Social performance: Society

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

Fully reported

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 2016, 68% of our reporting markets had CSI activities and the total Group CSI cash spend was £8.3 million. The proportion of our CSI spend across the three themes was as follows: sustainable agriculture and environment, 69%; empowerment, 28%; and civic life, 3%. The majority (78%) of the total Group CSI spend is focused in our strategic markets, with a further 16% on our global projects with the Eliminating Child Labour in Tobacco Growing (ECLT) Foundation .

Biodiversity assessments

We used the biodiversity risk and opportunity assessment (BROA) tool , developed by the former BAT Biodiversity Partnership, to conduct assessments across 100% of our leaf growing operations by the end 2015.

We make sure that the assessments and the actions taken encourage cooperation with local stakeholders and don’t just focus on tobacco. Collaboration with the people living and working in the agricultural landscapes or local NGOs is often required for these initiatives. See EN11, 12 and 13 for more information.

Stakeholder engagement

We engage with a wide range of stakeholders at local, regional and global levels on key sustainability issues. This long-standing approach has seen many positive impacts and outcomes over the years, including the development of our Statement of Business Principles and first International Marketing Standards in 2001.

Listening to our stakeholders helps us better understand their views and concerns and so respond to them appropriately. It gives us valuable feedback on our policies, procedures and ways of working, so that we can continually improve and strengthen them. It provides us with opportunities to put our views across, helping our stakeholders understand our positions.

We also actively share our experience and expertise with others, which can help to raise standards across the industry and make a valuable contribution to wider society. For example, openly sharing our scientific research and approach to product stewardship helped result in the first national standards for Vapour Products in the UK and France.

You can read more about our 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 Standards, and associated anti-corruption training materials, are fully aligned with the provisions of the UK Bribery Act 2010 and its associated guidance. We are also confident that they meet the standards of the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.

Continuous 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.

As part of our commitment to continuous improvement, in 2016, we developed new training and communications materials for our employees worldwide to clarify what they should do if they discover actions that conflict with our Standards.

In addition, our Principles for Engagement  provide clear guidance for our external engagement with regulators, politicians and other third parties. In 2016, we 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

Fully reported

In the year to 31 December 2016, 174 instances of suspected improper conduct contrary to our Standards of Business Conduct  were reported to the Board Audit Committee (2015: 94). Including 115 brought to our attention through ‘whistleblowing’ reports from employees, ex-employees, third parties or unknown individuals reporting anonymously (2015: 85).

Of the instances reported, 77 were established as breaches and appropriate action taken (2015: 29). In 65 cases, an investigation found no wrongdoing (2015: 43). In 32 cases, the investigation continued at the year-end (2015: 22), including our ongoing investigation into allegations of bribes being paid in Africa.

The appropriate action will vary from case to case but will include, depending on the circumstances, dismissal or disciplinary action and, where appropriate, reporting the case to the relevant authorities. Where any weakness in internal controls is identified, appropriate measures are taken to strengthen them.

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 are actively discouraged, and may only be made subject to specific controls. 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. Donations to political organisations and political expenditure within the European Union may only be made out of funds previously authorised by shareholders at a General Meeting.

In 2016, one company, British American Tobacco Japan Limited, reported contributions totalling Japanese yen ¥2,980,000 (£20,208) for the full year 2016 (compared to two companies in 2015 with a total political contribution of £25,804).

This expenditure by BAT Japan is reported as a political contribution although it related specifically to the purchase of tickets to receptions or dinners hosted by Members of Parliament (MPs). Representatives from British American Tobacco Japan Limited engaged with these MPs at the receptions on local tobacco tax issues.

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 2016, our companies reported the following matters:

  • In April 2016, our Georgian company and its UK parents were sued by local manufacturer, JSC Tbilisi Tobacco, for alleged sale of products below cost price in an alleged breach of local laws. BAT Georgia filed a counterclaim.  Both the claim and counterclaim were mutually withdrawn in February 2017.
  • In July 2016, OGT Ltd, another 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. The judgment will be appealed.
  • 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 2015, the Competition Authority started an investigation in Serbia against all local tobacco companies in respect of their alleged involvement in anti-trust practices. BAT’s local subsidiary cooperated with the investigation, but was nevertheless raided by the authorities who seized documents, and ex officio proceedings were initiated. The case 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 2016, our companies reported the following matters:

  • In Colombia, two actions were brought against BAT alleging violation of the Colombian Tobacco Control Act relating to the requirement for any form of tobacco product promotion to include a health warning. However, BAT contends that the materials in question were not promoted to or directed at consumers. One case found against BAT in the first instance, for which our company has filed an appeal. The second case is yet to be heard. In addition, our company is subject to another ongoing case relating to an alleged breach of advertising laws, and alleged selling of products with no previous authorisation from the Ministry of Health. Initially the courts upheld the complaint. BAT Colombia subsequently filed an appeal. The case is ongoing.
  • In Denmark, our company was reported to the Police by the Danish Consumer Ombudsman, which oversees compliance with the Tobacco Advertising Law, for a potential violation of the prohibition to advertise tobacco products in connection with the use of digital screens in 7 Eleven Stores, which constitutes a criminal offence in the country.  We are awaiting the outcome of the prosecutor’s investigation.
  • In France, two actions were brought against BAT by the Anti-Tobacco Assembly (CNCT) for alleged illegal advertising, and for organising a lunch which was attended by members of the French Parliament. BAT was acquitted of wrongdoing in both cases. CNCT are appealing the decision.
  • In South Africa, a complaint was lodged by a subsidiary of our competitor, Philip Morris International (PMI), with the Advertising Standards Authority against BAT South Africa’s (BATSA) Africa Gold Packaging, on the basis of alleged imitation of PMI’s Boxer pipe tobacco packaging. In October 2016, a ruling was made in favour of BATSA, but PMI has appealed against this decision and we are now awaiting a final ruling on the appeal.
  • In Spain, a BAT supplier Muxunav, filed both civil and criminal proceedings against BAT, certain of its employees and other tobacco companies in the country, in connection with an alleged infringement of a utility model. In 2015, the Tobacco Commissioner found against BAT and other tobacco companies which were fined a total of €300,000 (GBP £233,922) each. BAT paid the fine and the case is now closed.
  • In the UK, Her Majesty’s Revenue & Customs (HMRC) issued BAT 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. The parties have 56 days from the date of the decision in which to appeal.
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

Not reported – information not collated at Group-level

The Group’s Standards of Business Conduct  set out our Whistleblowing Policy which enables staff, in confidence, to raise concerns about possible improprieties in financial and other matters and to do so without fear of reprisal, provided that such concerns are not raised in bad faith. The policy is supplemented by local procedures throughout the Group, which provide staff with additional guidance and enable them to report matters in a language with which they are comfortable.

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