Social performance: Society

SO1 Percentage of operations with implemented local community engagement, impact assessments, and development plans

Fully reported

As an international business, we play an important role in countries around the world and have built close ties with local communities. We encourage our employees to play an active role both in their local and business communities.

We engage with a wide range of stakeholders at local, regional and global levels, including local communities where we operate.

Community investment

The Group’s Strategic Framework for Corporate Social Investment (CSI) details our Group CSI strategy and how we expect our local operating companies to develop, deliver and monitor community investment programmes within three selected themes: Sustainable Agriculture and Environment; Empowerment; and Civic Life.

In 2017, 64% of our reporting markets had CSI activities, and together with Reynolds American Inc. (RAI), we invested a total of £18.7 million in cash, and a further £14.3 million in in-kind charitable contributions and CSI projects in 2017. The proportion of our CSI spend across the three themes was as follows: sustainable agriculture and environment, 65%; empowerment, 22%; and civic life, 13%. The majority (73%) of the total Group CSI spend is focused in our strategic markets, with a further 14% on our global projects with the Eliminating Child Labour in Tobacco Growing (ECLT) Foundation .

Our Group Head of Sustainability has oversight of the Group CSI Strategy, and Board-level governance is managed through our Audit Committee, which reviews the strategy and an analysis of activities (including investment and alignment to the Group’s priorities) at least once a year.

Impact assessments

Our companies conduct or commission assessments on the impact of their CSI programmes on an ad-hoc basis.

Bangladesh

In 2017 the global consultancy Nielsen published an independent impact measurement study, commissioned by BAT, on three key community programmes in Bangladesh. The key findings include:

Bonayan afforestation programme

  • Over 95 million free saplings have been distributed to rural communities since 1980, bringing a range of environmental benefits.
  • This has also helped make farming communities more self-sufficient, offering them a new source of food, fruit and sustainable timber to sell for furniture making. 76% of beneficiaries told Nielsen that they have benefited financially from Bonayan.
  • This extra income means that more parents can now afford to send their children to school, which has had a dramatic impact on literacy rates in the communities.

Probaho safe drinking water programme

  • Over 170,000 people a day benefit from better access to safe drinking water, thanks to 65 new water filtration plants installed.
  • This has reduced the number of people suffering from waterborne diseases, from 32% down to only 0.3%.
  • The huge impact on the lives of the women and girls, who are responsible for collecting the family’s water each day, was also identified by the study.
  • It means that women no longer have to travel long distances to collect water or have to deal with constant sickness in the family. This gives them more time to spend helping their children with their studies and to take on more work, such as seamstresses for the village, helping to boost the family’s income.

Deepto solar energy project

  • This has brought solar power to 16 remote villages with no electricity.
  • 65% of beneficiaries reported that they have started new income-generating activities, such as basket weaving and sewing, since getting solar power in their homes.
  • Before Deepto, over 70% of schoolchildren faced problems keeping up with their schoolwork, due to not having sufficient light to study in the evenings. Over 84% now have more time to study, which is helping to improve their school performance.
  • Villagers also reported feeling much safer going outside at night, which is benefiting the community.

The full report of the Nielsen study is available at batbangladesh.com .

Myanmar

BAT Myanmar commissioned a study by Golden Plain Livelihood Development Services on a CSI project aimed at enhancing farmer and rural community livelihoods in Natogyi Township, Myingyan District and Mandalay Division. The study found that the project saw over 30,000 villagers from over 6,000 households getting access to community drinking water infrastructure, and a new bridge constructed. They also benefited from the provision of solar lanterns, and solar LEDs for students to enable studying in the evening. Farmers also benefited from farming tools, fertilisers and basic agricultural training and health training.

South Africa

BAT South Africa commissioned a study by North West University Research to assess the direct and indirect contribution of its Emerging Farmers Programme, one of our key corporate social investment (CSI) projects in the country. It also examined how these impacts contribute to the quality of life and overall well-being of farming communities in selected locations in the Limpopo and Mpumalanga provinces of South Africa.

All farmers who participated in the study indicated they have benefited from the tangible resources they received as part of their involvement in the project, such as fertilisers, pesticides, seeds/seedlings, various types of farming equipment and materials, as well as financial support. Additionally, the study confirmed direct and indirect educational benefits.

You can read more about our broader stakeholder engagement on bat.com .

SO2 Operations with significant actual and potential negative impacts on local communities

Not reported – information not collated at Group-level

Our Human Rights Policy, as part of the Group’s Standards of Business Conduct , includes our commitment to local communities. We seek to identify and understand the unique social, economic and environmental interests of the communities we operate in.

We encourage our employees to play an active role both in their local and business communities. Group companies should seek to create opportunities for skills development for employees and within communities, and aim to work in harmony with the development objectives and initiatives of host governments.

SO3 Total number and percentage of business units analysed for risks related to corruption and the significant risks identified

Fully reported

100% of our business units (both functional and regional) are analysed for corruption risks, as part of the procedures and formal controls in place for our Standards of Business Conduct  (SoBC). This includes:

  • All business units worldwide complete an annual self-assessment against our key audit controls, in which they confirm they have adequate procedures in place to support SoBC compliance; and
  • All staff working across the Group are required to complete an annual sign-off confirming their commitment and adherence to the SoBC and re-declare any personal conflicts of interest.

Our Anti-Bribery and Corruption Policy, as part of our SoBC, makes it abundantly clear that it is wholly unacceptable for Group companies, employees, or our business partners to be involved or implicated, in any way, in corrupt practices. This includes:

  • Never offering, promising or giving any gift, payment or other benefit to any person (directly or indirectly), to induce or reward improper conduct or influence any decision by a public official to our advantage;
  • Never soliciting, accepting or receiving any gift, payment or other advantage from any person (directly or indirectly) as a reward or inducement for improper conduct; and
  • Never making facilitation payments (directly or indirectly), other than where necessary to protect the health, safety or liberty of any employee.

Group companies are also expected to maintain controls to ensure that improper payments are not offered, made, solicited or received, by third parties performing services for or on their behalf. Controls should include:

  • ‘Know your supplier’ procedures which are proportionate to the risk involved;
  • Anti-corruption provisions in contracts with third parties where appropriate; and
  • Anti-corruption training and support for staff who manage supplier relationships

Our SoBC is fully aligned with the provisions of the UK Bribery Act and is designed to meet the standards of the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.

Our policies are continually kept under review and, on acquisition of Reynolds American Inc. (RAI) in July 2017, we updated our SoBC to reflect the requirements of the US Foreign and Corrupt Practices Act, and other relevant US law and regulation. In 2017, we also updated our SoBC to take account of the requirements of the UK Criminal Finances Act. All Group companies have adopted the SoBC or local equivalent, with the exception of RAI Companies until 31 December 2017. The RAI Code of Conduct, adopted prior to acquisition and substantially in alignment with the SoBC, applied to RAI Companies for the full year 2017.

Information on compliance with the Standards through the year is gathered at a global level and reported to the Regional Audit and CSR committees, and quarterly to the Board Audit Committee.

SO4 Communication and training on anti-corruption policies and procedures

Partially reported

Every Group company and every employee worldwide is expected to live up to our Standards of Business Conduct  (SoBC) and guidance on them, including the specific guidance on bribery and corruption, is provided across the Group through training and awareness programmes and a dedicated site on our intranet.

All business units worldwide complete an annual self-assessment against our key audit controls, in which they confirm they have adequate procedures in place to support SoBC compliance and have provided appropriate training and awareness to support them. In addition, all staff working across the Group are required to complete an annual sign-off, confirming their commitment and adherence to the SoBC, and to re-declare any personal conflicts of interest.

In 2017, we introduced our Delivery with Integrity programme focused on strengthening and driving a globally consistent approach to compliance across BAT. The design of the programme was informed by extensive due diligence on current best practice, including in managing bribery and corruption risks. The programme was launched in a two-day workshop held with 120 leaders from our Legal and External Affairs function and was opened by our Chief Executive. This was followed by a global communications campaign to all employees worldwide.

As part of the programme, we refreshed the Group’s approach to managing potential issues for our business in this area, including:

  • Regulatory engagement activities, guided by the Group’s Principles for Engagement and supported by targeted training to highlight associated risks; and
  • Engagement of third parties as suppliers and consultants to the Group, supported by the deployment of a revised third party due diligence procedure during 2018.

A key focus area of the programme in 2017 has been to strengthen our long-standing procedures for the annual employee SoBC sign-off. A requirement for managers and office-based employees to undertake a new SoBC e-learning and assessment was introduced in 2017. This included a module on our Anti-Bribery and Corruption Policy, and was completed by over 12,000 managers and an additional 6,000 non-management employees worldwide. Remaining employees, who may not have easy online access, received face-to-face training.

We also developed a new detailed e-learning course on anti-bribery and corruption, targeted specifically at employees who conduct external engagement with key stakeholders, governments and regulators. This will be completed by over 3,000 employees in 2018. Alongside this, a new mobile app will be launched in 2018 to provide employees with ‘on-the-go’ guidance on how to act in specific situations.

In addition, our Principles for Engagement  provide clear guidance for our external engagement with regulators, politicians and other third parties. In 2016, we had rolled out new internal guidelines on the Principles to provide further clarity and to ensure that they are interpreted consistently across the Group.

SO5 Confirmed incidents of corruption and actions taken

Partially reported

In 2017, a total of 183 instances of suspected violations of our Standards of Business Conduct  were reported to the Board Audit Committee (2016: 174). This included 131 brought to our attention through ‘whistleblowing’ reports from employees, ex-employees, third parties or unknown individuals reporting anonymously (2016: 115). These numbers represent the suspected violations reported against all policy areas of our SoBC that were reported in 2017.

Of this total of 183 instances, in 75 cases, investigations found no wrongdoing and in 30 cases the investigation continued at year-end. A total of 78 cases were established as breaches (2016: 77) and the appropriate action was taken, including dismissal, disciplinary measures and strengthening of our internal controls.

See LA16, HR3 and HR12 for instances of suspected improper business conduct contrary to our Workplace and Human Rights Policy in the Group’s Standards of Business Conduct.

SO6 Total value of political contributions by country and recipient/beneficiary

Fully reported

Our Standards of Business Conduct  set out our policy on political donations. Contributions from our companies to political parties and organisations, their officers, elected politicians and candidates for elective office may only be made subject to specific controls and in strict accordance with the law and our Group Policy as outlined in our SoBC. Contributions are not permitted to be made in order to achieve any improper business or other advantage or to influence any decision by a public official to the advantage of the Group or any Group company. In addition, they must not be intended personally to benefit the recipient or his or her family, friends, associates or acquaintances and must be permissible under all applicable laws.

Any donation must be authorised by the board of the company making it, must be fully documented in the company’s books and, if required by local law, must be put on the public record. Details must be notified in writing each year to the Company Secretary of British American Tobacco plc. and these are monitored by the Board Audit Committee.

The Group does not make contributions to European Union (EU) political organisations or incur EU political expenditure. The total amount of political contributions made to non-EU political parties in 2017 was £4,832,321 (2016: £20,208) as follows:

RAI Companies reported political contributions totalling £4,826,416 (US$6,221,250) for the full year 2017 to US political organisations, non-federal-level political party committees and to campaign committees of various non-federal candidates, in accordance with their contributions programme established prior to the acquisition of RAI by the Group. No corporate contributions were made to federal candidates or political party committees and all contributions were made in accordance with applicable laws. All political contributions made by RAI Companies are assessed and approved in accordance with RAI’s policies and procedures to ensure appropriate oversight and compliance with applicable laws. In accordance with the US Federal Election Campaign Act, RAI Companies continue to support an employee-operated Political Action Committee (PAC), a non-partisan committee registered with the US Federal Election Commission that facilitates voluntary political donations by eligible employees of RAI Companies. According to US federal finance laws, the PAC is a separate segregated fund and is controlled by a governing board of individual employee-members of the PAC. In 2017, RAI Companies incurred expenses, as authorised by US law, in providing administrative support to the PAC.

Carreras Limited, a BAT subsidiary in Jamaica, reported a contribution to the Jamaica Labour Party of £5,905 in 2017.

No other political donations were reported.

SO7 Total number of legal actions for anti-competitive behaviour, anti-trust and monopoly practices and their outcomes

Fully reported

For 2017, our companies reported the following matters:

  • In May 2017, the Belgian Competition Authority started an antitrust investigation into possible anti-competitive practices in the tobacco sector in Belgium. BAT’s local subsidiary is cooperating with the investigation, which is ongoing.
  • In March 2017, the Zambian Competition Authority started an antitrust investigation into possible anti-competitive practices in the tobacco sector in Zambia.  BAT’s local subsidiary is cooperating with the investigation, which is ongoing.
  • In February 2017, the Spanish Competition Authority started an antitrust investigation into possible anti-competitive practices in the tobacco sector in Spain. BAT’s local subsidiary is cooperating with the investigation, which is ongoing.
  • In February 2017, the Antimonopoly Committee of Ukraine started an antitrust investigation into possible anti-competitive practices in the tobacco sector in Ukraine. BAT’s local subsidiary is cooperating with the investigation, which is ongoing. 
  • In January 2017, a Ukrainian individual filed a lawsuit against BAT Ukraine and Imperial Tobacco Ukraine (ITU) regarding alleged anti-competitive practices and claimed his consumer rights were breached.  In April 2017 the first instance court partially found in the claimant’s favour and ordered each defendant to pay a moral damage of UAH1,000 (£30). BAT Ukraine and ITU successfully appealed this ruling, and the claim was dismissed.
  • In 2016, Papua New Guinea’s Independent Consumer & Competition Commission (ICCC) opened an antitrust investigation into a BAT subsidiary’s (“BATPNG”) wholesale and retail trading terms. BATPNG co-operated fully with the ICCC’s investigation and provided all information requested. In order to close the matter (and without any acceptance of liability), BATPNG voluntarily amended its trading terms. The matter was closed in August 2017.
  • In 2016, OGT Ltd, a Georgian tobacco manufacturer, filed a claim against BAT Georgia alleging anti-competitive practices. In February 2017 judgment was entered against BAT Georgia for US $101m. BAT Georgia successfully appealed this ruling, and the claim was dismissed without any penalties.
  • In 2016, BAT Georgia and its UK parents were sued by a tobacco manufacturer in Georgia, JSC Tbilisi Tobacco, for alleged anti-competitive behaviour. BAT Georgia filed a counterclaim. Both the claim and counterclaim were mutually withdrawn in February 2017.
  • In 2015, the Serbian Competition Authority started an antitrust investigation into possible anti-competitive practices in the tobacco sector in Serbia. BAT’s local subsidiary is cooperating with the investigation, which is ongoing.
  • In October 2014, the Dutch Competition Authority started an investigation against all local tobacco companies in respect of their alleged involvement in anti-trust practices. BAT’s local subsidiary is cooperating with the investigation, which is ongoing.
  • In 2012, Souza Cruz, BAT’s Brazilian subsidiary, executed a Cease and Desist Agreement with the Brazilian Competition Authority (CADE) through which Souza Cruz committed to guarantee that no exclusivity clause for merchandising, product display, storage or sale in tobacco points of sale would be inserted in its contracts with retailers.  Souza Cruz also paid a contribution to the Brazilian Diffused Rights Fund in order to help to promote fair competition in the Brazilian Cigarette Market. This was following on from the administrative proceedings initiated by CADE in 2005, against Souza Cruz and the local subsidiary of Phillip Morris International (PMI) over practices of merchandising and display exclusivity. From 2012 to 2017, the proceedings against Souza Cruz were suspended and Souza Cruz’s activities were closely monitored by CADE. Given the fact that all the terms of the Agreement between Souza Cruz and CADE were duly accomplished, in 2017 the proceedings against Souza Cruz were finally closed by CADE, with no penalty.
  • In 2012, closing statements were made in a criminal case in Zambia alleging anti-competitive behaviour by BAT’s local subsidiary and two of its employees.  Judgment has not yet been given. 

Although outside the 2017 reporting period, in January 2018, the French Competition Authority started an investigation into possible anti-competitive practices in the tobacco sector in France. BAT’s local subsidiary is cooperating with the investigation, which is ongoing.


SO8 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with laws and regulations

Fully reported

For 2017, our companies reported the following matters:

  • In 2015, the Anti-Tobacco Assembly (CNCT) filed two claims against a number of BAT Group companies in which it alleged that BAT had violated France’s rules against sponsorship and by organising a lunch which was attended by members of the French Parliament; and that BAT had breached various rules on packaging and advertising. In the first case, BAT was acquitted of wrongdoing and the case is now closed. In the second, the Court of Appeal upheld CNCT’s claim in part only, finding that the tobacco packaging in question contained a promotional statement and ordering BAT to pay 300,000 EUR (£262,550). CNCT is appealing.
  • In 2016, Her Majesty’s Revenue & Customs (HMRC) in the UK issued a BAT subsidiary with a six-month warning notice and a subsequent £650,000 penalty in relation to the supply and control of Cutters Choice hand rolling tobacco in Belgium. The company paid the penalty, prior to filing an appeal. The First Tier Tax Tribunal issued its decision on 14 February 2017, upholding the appeal in part and substituting HMRC’s penalty of £650,000 with a penalty of £100,000. Neither party appealed the decision and the case is now closed.

Fines received for confirmed breaches of antitrust, product labelling and marketing communications related law and regulations, if any, are reported under disclosures for other compliance-related GRIs: SO7, PR4, PR7 and PR9.

SO9 Percentage of new suppliers that were screened using criteria for impacts on society

Not reported – information not collated at Group-level

SO10 Significant actual and potential negative impacts on society in the supply chain and actions taken

Not reported – information not collated at Group-level

SO11 Number of grievances about impacts on society filed, addressed, and resolved through formal grievance mechanisms

Fully reported

Our Standards of Business Conduct  (SoBC) sets out the Group’s whistleblowing policy, which encourages anyone working for, or with, the Group who is concerned about actual or suspected wrongdoing at work to raise their concerns. The Policy outlines examples of wrongdoing, such as “endangering the health or safety of an individual or damaging the environment” and “bullying and harassment in the workplace, or other human rights abuses”. Our independently managed external Speak Up channels are available to raise concerns, anonymously if preferred, including impacts around society. These are available 24 hours a day in local languages and are highlighted in our internal training and communications. Our Speak Up  channels are also available to our business partners and suppliers.

Nothing was brought to our attention regarding any grievances about impacts on society, unless reported under disclosures for other grievance reporting related GRIs.

The Whistleblowing Policy is supplemented by local procedures throughout the Group and in the Group’s London headquarters, which provide staff with additional guidance and enable them to report matters in a language with which they are comfortable. An example of local procedures is the UK formal Grievance Policy. It enables employees to raise issues with management regarding their work, working environment or working relationships, or about their employer’s, client’s, a third party’s or their fellow worker’s actions that affect them. Examples include: terms and conditions of employment, health and safety, relationships at work, new working practices, organisational change and equal opportunities. This policy sets out a global best practice for replication throughout the Group subject to local, end market jurisdiction.

See LA16, HR3, HR12 and SO5 for details of suspected improper business conduct, contrary to our Standards of Business Conduct, reported in 2017.

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