Social performance: Product

PR1 Percentage of significant product and service categories for which health and safety impacts are assessed for improvement

Fully reported

We are committed to working to reduce the public health impact of smoking, through offering adult consumers a range of potentially reduced-risk products.

It is widely acknowledged that most of the harm associated with smoking is caused by inhaling the smoke produced by the burning of tobacco. Products that involve no combustion, including vapour products (e-cigarettes), tobacco heating products (THP) and smokeless oral tobacco, typically release far fewer and lower levels of toxicants compared to conventional cigarettes and may therefore have the potential to be significantly less harmful to health. That is why we are dedicated to the development and sale of products that provide much of enjoyment of smoking without burning tobacco.

However, no tobacco or nicotine product is 100% safe, so ensuring high quality and consumer safety is at the heart of how we design, develop and manufacture our products. We aim to be a recognised leader in the responsible stewardship of all tobacco and nicotine products, and we actively guide our research and development (R&D) activities to enable product risk to be characterised and minimised as much as possible.

Our approaches are based on well-established principles of toxicological and safety risk assessment and use a wide range of analytical techniques, specialised laboratory technology and expertise. They enable us to define acceptability criteria for many aspects of product specification and performance, in the interests of consumer safety. These in turn form the basis of the Group’s stewardship guidelines and standards across our product portfolio. Our stewardship remit incorporates the entire product lifecycle and, as such, provides expert advice and support to the development, manufacture and distribution of products.

For our next generation vapour and tobacco heating products, all our devices are CE certified for EU safety, health and environmental requirements and assessed by an independent third party, and we operate and maintain a quality management system based on requirements of ISO9001:2008. Then, with the e-liquids themselves, we use only pharmaceutical-grade ingredients and food-grade flavourings and our toxicologists work to ensure nothing is added that is known to increase the risk to the consumer. Only when we are fully satisfied that a product meets our high-quality standards do we allow it to go on the market.

We’ve also developed a framework of scientific tests to assess the reduced-risk potential of our Next Generation Products (NGPs) relative to smoking cigarettes. This includes testing everything from how consumers use a product and the content of the vapour it produces, to the biological impact of the vapour on cells in laboratory tests and, ultimately, the likely impact of the availability of that product on consumer health. We are using this framework to evaluate our NGPs, and have so far completed studies for both our Vype ePen and our glo THP.

While the results of our research are very encouraging, more is needed to understand the longer-term impact of using NGPs. That’s why we’re now embarking on one of our most ambitious and large-scale clinical studies, following hundreds of consumers in the UK for a full year, to look at whether switching to an NGP is comparable to quitting smoking, in terms of reducing toxicant exposure and the potential impact on health.

We would like to see these high standards become the benchmark for the industry and future regulation. It is only with such consistent, universal standards for NGPs that consumers and regulators will get the assurances they need.

That’s why we’ve been openly sharing our approach, contributing our expertise and participating as part of multi-stakeholder groups and consultations in the development of robust, industry-wide quality and safety standards for NGPs.

We are also actively encouraging the industry, vapers and public health communities to collaborate in this process. We do this through our work with taskforces, such as those of the Cooperation Centre for Scientific Research Relative to Tobacco (CORESTA), and our presentations on the global implications of product standards at conferences, such as those of the Food and Drug Law Institute, and the Global Tobacco and Nicotine Forum.

You can read more about our scientific research and results of product assessments and studies on our dedicated website . Detailed information on our work to research, develop and commercialise potentially reduced-risk alternatives to regular cigarettes can be found in the Harm Reduction section of our 2017 Sustainability Report  and Harm Reduction Focus Report .

PR2 Total number of incidents of non-compliance with regulations and voluntary codes concerning the health and safety impacts of products and services during their life cycle, by type of outcomes

Fully reported

Unless reported elsewhere in these GRIs, no material instances were reported by our companies in 2017.

PR3 Type of product and service information required by the organisation’s procedures for product and service information and labelling, and percentage of significant product and service categories subject to such information requirements

Fully reported

We have strict requirements in place that provide a globally consistent and responsible approach to marketing for all our products.

We are committed to ensuring all our product marketing complies with local legislation and, we are committed to aiming for 100% compliance with our global Marketing Principles  worldwide.

All our cigarette marketing, wherever these are sold, has been governed by our voluntary International Marketing Principles  (IMP) since 2001. With our shift to a multicategory portfolio of different tobacco and nicotine products, we have subsequently introduced Snus Marketing Standards and Vapour Product Marketing Principles, and in 2017, we developed our new principles for tobacco heating products. Alongside these, we have a digital marketing toolkit in place that includes in-depth guidance to help our markets apply our Marketing Principles online, covering content standards, use of social media and search engines, and ensuring robust age verification.

One of the core requirements of our IMP states that “all our advertising and packaging will carry clearly visible and legible health warnings.” Subsequently, all of our combustible tobacco products are required to carry clearly visible health warnings on packaging, even when not required by local regulation.

In addition, 100% of our vapour product packs, inserts and e-liquid refills have appropriate warnings, are sold in child-proof containers and are clearly labelled as being for those aged 18 and over.

All our marketing materials have to be formally reviewed and approved by our Legal and External Affairs function and we provide training to our marketing employees and trade representatives, as well as any external agencies we work with, to ensure they are effectively applied.

In light of the integration of Next Generation Products (NGPs) into our core business, we plan to develop a new set of consolidated Marketing Principles to cover all our product categories, including combustible cigarettes, smokeless tobacco and NGPs.

PR4 Total number of incidents of non-compliance with regulations and voluntary codes concerning product and service information and labelling, by type of outcomes

Fully reported

Unless reported elsewhere as part of our GRI reporting, for 2017, our companies reported the following matters:

  • In Belgium, our subsidiary BAT Belgium NV, was subject to fifteen infraction notices issued by the Ministry of Health for alleged infringements of the advertising legislation and the regulations transposing the Tobacco and Related Products Directive into domestic law. The alleged infringements included the use of various pack size descriptors, the use of menthol descriptors as well as applying prices on the packs. Belgium NV has agreed with the Ministry of Health to resolve the alleged infringements.
  • In Colombia, two actions were brought against a BAT subsidiary for alleged violations of certain provisions of the Colombian Tobacco Control Act: the requirement for any tobacco product packaging to be formally approved by the Ministry of Health and include a health warning; and the prohibition on promotional activities. BAT contends that the relevant packaging was indeed approved by the Ministry of Health and included the health warning, and that relevant materials were not promotional and/or directed at consumers. The two actions have been consolidated, and the appeal now encompasses all allegations. The Superintendence of Industry and Commerce found against BAT and a fine of COP $368,858,500 (£96,000) was imposed. BAT has appealed.
  • In Czech Republic, a BAT subsidiary was subject to an administrative proceeding in respect of its application of tax stamps and its purported non-compliance with the applicable excise regulations. It is alleged  that cigarette products manufactured and supplied by our subsidiary may have been wrongly labelled as containing an incorrect number of sticks. The case is still ongoing.
  • In Germany, a BAT subsidiary was issued with three non-compliance notices by the relevant authority in respect of the alleged breach of packaging and labelling laws. The allegation concerns the size of the lateral health warnings printed on three of BAT’s cigarette products. BAT has provided its response.
  • In Latvia, a BAT subsidiary was informed by the Latvian Health Inspectorate that the lateral health warnings on certain of BAT’s cigarette product may not in be compliance with Latvian legislation.  The industry was given three months (until end of March 2018) in which to bring its packaging into conformity with the Health Inspectorate’s interpretation of the legislation.
  • In October 2017, the Ministry of Health in the Solomon Islands sent correspondence to a number of tobacco companies, including a BAT subsidiary, alleging that retailer incentive schemes breach the Tobacco Control Act. BAT’s local subsidiary is corresponding with the Ministry of Health.
PR5 Results of surveys measuring customer satisfaction

Partially reported

We measure our retail customers’ satisfaction through our Customer Voice programme, which has been designed and developed to provide in-depth qualitative understanding of BAT’s customers. It provides us with a rich and detailed understanding of our retail customers, particularly in terms of uncovering customers’ attitudes, perceptions and ultimately the factors which drive opinions about the BAT experience.

The programme also includes an optional quantitative measurement of key metrics designed to add context to and enhance the findings of the qualitative phase where necessary.

By conducting an ongoing dialogue with customers, we better understand their issues and concerns in the changing retail environment for mutual business benefit. The study’s overall purpose is to provide essential input into BAT cycle planning, with the ultimate aim of implementing positive change where necessary to achieve business growth.

Specifically, it:

  • Creates a channel for retail customers to provide feedback and for BAT to act upon;
  • Identifies any opportunity and areas of lower performance, which can potentially be followed up with further monitoring and communication with retailers in any relevant market;
  • Assesses the satisfaction and relevancy of service provided by BAT;
  • Encourages and drives our companies’ action planning with multi-functional collaboration.

Since the launch of the revised Customer Voice methodology in 2016, we’ve used the programme to measure satisfaction across six of our key markets so far: Germany, Mexico, Russia, South Africa, South Korea and Turkey. Most recently, we achieved a customer engagement index score of 82 in Mexico and 84 in Turkey.

In 2018, we will be using the results from our Customer Voice programme in key markets to develop a consolidated Global Customer Engagement Index.

PR6 Sale of banned or disputed products

Fully reported

We comply with all laws and regulations relating to all our different product categories and openly respond to stakeholder questions or public debate.

Smokeless snus

The sale of snus, a low-toxicant smokeless oral tobacco product, is currently banned in some markets, including Australia and European Union (EU) member states. Sweden obtained an exemption from the ban when it joined the EU in 1995. In Europe, we currently sell snus products in Sweden and Norway.

Independent scientific evidence tells us that snus typically has substantially lower risks than cigarette smoking. The wide use of snus among Swedish men is seen as an important reason why Sweden has the lowest rate of male smoking-related diseases of any comparable developed nation.

Therefore, we believe that due to its significant harm reduction potential, snus should be legal in all countries. As such, we were disappointed that in the 2014 update of the EU Tobacco Products Directive (TPD), European regulators have not lifted the existing ban on the sale of snus.

Next Generation Products

At the end of 2017, our Next Generation Products (NGPs), such as vapour products and tobacco heating products, were available in 16 markets worldwide, as well as airport duty-free shops.

The NGP market is relatively new and regulation is still in its early stages. Globally, there is a mix of attitudes between those regulators who aim to encourage products that are potentially safer for smokers, and some regulators who view them with greater scepticism – including some countries where they are banned.

The UK is an example of what can happen with the support of regulators and public health bodies. Major reports on the reduced-risk potential of vapour products by the likes of Public Health England and the Royal College of Physicians, combined with a progressive approach to regulation, have helped the UK become the largest vaping market in Europe, as well as having the second-lowest rate of smoking.

As with any emerging area, views are evolving constantly. In July 2017, the US Food and Drug Administration (FDA) released its tobacco and nicotine plan which, for the first time, acknowledged the continuum of risk associated with tobacco and nicotine products. This was a significant milestone in suggesting that NGPs could play a role in harm reduction policies in a cigarette market as large as the US.

However, despite this, some markets still have restricted availability of NGPs. For example, in Australia and Japan vapour products containing nicotine are only available via a medicinal route which means they are not readily available to smokers. This is also the case in Canada, but the Canadian Government is in the midst of putting together a new regulatory framework for vaping products. To inform this, we have been advocating our views on an effective regulatory framework.

This is a fast-moving area and setting regulations in such a dynamic market is not easy. That’s why engagement with industry, public health bodies and consumers is so important for helping to ensure the regulations work and benefit public health.

PR7 Total number of incidents of non-compliance with regulations and voluntary codes concerning marketing communications, including advertising, promotion, and sponsorship, by type of outcomes

Fully reported

Compliance with our voluntary Marketing Principles

In 2017, no incidents of non-compliance with our International Marketing Principles for combustible tobacco products, our Snus Marketing Standards or our Vapour Products Marketing Principles were identified through our internal procedures.

In 2017, no incidents of non-compliance were identified through our internal procedures. There were, however, two external allegations made about our marketing practices in relation to local tobacco control and advertising laws. In each case we conducted detailed investigations and found no evidence of any wrongdoing. Where any instances of non-compliance or opportunities to further strengthen our internal controls are identified, immediate action plans are put in place to address them. For example, following a report published by an NGO on the tobacco industry and alleged marketing around schools in Nigeria, we conducted our own investigations and commissioned an independent audit. The audit findings did not support the allegations in the report in respect of BAT’s activities, although it did identify minor improvements in the controls around our marketing practices which were immediately implemented. 

Compliance with local regulations

For 2017, our companies reported the following matters:

  • In Argentina, a BAT subsidiary was served by the Ministry of Health with 24 notices of alleged infringements of the National Tobacco Law (NTL) in relation to point of sale communications. Since 2016, only one of the 24 cases has been determined, and was decided in favour of BAT, with the effect that the Ministry of Health is unable to issue further enforcement notices in respect of the allegedly infringing behaviour. the other 23 cases remain pending.
  • In Brazil, our subsidiary company, Souza Cruz, was the subject of thirteen infraction notices issued by the health authority in the course of 2010 for alleged breaches of packaging laws. Seven of these were closed in 2016 with the payment of a penalty of BRL 160,000 (approximately £41,900). The remaining six administrative cases were closed in 2017, with the payment of a total amount of BRL 266,000 (approximately £64,600) in penalties. The subject of two administrative cases have moved to discussion in the courts.
  • In Colombia, in addition to the cases listed in SO8, a BAT subsidiary was subject to seven investigations regarding various alleged acts of promotion and advertising in breach of the Tobacco Control Act. Four of these investigations were decided in favour of BAT and were closed in 2016. In 2017, the remaining three investigations were closed without penalty.
  • In Guatemala, a BAT subsidiary was fined Q348,600 (£37,000) in respect of an infringement of local advertising laws. The case is now closed.
  • In Honduras, a BAT subsidiary is subject to two cases relating to allegedly unlawful advertising practices at point of sale in retail outlets. In the first case, a fine of US$34,000 (£GBP £27,790) was imposed, which the company is in the process of appealing. The second case is pending further review by the courts.
  • In Hungary, a BAT subsidiary agreed to settle 30 claims initiated by a competent administrative authority in 2016 for alleged breaches of advertising regulations. Our subsidiary has agreed with the respective authority to resolve the alleged infringements. 18 cases remain outstanding. 
  • In Peru, a law suit was filed against a BAT Group company and a local subsidiary of PMI for allegedly providing misleading information in advertising. The case is ongoing.
  • In Solomon Islands, product packaging and price boards of a BAT subsidiary have been the subject of allegations by the Ministry of Health relating to breaches of the Tobacco Control Act.  In one instance, our subsidiary removed the relevant statement from product packaging. No further action was taken by the Ministry of Health and the matter was closed. In the other instance, the Ministry of Health visited our subsidiary’s retailers and suggested to retailers that BAT’s price boards were non-compliant.  As far as we are aware, no further action has been taken by Ministry of Health to date.
  • In Taiwan, a BAT subsidiary was subject to proceedings in respect of alleged breaches of Tobacco Hazards Prevention and Control Act, relating to on-pack communication. It is alleged that certain product packaging violated the prohibition against tobacco advertising. Two cases are awaiting decision from local Bureaus of Health; one case may be appealed to the High Administrative Court.
  • In 2016, Switzerland, the local subsidiary of Phillip Morris International filed a claim with the arbitral body of voluntary regulations (Swiss Cigarette), alleging that a BAT subsidiary breached provisions of the voluntary regulations (Swiss Cigarette Code). Any violation of the Swiss Cigarette Code is subject to an arbitral procedure, the outcome of which is not publicly disclosed or released. The case was dismissed by the arbitral judge in February 2017, and the decision was not appealed by the claimant. The matter is now closed.
  • In 2016, the Danish Consumer Ombudsman, which oversees compliance with the Tobacco Advertising Law, reported a BAT Group company to the Danish Police in respect of the alleged use of digital screens in 7 Eleven Stores to advertise tobacco product. The outcome of the prosecutor’s investigation is awaited.
PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services

Fully reported

  • In Brazil, a class action has been brought against Souza Cruz by the Paraná State Public Prosecution Office for alleged environmental damage due to butt littering. A decision was rendered by the Parana State Court of Appeals to suspend the expert evidence phase in order to include other tobacco companies in the lawsuit and all the cities of the State of Paraná. Souza Cruz has filed an appeal to Superior Court of Justice to discuss procedural issues regarding the case. There has not been any update in 2017, and we continue to await the outcome of the appeal.