british american tobacco p.l.c. sustainability report 2011 - Chief Executive's overview

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Sustainability Report 2011
Almost everything we do is preparing us for the future. That is why this Report focuses on what the future could look like and how we are preparing for it.Nicandro Durante, Chief Executive

Q What is your vision for a sustainable tobacco company?

A Many people ask me whether the cigarette business can be sustainable in the long term and whether people will keep on smoking? The fact is that despite an increase in smoking restrictions and the introduction of further tobacco control measures, many people continue to smoke and use tobacco products and will probably do so for the foreseeable future. So in 20 years’ time, I see the bulk of our business still being in conventional cigarettes.

Naturally, I want us to be able to help to reduce the impact of tobacco use on public health. This is something that should be of benefit to society as well as our shareholders since it will contribute to long-term business sustainability. However, the challenge should not be underestimated: policy makers are not all in agreement when it comes to how to approach tobacco related harm reduction, the science is complex and to resolve these issues requires a collaborative approach between the private and public sectors.

Because science is such an important topic for us I decided recently to create a new Management Board position of Group Scientific Director. This helps ensure that science is at the heart of our strategic planning and decision making.

So, as well as conventional cigarettes, we are driving our business to be able to offer consumers a choice of reduced toxicant cigarettes, as well as new categories such as low-toxicant smokeless tobacco and regulatory approved nicotine products. I like to describe this approach as the ‘responsible use of tobacco’ but I recognise that this is a contentious concept and that for good reasons stakeholders hold widely different views. Our commitment to this is the reason we have recently established a new company, Nicoventures.

Q What is Nicoventures and where does it fit with your sustainability agenda?

A Nicoventures is a new stand-alone company in the Group that is pioneering our development of regulatory approved nicotine products. We believe there is a potential market for products that will offer smokers much of the experience they expect to get from a cigarette but without the real and serious health risks of smoking. This requires a different approach and we hope that Nicoventures will make significant progress in this area and make a meaningful contribution to tobacco harm reduction.

Q What other sustainability issues are important to British American Tobacco?

A In the marketplace it’s essential we continue to market our products in a responsible way to informed adult consumers and work with retailers to prevent youth access to tobacco products. It’s also important to work with governments and enforcement authorities to combat the black market in tobacco, which has become our fourth largest competitor.

We also have a considerable impact upon the environment in both our direct operations and in tobacco growing areas and for several years we have put in place various initiatives to help mitigate our impact on biodiversity, to limit and reduce deforestation in our leaf growing operations and to improve efficiencies relating to energy and water use. In the supply chain it’s important to ensure that the rights of tobacco farmers are respected and that the industry and stakeholders work together to tackle child labour. Initiatives such as our Social Responsibility in Tobacco Production programme and participation in the Eliminating Child Labour in Tobacco Growing Foundation help us play our part.

Sustainable agriculture is important to us too – tobacco farming makes an important contribution to rural development by improving both landscape and livelihoods and through providing agronomy support to our contracted farmers we are able to help share best practice.

Q Why is your business facing increased regulation?

A Regulation has been increasing in many consumer goods industries but especially in tobacco due to the public health impact of the product. Many people think we are opposed to regulation and it may come as a surprise that we actually support evidence based regulation that achieves the objective of reducing the impact of tobacco use on public health.

We are, however, very concerned about regulation that isn’t based on sound evidence, fails to achieve public health goals and exacerbates the illegal trade in tobacco products. For example, steady, gradual increases in tobacco taxation can help reduce smoking rates and increase government revenues. However, in many cases we see large and sudden increases in tax that destabilise markets. Consumers often down-trade to widely available illegal products in such circumstances, depriving the Government of revenue and undermining public health policy while damaging the legitimate business interests of retailers.

We’ve often been accused of being underhand when it comes to lobbying and engagement but I can tell you that our engagement and advocacy on key regulatory issues is very open and transparent – you can read our views on these issues in this Report.

Q What else is British American Tobacco doing to prepare for the future?

A Almost everything we do is preparing us for the future. That is why this Report focuses on what the future could look like and how we are preparing for it. For example, over the past year, we have been mapping climate change risks to help us identify where in the world things such as water availability and energy security could impact our operations and tobacco growing in the future. We’re also looking at how we can make sure we get the very best people into the business. Employee expectations of a satisfying career are changing and we know we need to understand and meet those expectations.

So can a business like ours be sustainable? By taking the lead, setting out a clear agenda for the future and doing things right, the answer is yes.

Nicandro Durante, Chief Executive
March 2012

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