british american tobacco p.l.c. sustainability report 2011 - Society

 
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Sustainability Report 2011

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. They also provide that Group companies and employees are prohibited from making facilitation payments, save in exceptional circumstances where necessary to protect the health, safety or liberty of any employee.

The Standards 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 were updated with effect from 1 September 2011 in order to ensure that they remain at the forefront of best business practice and to ensure alignment with the provisions of the UK Bribery Act 2010, which came into effect on 1 July 2011, and associated guidance.

The Standards apply to all Group companies and all employees, including senior management and all directors of Group companies, and each company is required formally to adopt them or local policies embodying them. Senior managers in the Group 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 compliance with the Standards through the year is gathered at a global level and reported to the regional audit and CSR committees and quarterly to the Board Audit Committee. The Board CSR Committee also reviews Group reputation-related issues arising from non-compliance with the Standards.

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 guidance on bribery and corruption, which is provided across the Group, 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 2011, 28 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 (2010: 38), including 19 brought to attention through ‘whistleblowing’ reports from employees, ex-employees, third parties or unknown individuals reporting anonymously (2010: 33).

11 were established as breaches and appropriate action was taken (2010: 13). In 14 cases, an investigation found no wrongdoing (2010: 22). In three cases, the investigation continued at the year-end (2010: three). 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. We believe that views advocated in policy formation should be communicated transparently. So the view and positions we advocate are reflected on www.bat.com Opens in new window. We support best practice principles on the development of regulation, including the EU Communication on Smart Regulation and the guidelines of the Organisation for Economic Cooperation and Development and the UK Better Regulation Executive.

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 2011, we continued to engage with our stakeholders on regulatory issues at global and local levels. Our regulatory centre of expertise coordinates this activity, developing global positions and helping our companies improve their abilities to advocate our positions. We also worked with independent third parties to build an objective evidence base that underpins our positions.

You can read details of our engagement focus in 2011 in the marketplace section of this Report, including our views on plain packaging, alternative crops, ingredients bans, pricing and tax measures and retail display bans.

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 in order to achieve any improper business or other advantage or to influence any decision by a public official to the advantage of the Group or any Group company. In addition, they 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 2011 were as follows:

 Parties
£ equivalent
Australia: British American Tobacco Australia Ltd63,310
Jamaica: Carreras Ltd145,794
Total209,104
SO7 Total number of legal actions for anti-competitive behaviour, anti-trust and monopoly practices and their outcomes

For 2011, our companies reported the following matters:

  • In Argentina, proceedings brought by a private individual against public officers of the Ministry of Economy and representatives of the tobacco industry, including our company, which alleged wrongful conduct on the basis of their entry into a revenue collection agreement, were dismissed at trial. The dismissal was upheld on appeal.
     
  • 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 (£85.12 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.
     
  • In Chile, our company defended an action brought by the National Economic Prosecutor’s Office, and supported by a competitor, alleging a breach of an order made in previous anti-trust proceedings. Following trial, the court made a partial finding in respect of some of the alleged activity and the company was ordered to adjust its practices accordingly. No penalty was imposed.
     
  • The Competition Office in Hungary has commenced an investigation in relation to certain short-term exclusivity agreements entered into by our company there with a number of retailers. Our company does not consider its conduct to have been unlawful, but is cooperating in the investigation.
     
  • In Romania, an investigation by the Competition Council of the Romanian cigarette market is continuing, based on their suspicion of breach of national and EU competition law by various market participants, including our local subsidiary.
     
  • In South Africa, our company had been defending 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. In 2011, the competitor’s appeal was abandoned.
     
  • 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.
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 2011, the following matters were reported by our companies:

  • Our company in Kenya is disputing the amount of an excise payment of KES594,076,450 (£4,169,986) demanded by the revenue authority on the basis of a differing interpretation of the applicable regulations. The matter remains pending resolution.
     
  • In Turkey, following a successful claim by the Labour Directorate, our company’s agreement with a sub-contractor relating to the sub-contracting of services was found to be in breach of labour rules. The agreement was declared null and void and the relevant employees were transferred to our company. Our company in Turkey also continued to contest a fine of £10.8 million imposed by the customs authority for alleged non-payment of Tobacco Fund Tax and VAT, and was successful in having the fine reduced to £2.7 million.
     
  • In Ukraine, in connection with the importation of non-tobacco materials, our company successfully defended 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. The decision is being appealed.
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