british american tobacco p.l.c. sustainability report 2009 - GRIs: Product responsibility

PR1 Life cycle stages in which health and safety impacts of products and services are assessed for improvement, and percentage of significant products and services categories subject to such procedures

All tobacco products, even when produced to the highest quality standards, pose real and serious risks to health.

Risk awareness among consumers is constantly reinforced by health warnings on primary packaging mandated by the majority of governments. Our approach to tobacco harm reduction is to pursue the research, development and test marketing of innovative tobacco products that will have consumer acceptability, and will be recognised by the scientific and public health communities and regulators as posing reduced risks to health. For more information, please see the Harm reduction section of this Report.

In the context of possible product deterioration or contamination, our companies follow a common approach to assuring product integrity. This seeks to minimise the risk of product integrity issues arising, through risk assessment and controls across our product design and supply chain, and to ensure the appropriate response capability should a product integrity issue arise through incidents within or beyond our control.

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

Save as reported elsewhere in these GRIs, no instances were reported by our companies in 2009.

PR3 Type of product and service information required by procedures, and percentage of significant products and services subject to such information requirements

Where health warnings on packaging are not required by local laws or regulations, our Health Warnings on Cigarette Packaging policy requires Group companies to comply with any voluntary codes in force or, in the absence of these, to follow Group guidelines in placing an appropriate health warning on packaging.

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

See also PR6 and PR7 for details of our voluntary International Tobacco Products Marketing Standards.

In 2009, the following matters were reported by our companies:

• In Brazil, Souza Cruz received five infraction notices from the standards authority in relation to samples of a ‘roll your own’ tobacco product, claiming that the product weight was below that stated on the pack. In three cases, Souza Cruz was ordered to pay fines totalling BRL 11,973 (£3,852). In two cases, Souza Cruz awaits the authority’s final decision. In each case, Souza Cruz has determined that loss of moisture in dry conditions caused the weight difference, and it has implemented measures to prevent recurrence.
• Souza Cruz is also disputing an infraction notice issued by the health authority for alleged breach of packaging laws following a change in the pack design of one of its products. The health authority’s decision is pending and no fine has been imposed to date.
• Our company in Costa Rica was prosecuted (together with another tobacco company) for using language other than Spanish in terms included on its product packaging. The company successfully defended the charge, but was found liable for providing misleading information by its use of the term ‘lights’. It is challenging the decision, but in the meantime a fine of CRC 2,497,000 (£2,780) has been imposed.
• Our company in Rwanda was requested by the standards authority to implement international standards on tar and nicotine labelling. Following negotiations, it has been agreed that no further action is required pending the proposed enactment of labelling regulations by the Rwandan Government.

£ equivalent based on the same average currency conversion rates as used for the Group Income Statement in the Annual Report 2009 .

PR5 Practices related to customer satisfaction, including results of surveys measuring customer satisfaction

Our companies have a common market and information system including:

• An annual General Consumer Survey, including satisfaction with product quality; and
• A biannual Trade Customer Satisfaction Measurement among key distribution and retail partners, providing feedback on service quality.

Our companies are also encouraged to adopt consumer feedback mechanisms such as call centres, websites and mail response suited to the local environment. The biannual Customer Satisfaction Measurement among key distribution and retail partners is carried out in our top markets, providing feedback on service quality and other aspects of our business relationship, and comparing British American Tobacco with its key competitors and top consumer goods companies servicing the same retailers. The results of the most recent survey are available on www.bat.com/consumers .

PR6 Programmes for adherence to laws, standards and voluntary codes related to marketing communications, including advertising, promotion and sponsorship

In 2001, we collaborated with other international tobacco companies to establish a set of voluntary International Tobacco Products Marketing Standards (IMS) and in 2007 we updated them, in response to stakeholder dialogue and without the collaboration of the rest of the industry. Our updated Standards include, for example, further procedures for adult verification and responsible use of new media such as the internet and other electronic messaging.

The Standards require that marketing activities should not be aimed at, or particularly appeal to, youth, and not feature celebrities nor link tobacco with sporting, professional, social or sexual success. They also state that advertising should not appear in printed publications unless at least 75 per cent of readers are verified as adults and that all marketing materials must carry a health warning as well as the health warnings on product packs.

Group companies must report annually on their level of adherence with the Standards. Adherence by our companies is monitored by our regional audit and CSR committees and updates reported to our Board CSR Committee. For information on adherence to our International Marketing Standards, including progress on actions from our 2008 review and adherence in 2009, please see the Marketplace section of this Report and PR7.

To download the Standards in full, go to www.bat.com/marketingstandards .

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

In 2008, we reviewed how our companies were applying our International Market Standards (IMS) which had been updated with further requirements to be met in 2008. The assessment reported an adherence rate of 97 per cent, but also some inconsistencies in the interpretation of the Standards. In 2009 we addressed these issues, with progress monitored by our regional audit and CSR committees, and updates reported to our Board CSR Committee. Examples of actions taken include:

• Our Africa and Middle East region banning the distribution to retailers of single cigarette pots of any kind. The region also issued guidance stating that any price for single cigarettes displayed by retailers should only be in black and white, unbranded and together with the price of a whole pack.
• Internal webinars to provide clarity on IMS interpretation in key areas, such as consumer engagement and retail display.
• Internal guidance to clarify the sanctions that can be applied to retailers who sell tobacco products to underage consumers and the circumstances in which such sanctions might be imposed.

At the end of 2009 all actions to address issues identified in the 2008 review had been completed in all but two markets. Both are expected to be complete by mid-2010.

In 2009, 12 companies reported a total of 15 instances of non-adherence to our IMS. Action plans were in place by year end, with the aim of achieving full adherence in 2010.

In addition, the marketing activities of the business that we acquired in Indonesia in mid-2009, and where we took control in January 2010, do not adhere to our IMS. Indonesia is not currently a signatory to the World Health Organisation’s Framework Convention on Tobacco Control and the market is very lightly regulated. Our plans to introduce IMS have been overtaken by proposed regulations from the Ministry of Health. However, we are committed to bringing our operations in Indonesia in line with our IMS as soon as is practical and will, of course, comply with any new regulations.

For 2009, our companies reported the following matters:

• In Brazil, Souza Cruz is defending a prosecution for alleged unlawful practices in the advertising of tobacco products brought by the prosecuting authority on the instance of an anti-tobacco organisation. The matter is pending resolution.
• Souza Cruz is also defending a number of claims brought by consumers alleging misleading advertising practices and breach of advertising law in relation to promotional campaigns. Eight claims involve complaints that promotional lighters were unavailable in accordance with the terms of a promotion. In a further two claims, consumers complain that they were unable to purchase cigarettes without paying also to receive an MP3 player offered as part of a product tie-in. Most of these claims are proceeding in the small claims courts and all are pending resolution. 
• Our company in the Czech Republic is defending a case brought by the state authority against it and other tobacco companies claiming that the depiction of a cigarette in point-of-sale materials is a breach of the law on advertising. A decision in the case is pending.
• In France, our company’s appeal continues against a case relating to whether illustrations included on cigarette packs are prohibited advertisements. Our company in France is also defending three cases brought against it by an anti-tobacco organisation for alleged breach of advertising laws, arising from an advertisement displayed at a temporary tobacco shop at a fair, the distribution of free biodegradable ashtrays, and advertisements for ‘Dunhill’ cigars published in a specialist cigar magazine. The first two cases are pending resolution. The third was rejected at first instance, but is under appeal.
• Our company in Germany is defending three cases brought against it by German consumer organisations for alleged breach of advertising laws. Two claims arise from features published in magazines featuring, in one case, certain of the company’s brands and, in the other, snus. The third claim arises from an advertisement on a university campus. All three cases are pending resolution.
• Our company in Mexico received four injunction orders from the health authority arising from advertisements featured in adult magazines. It is defending the proceedings, based on a lack of clarity over the definition of ‘adult magazine’ and the matter is pending resolution.
• Our company in Russia was fined RUB 513,364 (£10,364) for non-compliance with advertising laws arising from technical faults in merchandising equipment.
• Our company in Singapore was fined SGD 1,000 (£440) by the regulator on the basis that its retailer loyalty programme was deemed to be promotional. It was also fined SGD 2,000 (£880) on the basis that a temporary structure outside the premises of a licensed area was deemed to be advertising.
• Our company in Sweden is defending a claim by the consumer ombudsman for breach of a binding injunction to remove certain point-of-sale material, which was subject to a conditional fine of SEK 400,000 (£33,534). The matter is pending resolution. The company was also approached by the ombudsman in relation to the appearance of its corporate logo on the ‘Stockholm Pride’ website, although the matter was settled without any finding of non-compliance on the basis that the logo would be removed.
• Our company in Switzerland is defending two claims brought by two rival manufacturers for breach of a voluntary marketing code established by the National Manufacturers Association. One claim is based on illustrations featured on a van used as a mobile sales kiosk during a festival. In the other, it is alleged that a promotional pack featuring a free lighter was misleading in suggesting that the pack was free. Both claims are pending resolution.
• Our company in Turkey reported that it was not successful in its appeal against a written warning issued by the tobacco regulatory authority in respect of consumer contact activity.

£ equivalent based on the same average currency conversion rates as used for the Group Income Statement in the Annual Report 2009 .

PR8 Total number of substantiated complaints regarding breaches of customer privacy and losses of customer data

In 2009, no material instances were reported by our companies.

PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services

Save as reported elsewhere in these GRIs, no instances were reported by our companies in 2009.