british american tobacco p.l.c. sustainability report 2010 - Society

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Sustainability Report 2010

Community

SO1 Nature, scope and effectiveness of any programmes and practices that assess and manage the impacts of operations on communities, including entering, operating and exiting

This information is more relevant locally and we do not collate global data on it. Our approach to managing change is covered in the people and culture section of our Sustainability Report.

SO2 Percentage and total number of business units analysed for risks related to corruption

100 per cent of all business units are analysed for risks related to corruption.

It is a fundamental Group policy, set out in our Standards of Business Conduct (available at www.bat.com/corporategovernance Opens in new window), that all Group companies and all employees observe and comply with the laws and regulations applicable to them and that they act with high standards of business integrity. The Standards include specific provisions on bribery and corruption which prohibit the giving or taking of bribes to or from any person, and any other activity which contravenes any applicable anti-corruption measures, including those prohibiting corrupt practices abroad.

The Standards also include specific provisions on gifts and business entertainment, and provide employees with guidance on what they may and may not offer or accept in this regard. Gifts and business entertainment that are modest, appropriate and consistent with reasonable business practice are permissible without prior approval. Otherwise, they may only be offered or accepted with prior management approval, and must be notified to the Company Secretary or legal counsel of the company concerned and recorded in its books. Additionally, certain types of gift and entertainment are specified as unacceptable (essentially, where they would represent a bribe or otherwise involve illegality).

We are confident that our policy meets the standards of the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.

Our Standards of Business Conduct have been in place for many years. They are currently under review to ensure that the Group’s policies and procedures remain at the forefront of best practice and to ensure alignment with the provisions of the UK Bribery Act 2010.

The Standards apply to all Group companies and all employees, and each company is required formally to adopt them or local policies embodying them. Senior managers must report on annual compliance with the Standards with regard to all employees in the company or department for which they are responsible. All business units within the Group are covered in this way. Continuous information on performance against the Standards through the year is gathered at a global level and reported quarterly to the Board Audit Committee.

SO3 Percentage of employees trained in organisation’s anti-corruption policies and procedures

Every Group company and every employee worldwide is expected to live up to our Standards of Business Conduct and guidance on them, including the specific provisions on bribery and corruption. These are communicated regularly throughout the Group, including through training and awareness programmes and a dedicated site on our intranet.

An online training course on the Standards is available to UK Head Office staff and new joiners, and has also been made available to our businesses overseas for incorporation, where appropriate, into their training programmes. As part of the annual confirmation of compliance with the Standards of Business Conduct, senior managers are required to confirm that the Standards have been made available to all staff reporting to them.

SO4 Actions taken in response to incidents of corruption

In the year to 31 December 2010, 38 instances of suspected improper business conduct contrary to our Standards of Business Conduct (excluding employee fraud and theft against Group companies) were reported to the Board Audit Committee (2009: 39), including 33 brought to attention through ‘whistleblowing’ reports from employees, ex-employees, third parties or unknown individuals reporting anonymously (2009: 27).

13 were established as breaches and appropriate action was taken (2009: 16). In 22 cases, an investigation found no wrongdoing (2009: 22). In three cases, the investigation continued at the year end (2009: one). No instances involved sums or matters considered material to the Group.

The appropriate action will vary from case to case but will include, depending on the circumstances, dismissal or disciplinary action. Where criminal activity is believed to be involved, the matter will generally be reported to the relevant authorities. Where any weakness in internal controls is identified, appropriate measures are taken to strengthen them.

SO5 Public policy positions and participation in public policy development and lobbying

We are committed to responsible and transparent engagement with governments. This commitment is embodied in our Statement of Business Principles, which is publicly available at www.bat.com/principles Opens in new window. In the course of normal business, our companies consult widely with officials in health, revenue, customs, agriculture and other areas. Regulatory engagement by our companies is monitored by our regional audit and CSR committees.

In 2010, we continued to coordinate consistent engagement on key regulatory issues across the business. Our regulatory centre of expertise led this work by developing global engagement positions and providing support to our companies. We also continued to ensure that the views and positions we advocate to regulators are reflected on www.bat.com Opens in new window.

You can read details of our engagement focus in 2010 in the marketplace section of this Report, including our views on FCTC product guidelines and the progress report on alternative crops.

In the marketplace section, you can also read our positions on other regulatory issues, as well as a statement from Michael Prideaux, Group Corporate and Regulatory Affairs Director, on transparent lobbying.

SO6 Total value of financial and in-kind contributions to political parties, politicians, and related institutions by country

Our Standards of Business Conduct set out our policy on political donations. Contributions from our companies to political parties and organisations, their officers, elected politicians and candidates for elective office are generally not encouraged, and may only be made subject to specific controls. Contributions are not permitted to be made to achieve any improper business or other advantage (such as to secure a government contract), must not be intended personally to benefit the recipient or his or her family, friends, associates or acquaintances and must be permissible under all applicable laws.

Any donation must be authorised by the board of the company making it, must be fully documented in the company’s books and, if required by local law, must be put on the public record. Details must be notified in writing each year to the Company Secretary of British American Tobacco p.l.c. and these are monitored by the Board Audit Committee. Donations to political organisations and political expenditure within the European Union may only be made out of funds previously authorised by shareholders at a General Meeting.

We collate information centrally on contributions to political parties and to individual politicians that are made for the benefit of their party. Payments in 2010 were as follows:

 Parties
£ equivalent
Australia: British American Tobacco Australia Ltd111,123.00
Canada: Imperial Tobacco Canada Limited1,068.00
Solomon Islands: Solomon Islands Tobacco Company Ltd2,054.00
Total114,245.00

£ equivalent based on the same average currency conversion rates as used for the Group Income Statement in our Annual Report 2010.

SO7 Total number of legal actions for anti-competitive behaviour, anti-trust and monopoly practices and their outcomes

For 2010, our companies reported the following matters:

  • Our company in Argentina continues to be involved in proceedings brought by a private individual against public officers of the Ministry of Economy and representatives of the tobacco industry, which allege wrongful conduct on the basis of their entry into a revenue collection agreement. The allegations against our company are denied
  • In Belarus an action was brought by the Ministry of Economy against our company and another tobacco company at the request of a competitor, which alleged anti-competitive practices on their part. The anti-trust body issued an order requiring both companies to take steps to align their marketing practices with local anti-trust law. Our company has complied with the order and made adjustments to its marketing practices to ensure future compliance. No fine or penalty was imposed.
  • Our Brazilian subsidiary Souza Cruz continues to defend an administrative proceeding brought by the Brazilian competition authority relating to merchandising and product display practices, a case brought by a competitor which alleges breach of a previous administrative order prohibiting exclusive sales agreements with retailers, and an administrative proceeding brought by the public prosecutor, based on a complaint by a third party, alleging breach of an order prohibiting exclusivity of sales.
  • Our subsidiary Imperial Tobacco Canada continues to contest a claim for C$135 million (£84.81 million) by a wholesaler which includes allegations of anti-competitive behaviour in connection with the company’s move to direct delivery to stores and introduction of new terms of trade with wholesalers.
  • The National Economic Prosecutor’s Office has filed an action against our company in Chile alleging a breach of an order made in previous anti-trust proceedings. The action, which is supported by a competitor, is being contested.
  • A complaint by a contracting business partner of our company in Cyprus prompted an investigation by the local Competition Commission. Following our company’s co-operation with the authority and engagement with the contracting partner, the complaint was withdrawn and the investigation closed.
  • A complaint lodged against our Greek subsidiary in 2006 alleging infringement of national competition rules led to an investigation by the Greek Competition Commission. The complaint was rejected in 2010, but our company was required to amend a provision in one of its distribution agreements to avoid future misunderstanding, which it has now done. 
  • In Italy, proceedings continued in relation to a competition authority fine of €20 million (£17.15 million) imposed on ETI, the former state-owned tobacco company purchased by British American Tobacco in 2003, for alleged cartel activity between 1993 and 2001. In 2009, the Council of State upheld the finding in relation to the cartel but annulled the fine against ETI on the basis that ETI should not be held liable for misconduct during the period 1993 to 1998, prior to its incorporation. In light of this, the competition authority has reduced the level of the fine against ETI to €10,000 (£8,574).
  • In Malta, the Commission for Fair Trading upheld a decision of the Office of Fair Trading requiring our company to open vending machine space to competitor brands and to cease paying advance sales commission on sales from vending machines. No fine or further penalty was imposed. Our company is seeking a judicial review of the decision.
  • In Romania, the Competition Council commenced an investigation of the Romanian cigarette market on the basis of suspected breach of national and EU competition law by various market participants, including our local subsidiary. The investigation is ongoing.
  • In South Africa, our subsidiary continues to contest an appeal by a competitor against the Competition Commission’s ruling in our company’s favour, rejecting allegations that it had abused a dominant market position, originally raised by the competitor. 
  • In the USA, a class action alleging price-fixing against certain tobacco companies including British American Tobacco (Investments) Limited is continuing in the Kansas State Court.
  • In Uruguay, our company and another international tobacco company are defending an action brought by a local competitor alleging that sales at below cost price constituted a breach of anti-trust law.
  • In Zambia, the local Competition has initiated anti-trust proceedings against our subsidiary and certain of its employees, alleging that they requested retailers to cease selling competitor brands and to stock our company brands in their place. The proceedings are being defended.

£ equivalent based on the same average currency conversion rates as used for the Group Income Statement in our Annual Report 2010.

SO8 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with laws and regulations

See also EN28, SO7, PR2, PR4 and PR7.

In 2010, the following matters were reported by our companies:

  • Our company in the Democratic Republic of Congo is continuing to contest a fine in relation to an alleged incorrect price structure submission. In 2010, the fine was increased to CDF 3,823,434,736 (£2,730,854) but, following a complaint by our company, the Prime Minister has ordered the Finance Ministry to reopen the case. Our company is also continuing to contest a fine of CDF 539,034,650 (£385,000) in relation to alleged non-payment of taxes, although there were no developments in relation to this matter in 2010. In addition, our company is contesting fines of CDF 18,237,215 (£13,026), CDF 295,788,562 (£211,264), CDF 36,165,168 (£25,831) and CDF 167,843,422 (£119,881) imposed in 2010 in relation to alleged underpayments of taxes and social fund contributions and, in connection with these cases, has been contesting orders sought by the authorities to freeze its bank accounts and/or seize its assets.
  • In 2009, our company in Italy reported that it had received complaints over noise levels at one of its factories. Following an inspection by the authorities for possible breach of noise pollution regulations, it has put in place enhanced controls. A further inspection has been carried out to ensure that noise levels are now compliant with legal requirements and, while the formal result is awaited, our company anticipates a successful conclusion to the case.
  • Our company in Kenya is disputing the amount of an excise payment of KES 594,076,450 (£4,850,646) demanded by the revenue authority on the basis of a differing interpretation of the applicable regulations. The matter remains pending resolution.
  • In Romania, our company contested two cases where sales representatives were alleged by the finance authorities to have had inadequate origin documentation to support the products and merchandise in their possession. In one, the case was successfully defended while, in the other, a fine of RON 20,000 (£4,070) was imposed.
  • Our company in Turkey is defending a claim by the Labor Directorate for breach of labour rules relating to the sub-contracting of services. It is also contesting a fine imposed by the customs authority of the sum of £10.8 million for alleged non-payment of funds levied on imported tobacco and VAT.
  • Our company in Ukraine successfully defended a demand by the revenue authority for payment of tax representing a proportion of advertising expenses, said to be payable under local advertising legislation. In addition, in connection with the importation of non-tobacco materials, it is contesting a claim by the customs authorities for additional customs duty and a fine for non-compliance with customs regulations relating to the identification of country of origin. 
  • In common with a majority of other companies in the country, our subsidiary in Venezuela was unable to meet a regulation imposed in 2008 stipulating a quota for the number of disabled employees in the company and was fined VEB 135,239 (£20,620) by the Ministry of Labour. It has an action plan in place to meet the quota.

£ equivalent based on the same average currency conversion rates as used for the Group Income Statement in our Annual Report 2010.