british american tobacco p.l.c. sustainability report 2010 - Sustainability and our business

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Sustainability Report 2010
We know that for our business to grow and prosper, we must operate sustainably. Our sustainability agenda sets out how we will achieve this.
Sustainability and our business

Embedding sustainability

Our focus in 2010 has been on embedding our approach to sustainability across the Group and implementing activities in each of the five areas to help us reach our sustainability goals. We know we do not have all the answers to our sustainability challenges. We need to work in partnership with our stakeholders to achieve our goals and to do that, we must build trust. Being transparent about our performance is an important step.

Tobacco field in Indonesia

We are making good progress in many areas and our successes include making a significant contribution to the science of tobacco harm reduction, completing biodiversity risk and opportunity assessments in all our leaf growing operations and developing an integrated supply chain sustainability strategy. However, progress has been slower than we would have liked in some areas. For instance, because we now understand much more about the challenges of establishing snus, a type of smokeless tobacco, we have scaled back our test markets while we review our approach to developing new reduced-risk product categories.

We know we have a way to go before sustainability becomes ingrained in every part of the organisation. Our sustainability agenda aims to support the growth of the business by taking advantage of the opportunity sustainability presents and by developing solutions to future challenges.

To make significant progress against our sustainability agenda, we need robust, commercial sustainability plans. We also need to ensure that our people throughout the business understand that sustainability benefits, rather than compromises, commercial success. Building on our approach in 2010, we aim to do this in three ways:

1. Continuing to build a Group-wide understanding of sustainability

We will work across all levels of our business to build understanding of the concept of shared value creation. By increasing understanding of sustainability and the value it brings we hope to fully integrate sustainability thinking throughout the Group.

2. Engaging with stakeholders to jointly develop plans and activities

Our approach to dialogue is now designed to enable the joint development of plans and activities and we have seen increasingly practical outputs from our dialogue sessions. For instance, our 2009 supply chain dialogue has led to a series of more focused sessions looking at the specific implications of climate change for our business. The practical nature of the dialogue sessions makes it easier for the outputs to be integrated into business plan development. We will continue to build on this approach and already have dialogue sessions planned for 2011 to investigate the business opportunities presented by carbon pricing, renewable energy options and further developing our approach to sustainable agriculture.

3. Better measurement of the value sustainability brings to our business

The value our sustainability agenda brings to us is not always purely financial or easy to demonstrate. We are looking to develop more advanced ways of measuring our progress and the value generated by our sustainability activities. We understand that this is an area that many have looked at in the past, often with limited success. However, we feel it is important to try to measure the significant value we believe the Group derives from the sustainability agenda.

By focusing on these three areas we hope to lead the development of sustainability within the industry.

Building sustainable value

In 2007, we developed our sustainability agenda, which focuses on five pillars: harm reduction, marketplace, environment, supply chain and people and culture.

Our sustainability agenda aims to build value for our shareholders and other stakeholders by addressing our social, environmental and economic impacts. This means generating returns for our shareholders by doing the right thing by our stakeholders and the environment. This concept of sustainable value underpins all of our sustainability activities. By taking action to address our impacts today, we help our business to thrive in the future.

Our sustainability agenda
 

Harm reduction
We will strive to bring commercially viable, consumer acceptable reduced-risk products to market.

Marketplace
We will take a lead in upholding high standards of corporate conduct within our marketplace.

Environment
We will actively address the impacts of our business on the natural environment.

Supply chain
We will work for positive social, environmental and economic impacts in our supply chain.

People and culture
We will work to ensure we have the right people and culture to meet our goals.

Challenges and opportunities

In our last Sustainability Report, we answered some of the more difficult questions our stakeholders ask, such as why we have yet to launch a ‘safer’ cigarette and whether a tobacco company should aim to be sustainable at all. You can find these repeated in Stakeholders' challenging questions.

In this Report, we continue in this spirit of transparency, highlighting some of the biggest challenges we face. For every challenge there is an opportunity and it is important to be clear about these too – sustainability is not philanthropy. We hope that our transparency will encourage our stakeholders to engage with us about how best to overcome the challenges we face.

Using dialogue to deliver sustainability

We need our stakeholders’ help to navigate the way through our sustainability challenges and have adapted our approach to formal stakeholder dialogue to support this. It has meant a shift from using dialogue to listen to stakeholders’ concerns and comments, to jointly developing plans of action that will help us meet our sustainability goals.

In 2010, we held dialogue sessions on employee wellbeing, water management and supply chain sustainability. You can read more about these dialogues in the relevant sections of this Report. In addition, several Group companies also conducted formal dialogue to advance their local sustainability plans on topics including tobacco harm reduction, anti-illicit trade and environmental impacts.

We also held a dialogue on sustainability reporting which explored in more detail the issue of integrated sustainability and financial reporting. We gathered a group of investors, accounting firms and other opinion leaders in the area to understand the expectations from report users around integration and to discuss the potential implications any new frameworks may have on our existing approach.

While there was general agreement that more relevant sustainability information being featured in annual financial reports could only be a good thing, there was also firm agreement that this should not come at the expense of stand-alone sustainability communications. In addition, we were pleased to hear that the stakeholders present already considered our reporting to be well integrated and that they felt there was little that should change in our current approach. As a result, we will continue to align the information in our Sustainability and Annual Reports but we have elected not to condense our reporting into one document.

To share some of the key learnings from this dialogue, we have published a summary, which can be found at www.bat.com/stakeholder Opens in new window.

We welcome comments on any aspect of our approach to sustainability. Please email us at sustainability@bat.com.


Dow Jones Sustainability Indexes
Dow Jones Indexes
In 2010, we were, for the ninth year running, included in the Dow Jones Sustainability World Index. This index tracks the economic, environmental and social performance of leading companies based on how well they integrate sustainability into their businesses. In 2010, our overall score decreased from 81 per cent to 78 per cent. We are working to identify opportunities for improvement and hope to soon see our performance improve.

Business in the Community
In 2010, British American Tobacco was once again included in the platinum sector of the UK’s Business in the Community 2009 Corporate Responsibility Index, with a score of 96.5 per cent. In 2009, we were the first tobacco company to achieve platinum status.