bat sustainability report 2007 - Economic performance
EC1 Direct economic value generated and distributed, including revenues, operating costs, employee compensation, donations and other community investments, retained earnings, and payments to capital providers and governments
| Component | Comment | 2007 Response |
|---|---|---|
| Direct economic value generated | ||
| a) Revenues | Net sales plus revenues from financial investments and sales of assets | £26,910m |
| Economic value distributed | ||
| b) Operating costs | Payments to suppliers, non-strategic investments, royalties, and facilitation payments | £5,408m |
| c) Employee wages and benefits | Total monetary outflows for employees (current payments, not future commitments) | £1,586m |
| d) Payments to providers of capital | All financial payments made to the providers of the organization’s capital. | £1,753m |
| e) Payments to government | £17,007m (gross taxes) | |
| f) Community investments | Voluntary contributions and investment of funds in the broader community (includes donations) | £16.1m (statutory reporting criteria) £17.4m (LBG criteria) |
| Economic value retained (calculated as economic value generated less economic value distributed) | Investments, equity release, etc. | £1,139.9m |
EC2 Financial implications and other risks and opportunities for the organization’s activities due to climate change
At the end of 2006 and following the publication of the Stern Report, we undertook an analysis of the potential risks posed by changes in climate over the next 10 to 20 years. Assisted by the consultancy company Environmental Resources Management (ERM), the study concentrated on key leaf operations, factories and global impact areas such as direct materials supply, business travel and freight. ERM identified 56 potential climate change risks, ranging from weather related phenomena (changes in temperature, precipitation, extreme events) to regulation (levies on emissions) and established upper and lower boundaries for a potential future in 2020, based on available academic literature from sources such as the Stern Report and Intergovernmental Panel on Climate Change publications.
The headline outcome from this study was that climate change could potentially bring physical impacts affecting our companies. The annual incremental costs of this could range from £50 to £100 million. The study foresaw almost no regulatory impacts.
EC3 Coverage of the organization's defined benefit plan obligations
This information is in our 2007 Annual Report and Accounts 
.
EC4 Significant financial assistance received from government
This information is more relevant locally and we do not collate global data on it.
EC5 Range of ratios of standard entry level wage compared to local minimum wage at significant locations of operation
This information is more relevant locally and we do not collate global data on it.
EC6 Policy, practices, and proportion of spending on locally-based suppliers at significant locations of operation
We do not currently measure the proportion of spending on locally based suppliers as this would be an extremely complex calculation. We are a global business and have contracts with global suppliers, although the delivery and invoicing of goods and services often takes place locally, making it difficult to categorise spend as 'global' or 'local'. Our companies use the most appropriate supplier for goods and services, taking into account numerous factors such as meeting our minimum standards, capability and capacity to supply, quality, location, price, speed of delivery and various other criteria, including local regulations and social issues.
EC7 Procedures for local hiring and proportion of senior management hired from the local community at significant locations of operation
There is information on our approach to recruitment in the People and culture section of our Sustainability Report.
EC8 Development and impact of infrastructure investments and services provided primarily for public benefit through commercial, in-kind, or pro bono engagement
This information is more relevant locally and we do not collate global data on it.
EC9 Understanding and describing significant indirect economic impacts, including the extent of impacts
Our companies commission economic impact studies on an ad-hoc basis to meet local business needs. In 2007, two of our subsidiaries in reported commissioning assessments on how they contributed to the longer-term prospects for economic development in Brazil and Argentina.
In Brazil, our subsidiary Souza Cruz commissioned a study, ‘The leaf culture and its impacts on the Brazilian economy’, conducted by the Getulio Vargas Foundation, an established Brazilian business school, to evaluate the economic impact of the company’s leaf agro-business and to determine how much income, employment and taxation it generates. More widely, the study also focused on the role of agriculture in the regional economy of southern Brazil and amongst its leaf growers. Following an analysis by the Foundation of the company’s primary supply chain, including farmers, suppliers and clients, the study found that 138,000 direct and indirect jobs are created by Souza Cruz with a 68 per cent concentration in rural areas, and that total salaries and social contributions amount to approximately US$475 million (£237 million).
In Argentina, a study, ‘The importance of tobacco for Argentina and its regions’, was conducted in 2005 by the independent consultants Joasquin Ledesma and Asociados. In 2007, this was updated using 2006 figures by Estrateco Consultores, another external firm. The updated study found that the tobacco industry contributes 0.7% of the gross value of Argentina’s industrial production, and that 68 per cent of the retail price of a packet of cigarettes is made up of taxes and special funds that are contributed to the public treasury. In value terms, our subsidiary Nobleza Piccardo provides more than one billion Argentine pesos (£160,256,410 million) annually in national, provincial and municipal taxes. The 2006 tax contribution of the sector accounted for 3.25% of Argentina’s total tax revenues.
© 2008 British American Tobacco