Independent assurance statement by Ernst & Young to British American Tobacco management
The British American Tobacco p.l.c. online Sustainability Report 2007 and www.bat.com content have been prepared by British American Tobacco management, who are responsible for the collection and presentation of information within it. Our responsibility, in accordance with the instructions of British American Tobacco management, is to carry out a review of the online Sustainability Report 2007 and selected pages of www.bat.com (the Report). We have completed a ‘reasonable level’ assurance engagement on the information presented on the London stakeholder dialogue sessions and a ‘limited level’ assurance engagement on the rest of the Report. The level of assurance is defined by the International Federation of Accountants’ ISAE3000 [ 1 ].
Our responsibility in performing our assurance activities is to the management of British American Tobacco only and in accordance with the terms of reference agreed with them. We do not therefore accept or assume any responsibility for any other purpose or to any other person or organisation. Any reliance any such third party may place on the Report is entirely at its own risk.
What did we do to form our conclusions?
Our assurance engagement has been planned and performed in accordance with the Institute of Social and Ethical Accountability’s AA1000 Assurance Standard and ISAE3000. The Report has been evaluated against adherence to the principles of Materiality, Completeness and Responsiveness as set out in the AA1000 Assurance Standard.
To form our conclusions on the Report we undertook the following steps:
- Interviewed a selection of British American Tobacco executives and senior managers at British American Tobacco’s headquarters in London (headquarters) to understand the current status of social, ethical and environmental activities and progress made during the reporting period.
- Conducted a benchmarking exercise of the material issues and areas of performance covered in the non-financial reporting of British American Tobacco’s peers.
- Reviewed a selection of external media reports and selected documents at headquarters relating to social, ethical and environmental aspects of British American Tobacco’s performance, to test the coverage of topics within the Report.
- Reviewed information or explanation about the Report’s data, statements and assertions regarding British American Tobacco’s sustainability performance in 2007.
- Reviewed and challenged the collation and validation processes for a selection of data parameters at headquarters. This review encompassed Environment, Health and Safety, Group Corporate Social Responsibility (CSR) survey, community investment, employee performance review, machinery destroyed, Business Enabler Survey Tool (BEST) and Social Responsibility in Tobacco Production (SRTP) data.
- Reviewed British American Tobacco’s processes for determining material issues to be included in the Report.
In addition, in order to form our conclusions on the information regarding stakeholder dialogue sessions in London, we:
- Attended four independently facilitated stakeholder dialogue sessions held in London during late 2007 and early 2008.
- Reviewed the minutes of the dialogue to form conclusions on their accuracy.
Level of assurance
Our evidence gathering procedures have been designed to obtain a ‘limited level’ of assurance (as set out in ISAE3000) on which to base our conclusions for the whole of the Report. The extent of evidence gathering procedures performed is less than that of a ‘reasonable level’ assurance engagement (such as a financial audit) and therefore a lower level of assurance is provided. Our attendance at the independently facilitated stakeholder dialogue sessions in London and our review of the outputs of these sessions has provided sufficient evidence for us to provide a ‘reasonable level’ of assurance on the summary of these engagement activities provided in the Report.
Limitations of our review
Our scope of work covered the online Sustainability Report 2007 and the web pages on www.bat.com that are marked with the Ernst & Young footnote . We did not review all www.bat.com web pages.
Our work was limited to activities at headquarters. We did not visit any of the operating companies.
Our conclusions on the data are limited to the 2007 data collated at headquarters. We therefore provide no conclusions on the processes or accuracy of the data reported by the operating companies, or the data presented for previous years.
Our engagement with stakeholders was limited to those who attended the London stakeholder dialogue sessions held by British American Tobacco referred to above.
On the basis of our review and in accordance with the terms of reference for our work we provide the following conclusions on the Report in relation to each of the main AA1000 Assurance Standard’s principles (Materiality, Completeness and Responsiveness). Our conclusions should be read in conjunction with the above section on ‘What did we do to form our conclusions?’.
Has British American Tobacco provided a balanced representation of material issues concerning its sustainability performance?
Based on our review:
- British American Tobacco undertook a materiality process which was refined through discussions with management and specific external stakeholders. The application of the materiality process has required a significant degree of judgement by management on the relevance of particular topics to the readers of the Report and the significance to British American Tobacco’s business. We are not aware of key topics considered most material by British American Tobacco through this process that were not included in the Report.
- There were a number of topics that were assessed through British American Tobacco’s materiality process as not sufficiently material for the Report, which our own materiality tests highlighted may be of interest to certain stakeholder groups. These include:
- Overview of the economic impact of the business;
- Public place smoking bans; and
- Community investment.
- We understand that British American Tobacco includes information on a number of these topics at www.bat.com that were outside the scope of our review.
Does British American Tobacco have complete information on which to base a judgement of what is material for inclusion in the Report?
Based on our review:
- We are not aware of any material issues excluded from British American Tobacco’s judgements on the content of the Report; and
- We have reviewed information or explanation on the statements on British American Tobacco’s sustainability activities presented in the Report and we are not aware of any misstatements in the assertions made.
Environment, Health and Safety, Group CSR survey, community investment, employee performance review, machinery destroyed, BEST and SRTP data:
- With the exception of the 10% of operating companies (by global sales volume) that did not submit data to the Group CSR survey, we are not aware of any material reporting units that have been excluded from the headquarters level data relating to the topics above; and
- We are not aware of any errors in the collation of data at headquarters that would materially affect the data as presented in the Report.
How has British American Tobacco responded to stakeholder concerns?
Based on our review:
- We are not aware of any additional issues of stakeholder interest raised during the four dialogue sessions that are not currently included in the Report’s scope and content; and
- We have reviewed the text in the Report regarding the independently facilitated stakeholder dialogue sessions held in London and conclude that they provide a fair summary of the engagement at these sessions and agreed actions.
Observations on particular aspects of our engagement
Our observations and areas for improvement will be raised in a report to British American Tobacco management. We have provided a selection of these observations below. Additional specific observations are provided within the Report on the following topics: governance, materiality process and stakeholder engagement. These observations do not affect our conclusions on the Report set out above.
- We have observed policies, programmes and discrete activities aimed at addressing issues raised through stakeholder engagement. It is recognised that the response taken is British American Tobacco’s judgement and may not always be consistent with the expectations of all stakeholders.
- British American Tobacco’s materiality process has been refined through engagement between stakeholders and British American Tobacco’s management. It will be important that the process continues to develop, to take into consideration feedback on the Report on topics that could have been covered in more detail as well as to respond to emerging topics of stakeholder interest.
- Data derived from the Group CSR survey which is used to gather some of the non-Environmental, Health and Safety data for the Report is dependent upon a manual collation process at headquarters which introduces a greater risk of error than automated collation systems.
- We have observed that a number of operating companies have not submitted data to the Group CSR survey. We consider that further effort should be made to encourage reporting from all operating companies.
- There has been limited challenge and review by British American Tobacco management of the methods used by the operating companies to generate the data reported to headquarters. A review by management of the local data processes may lead to improvements in the completeness, consistency and accuracy of data reported in future years.
This is the first year Ernst & Young LLP has provided independent assurance services in relation to British American Tobacco p.l.c.’s Sustainability Report. We have provided no other services relating to British American Tobacco’s approach to sustainability reporting.
Our assurance team
Our assurance team has been drawn from our global environment and sustainability network, which undertakes similar engagements to this with a number of significant UK and international businesses.
Ernst & Young LLP
London June 2008
- International Federation of Accountants’ International Standard for Assurance Engagements Other Than Audits or Reviews of Historical Financial Information (ISAE3000).