas such as clinical trials of new CLINICAL TRIAL PARTICIPANTS LICENSE PARTNERS JOINT RESEARCH PARTNERS drugs, animal testing, and management of chemical CLINICAL TRIAL INSTITUTIONS ingredients.
We are transparent about the way in which we cooperate OUR COMPANY with other organizations on drug development, and we RESEARCH & DEVELOPMENT 5 SUPPLIERS (BULK DRUG SUBSTANCE) aim to take a responsible approach to how we sell and (JT AND TORII PHARMACEUTICAL*) market our pharmaceutical products – functions that are * SUBSIDIARY carried out by our subsidiary, Torii Pharmaceutical.
2015 highlights
SALES AND PROMOTIONS 1 FACTORY (CONDUCTED BY TORII (TORII PHARMACEUTICAL) PHARMACEUTICAL)
3 SUBCONTRACT WAREHOUSE FACTORIES 2015 2015 2015
Our subsidiary, Torii Pharmaceutical, 2 WAREHOUSES We hosted executives (TORII PHARMACEUTICAL) 30 gained APPROVAL IN JAPAN billion Yen 30.7 TO MARKET A NEW OUR CUSTOMERS at spent on R&D, compared to WORKSHOPS & CONSUMERS in Japan to better understand DRUG, MITICURE® HOSPITAL PATIENTS’ NEEDS. House Dust Mite Sublingual Tablets, 28.9billion Yen for house dust mite allergy. in 2014 WHOLESALE This diagram represents the value chain of products PATIENTS manufactured and/or developed by JT and sold by Torii Pharmaceutical.
74 75 OUR BUSINESSESOUR OUR WAY OF OUR PEOPLE OUR PLANET OUR CONTRIBUTIONS OUR TOBACCO BUSINESS OUR PHARMACEUTICAL OUR PROCESSED FOODOUR BUSINESSES SUSTAINABILITY DOING BUSINESS TO SOCIETY BUSINESSOUR PHARMACEUTICAL BUSINESS OUR PHARMACEUTICALJOURNEY BUSINESS BUSINESS OUR PHARMACEUTICAL BUSINESS
COMPLYING WITH PHARMACEUTICAL REGULATIONS AND Approach to STANDARDS We have a rigorous system of checks in TRANSPARENCY ON bodies and disclose such payments place to ensure that drug development COOPERATION WITH online. We follow guidelines in this product responsibility complies with all relevant laws, area that have been set out by the regulations, and industry standards. INSTITUTIONS Japan Pharmaceutical Manufacturers In-house audits make sure we follow Cooperation with research institutes, Association (JPMA). We focus research and development PHARMACEUTICAL R&D EXPENDITURE the procedures as laid out in our own universities, medical institutions, (R&D) mainly on three areas: glucose (BILLION YEN) manuals, and that we control our drug and organizations for patients is and lipid metabolism, anti-virus development and trials safely. We also essential if we are to realize our research, and immune disorders and 30.7 30.5 30.7 collect data to monitor the efficacy and mission. We are transparent about inflammation. 30 28.9 side effects of drugs. financial contributions to these 24.9 During 2015 we spent 30.7 billion Yen on R&D. During the year our subsidiary, 20 Torii Pharmaceutical, gained approval MANAGING CHEMICAL SUBSTANCES from the Ministry of Health, Labour and Welfare in Japan to market a new 10 We comply with all relevant laws after which they attend regular lectures drug, MITICURE® House Dust Mite and regulations on the control of to receive updates on new legislation Sublingual Tablets, an immunotherapy designated chemical substances, and learn lessons from serious tablet treatment for rhinitis brought on and our employees are made aware accidents that have occurred in other by house dust mite allergy. FY FY FY 2014 2015 2011 2012 2013 of chemical safety risks. We have a companies. system for carefully managing these risks, from the point where we take Torii Pharmaceutical separates delivery of chemicals through to their chemicals into categories requiring RESPONSIBLE storage, use, and eventual disposal. We different levels of management, and has encourage employees who are working specific rules and procedures according RESEARCH AND in our laboratories to acquire Class A to the characteristics and safety risks of hazardous materials engineer licenses, each category of chemicals. DEVELOPMENT
Our pharmaceutical business has a direct impact on human life, and RESPONSIBLE MARKETING therefore our R&D is guided by a strong sense of responsibility and ethics. Any We are members of the JPMA, and Torii Pharmaceutical has created a divergence from this path could result we comply with its Code of Practice, medical compliance department to in loss of life or damage to health – as which promotes high ethical and enhance the way product information well as diminished trust in the business. transparency standards in the marketing is managed and to educate employees Our research activities are carried out of prescription drugs. on compliance with standards on the in an ethical manner and comply with promotion of prescription drugs. all laws, regulations, and industry Torii Pharmaceutical also has its own standards. Code of Practice. This is supported Outside Japan we license drugs to other by training programs that ensure pharmaceutical manufacturers and do employees – including our 512 medical not have a sales function. representatives who sell and promote drugs to healthcare professionals – comply with its requirements.
ETHICAL CONSIDERATIONS
To ensure appropriate conduct and care of laboratory animals in animal testing, our in-house standards are based on TAKING A PATIENT-FOCUSED VIEW relevant government legislation. We have established the Institutional Animal Care and Use Committee that reviews To develop better medicines we need to attitude. We also visited health animal testing and ensures it is conducted in accordance understand the views and experiences professionals including doctors, nurses, with the ‘3R’ concept: replacing laboratory animals with other 3R of people who are affected by some and pharmacists to understand what research materials where possible, reducing the number of REPLACEMENT REFINEMENT of the conditions that we aim to treat. innovative drugs are truly needed in the WHERE POSSIBLE, DO NOT LET Doing so gives us a clearer sense both medical field. animals used, and refining tests so that animals do not suffer OPT FOR TEST LABORATORY REDUCTION of what they require and where we unnecessary pain. Our animal testing management practices METHODS THAT MINIMIZE THE ANIMALS SUFFER are certified regularly by an external authority. DO NOT USE NUMBER OF UNNECESSARY should be focusing our efforts in drug We believe this helps us to adopt a ANIMALS ANIMALS USED PAIN development. position where future strategy and IN TESTING We have an Ethics Review Committee that is based on the development is based more on our Japanese Ethical Guidelines for Medical and Health Research Since 2013 we have been running essential mission: we shall create Involving Human Subjects. This committee examines the workshops and discussion sessions epoch-making drugs in the shortest ethical justification and scientific validity of research utilizing on how we can continue to adopt possible time in a safe and secure human tissue samples. a more ‘patient-focused’ corporate manner.
76 77 OUR OUR WAY OF OUR PEOPLE OUR PLANET OUR CONTRIBUTIONS OUR TOBACCO BUSINESS OUR PHARMACEUTICAL OUR PROCESSED FOODOUR BUSINESSES SUSTAINABILITY DOING BUSINESS TO SOCIETY BUSINESS BUSINESSOUR PROCESSED FOOD JOURNEY BUSINESS OUR PROCESSED FOOD BUSINESS
OUR BUSINESSES Overview
Within TableMark’s frozen food business, we work with more than 400 suppliers, which include trading firms and contract factories. Of these, approximately 100 supply us with packaging materials and approximately 300 wholesalers provide raw materials. We do not deal directly with raw materials producers such as farmers, as they have relationships only with trading firms or contract factories.
Although we do source packaging consumers’ needs – and preserve from suppliers – including second-tier materials, within our frozen food supply our good reputation – by providing suppliers such as farmers and fishers chain our main focus is on the raw food the highest-quality, safest, and best- – to be produced in accordance with ingredients that go into our products. tasting products. The policy includes the policy. While we need to achieve Therefore, the key issue in our supply a commitment to annual monitoring a sensible balance between the cost Our processed chain is food safety. of first-tier suppliers, with the scope of ingredients and the safety, quality, The product portfolio of TableMark, our of such monitoring depending on and reliability of supply, we will never TableMark has its own sourcing policy key issues identified at each location. sacrifice safety for the sake of cost. processed food business in Japan, includes on food safety. This aims to meet We expect all ingredients sourced food business frozen noodles, frozen and packed cooked rice, frozen baked bread, pastries, and seasonings. Frozen foods account for around three-quarters of our processed food business’s turnover.
Most of the key sustainability issues are in our supply chain, particularly in terms of ensuring food safety and quality. PROCESSED FOOD BUSINESS VALUE CHAIN
OUR SUPPLIERS
WHOLESALE SUBCONTRACT PACKAGING MATERIALS RAW MATERIALS TRADING COMPANIES FACTORIES
SUPPLIERS SUPPLIERS SUPPLIERS 100+ 300+ 50+
2015 highlights
OUR COMPANY 31 FACTORIES (THE TABLEMARK GROUP)
2015 2015 2015
We launched a rice tray that uses OUR CUSTOMERS & CONSUMERS 100% 1,837 BUSINESS frozen food factories certified people went on tours of our Uonuma to ISO 22000 Mizunosato factory as part of efforts 11% less plastic while holding the same to communicate with consumers. DISTRIBUTION CUSTOMERS & CONSUMERS amount of rice. 2014 100% This diagram represents TableMark Co., Ltd. only.
78 79 OUR BUSINESSESOUR OUR WAY OF OUR PEOPLE OUR PLANET OUR CONTRIBUTIONS OUR TOBACCO BUSINESS OUR PHARMACEUTICAL OUR PROCESSED FOODOUR BUSINESSES SUSTAINABILITY DOING BUSINESS TO SOCIETY BUSINESS BUSINESSOUR PROCESSED FOOD OUR PROCESSEDJOURNEY FOOD BUSINESS BUSINESS OUR PROCESSED FOOD BUSINESS
Delivering safe, high-quality FOOD QUALITY We ensure food quality through certification to ISO 22000 or FSSC 22000, but TableMark also has a quality improvement committee that responds products FOOD to consumer opinions. In 2015, for instance, such feedback led us to QUALITY provide more comprehensive thawing We have a rigorous quality and process ENSURING CUSTOMERS GET HIGH-QUALITY instructions for our frozen baked bread. control system focused on four areas: PRODUCTS THEY ENJOY Our consumer complaints management food safety, food defense, food quality, system is compliant with ISO 10002, and food communication. This aims the international standard for customer to guarantee safety in all parts of our satisfaction and complaints handling. processed food business, from the buying of raw materials to manufacturing and distribution. A panel of external advisers guides our approach across FOOD FOOD COMMUNICATION these four areas. We regularly review COMMUNICATION our procedures to ensure our products PROVIDING INFORMATION We always disclose the factory where – went on tours of this factory. Fifty- food safety tips and shared their ABOUT OUR PRODUCTS food products are made, as well as the one shareholders were also invited for thoughts on the importance of food are produced and delivered in the safest country of origin of main ingredients. factory visits for the first time in 2015. safety. Among attendees were quality possible manner. FOOD FOOD We record farm origin details and can control personnel from TableMark, and SAFETY DEFENSE trace back our products. We offer We also place emphasis on representatives from subcontractor IDENTIFYING AND PROTECTING FOOD toll-free numbers on product labels communicating internally as a way of companies. ADDRESSING BROAD FROM RISK OF so consumers can request additional building capabilities and understanding. FOOD SAFETY RISKS CONTAMINATION information. Since 2008 we have used the The advisers are Kenji Isshiki, of Japan expertise of three independent food Food Research Laboratories, Nobuko FOOD SAFETY One way of communicating with safety advisers to help us develop Hiwasa, of Yokohama City Consumers consumers is by allowing them to visit our approach to food safety and to Association, and Kunio Morita, of Our processed food business has a All of our own frozen food factories, Unfortunately, there were two voluntary our Uonuma Mizunosato frozen noodle help with audits in factories. In 2015 Japan Meat Science and Technology division to control food safety, and as well as those owned by third-party recall incidents in 2015, which both and packed cooked rice factory, where we asked these experts to present Laboratories. holds a quarterly meeting to review frozen food contractor factories, are involved a small fraction of a plastic we explain our approach to production. separate lectures to TableMark food safety initiatives and share best certified to the ISO 22000 food safety machine part found in our frozen In 2015, 1,837 people – mainly students employees at which they provided practice. We analyze product-specific management system. Six of our own food product. We have enhanced our safety risks and conduct inspections factories have also certified to the FSSC machine maintenance processes and and audits in line with these risks. 22000 food safety management system. procedures so that similar events will We inspect the food safety systems of not happen in future. our contracted partners ourselves. DEVELOPING FOOD DEFENSE NEW PRODUCTS
Food defense is about protecting We are aware of growing consumer our manufacturing processes demand for healthier and more and our products from intentional nutritious food options. We use contamination. TableMark has robust 100% ‘healthier’ ingredients in products food defense guidelines that are where we can. For example, in 2015 we applied throughout the supply chain, to launched a packed cooked rice product factories and to distribution centers as that contains higher levels of fiber. well as contract manufacturers. We use these guidelines in our annual audits FROZEN FOOD FACTORIES and provide direction to contractor ACHIEVED ISO 22000 factories as necessary. CERTIFICATION ENVIRONMENTAL IMPACTS OF PRODUCTS FOOD DEFENSE GUIDELINES There are ways in which the design, holding the same amount of rice. We distribution, and manufacture of also produced a new range of ‘natural our food products can be adjusted thaw’ products that can be defrosted TIGHT CONTROL OF RESTRICTED RESTRICTIONS to reduce environmental impacts, without the use of a microwave oven – including by reducing packaging thereby reducing energy consumption FACILITIES, WATER AREAS FOR BOTH ON PERSONAL and by cutting energy used both in by the consumer. SOURCES, AND TOXIC EMPLOYEES AND BELONGINGS IN manufacture and in use by consumers. SUBSTANCES VISITORS FACTORIES In 2015, for instance, we developed a compact tray for our packed cooked rice that uses 11% less plastic while
80 81 OUR OUR WAY OF OUR PEOPLE OUR PLANET OUR CONTRIBUTIONS OUR TOBACCO BUSINESS OUR PHARMACEUTICAL OUR PROCESSED FOOD SUSTAINABILITY DOING BUSINESS TO SOCIETY BUSINESS BUSINESS JOURNEY
CHANGES IN STRUCTURE, SIZE, OR OWNERSHIP About this report In October 2014 we announced the In July 2015 we completed the In October 2015 we communicated decision to close factories in Wervik, acquisition Logic Technology that we were considering closing our Belgium, and Lisnafillan, Northern Development LLC, which is a leading Wadeville factory in South Africa. We We report annually on our sustainability activities and performance and have been publishing environmental or CSR reports since Ireland, potentially affecting around U.S.A. e-cigarettes company. In the also announced the acquisition of Arian 1998. Our last report, ‘JT Group Sustainability Report FY2014,’ was published in June 2015. 1,100 jobs. same month we also announced that Tobacco Industry (ATI), a cigarette we had decided to close our Moscow manufacturing company in Iran. The FY2015 report has been compiled in accordance with the Global Reporting Initiative (GRI) G4 Sustainability Reporting Guidelines In February 2015 our Japanese factory by mid-2016 due to the serious ‘Core’ level. We defined the content of this document using a materiality assessment that covered the entire JT Group. domestic tobacco business announced contraction of the tobacco market in During 2015 we withdrew from the that 1,754 employees had agreed Russia. manufacture and sale of beverage to take voluntary retirement under a products and sold our beverage vending Data in this report covers January to December 2015, unless otherwise stated. Historic data indicated with ‘FY’ covers the fiscal year program announced in late 2013 due In September 2015 we announced the machine operations. from April 1 to March 31 for our Japanese domestic operations. In 2014 the JT Group moved its reporting period to the calendar partly to the closure of some Japanese acquisition of Natural American Spirit, year ending December 31. Until March 2014, Group companies outside Japan reported their financial performance from January to domestic tobacco-related factories which was completed in January 2016. December, while in Japan our business took its financial year to be from April 1 to March 31. Data covering the calendar year 2014 between 2015 and 2016. The majority reflects businesses’ performance spanning from January 1 to December 31, with adjustment in 2014 data for comparability with of these had left the company in March 2015 data. 2015.
NOTES ON DATA OTHER PUBLICATIONS Although we report overall JT Group data presented in this report has been period FY2009 through 2014, which Websites Torii Pharmaceutical Co., Ltd. Publications figures wherever possible, in some restated accordingly. was disclosed in the FY2014 report, Japan Tobacco Inc.: (pharmaceutical subsidiary): JT Annual Report: areas this has not been possible. In has been restated to align with the www.jt.com www.torii.co.jp/en www.jt.com/investors/results/ such instances we have made it clear We have shown how we calculate and requirements of the GHG Protocol. annual_report/index.html to which part of the business the data consolidate environmental, health and Japan Tobacco International TableMark Co., Ltd. (processed food applies. In the middle of 2015 the JT safety, and HR data in our separate The Japanese Yen exchange rates (international tobacco business): subsidiary): Group withdrew from the beverage Basis of Reporting document, which we against the U.S. Dollar used in this www.jti.com www.tablemark.co.jp (in Japanese) business, and some of the historical will continue to update in the future. report are the same as used in our Historical environmental data for the consolidated financial reporting. AWARDS AND RECOGNITION We are a member of the Dow Jones In March 2016 JT was selected as a Sustainability Asia Pacific Index Nadeshiko Brand for demonstrating JAPAN TOBACCO INC. (JT) (www.sustainability-indices. outstanding commitment to com) and of the Morningstar Socially empowering women in the workplace *A *B *C *D Responsible Investment Index (www. among 45 other listed companies on morningstar.co.jp/sri, in Japanese). the Tokyo Stock Exchange.
*A *B *C *D *A *B *C *D *A *B *C *D We have also been awarded with We were chosen by the Ministry a position on the Japan 500 2015 of Economy, Trade and Industry as JAPANESE CORPORATE DOMESTIC INTERNATIONAL Climate Disclosure Leadership Index, one of its 34 Diversity Management FUNCTIONS PROCESSED FOOD PHARMACEUTICAL TOBACCO TOBACCO run by CDP, a global body that helps Selection 100 companies, recognizing companies measure, manage, and us for creating new value by embracing *A *C *A *C *A *C *A *C *A *D *E disclose environmental performance. diversity in the workplace. This is recognition for the depth TORII JAPAN TOBACCO SUBSIDIARIES TABLEMARK PHARMACEUTICAL SUBSIDIARIES INTERNATIONAL and quality of the climate change information we have disclosed *A *C *A *C (www.cdp.net).
TABLEMARK GROUP COMPANIES SUBSIDIARIES
*A = the entire JT Group *B = solely Japan Tobacco Inc. (JT) *C = Japan Tobacco Inc. (JT) and Japanese domestic Group companies
*D = Japan Tobacco Inc. (JT) and Japan Tobacco International (JTI) *E = solely Japan Tobacco International (JTI) CONTACTS AND FEEDBACK
Japan Tobacco Inc. (Headquarters) EXTERNAL VERIFICATION AND ASSURANCE 2-1, Toranomon 2-chome Minato-ku This report is not externally assured, Group-wide Scope 1 and 2 GHG data assurance of our non-financial data and Tokyo 105-8422 FOR MORE INFORMATION OR although some of the data within it has and some Scope 3 GHG data. In future the contents of this report. Japan TO PROVIDE FEEDBACK ON been externally verified. This includes we will consider expanding the scope of www.jt.com THIS REPORT, PLEASE E-MAIL: JT International SA IN ACCORDANCE WITH GRI G4 ‘CORE’ 8, rue Kazem Radjavi, 1202 Geneva In 2013 we set a goal of reporting Our GRI G4 Content Index (www. public documents, such as our Annual Switzerland in accordance with the G4 ‘Core’ jt.com/csr/report/index.html) Report. The identification of specific www.jti.com Guidelines. Having achieved this goal, shows the list of Standard Disclosures Standard Disclosures is based on we will strive to continuously improve for which we have either provided materiality assessments for the entire [email protected] our reporting in the future. information in this report or in other JT Group.
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