british american tobacco p.l.c. sustainability report 2011 - Product responsibility

 
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Sustainability Report 2011

Customer health and safety

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 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. We believe that a ‘one product fits all’ approach cannot achieve tobacco harm reduction, so our approach is to make available a range of reduced-risk tobacco and nicotine products for adult consumers. 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 2011.

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 primary 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 for details of our voluntary International Tobacco Products Marketing Standards.

In 2011, the following matters were reported by our companies:

  • In Brazil, Souza Cruz received a fine of BRL3,068.21 (£1,144) pursuant to an infraction notice issued by the standards authority in relation to samples of a ‘roll your own’ tobacco product, claiming that the average product weight was less than acceptable. Souza Cruz is disputing nine infraction notices issued by the health authority for alleged breach of packaging laws based on allegations that the packaging differs from that previously notified and/or that it contains a prohibited advertising message. In eight of these cases, the health authority’s decision is pending and no fines have been imposed to date and, in the remaining case, the health authority’s decision to issue a fixed penalty of BRL160,000 (£59,638) is under appeal. Souza Cruz is also disputing an infraction notice alleging that consumers were not sufficiently informed of increases in tar, nicotine and carbon monoxide levels. In a further case, Souza Cruz successfully resisted an infraction notice issued by the health authority claiming that insufficient space was devoted to pictorial health warnings.
     
  • 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’. The company’s challenge to the decision was rejected and its appeal is pending. In the meantime a fine of US$4,000 (£2,494) has been imposed.
     
  • In Ukraine, following an audit of our factory, the Legal Metrology Authority issued 13 orders preventing the sale of five brand variations. Our company was successful in setting aside 12 of the 13 orders and was able to resume sales of all products concerned. It is seeking to invalidate all 13 orders, claiming that the method used by the Authority to collect samples unlawful.
PR5 Practices related to customer satisfaction, including results of surveys measuring customer satisfaction

For several years, our companies have commissioned an independent customer satisfaction survey among key distribution and retail partners, providing feedback on service quality and other aspects of our business relationship. In 2010, the survey was enhanced to include new methodologies, providing greater focus and allowing it to be coordinated globally by an independent research agency.

The survey covers several of our largest markets. In each market, it benchmarks British American Tobacco against our major local tobacco competitor and the Fast Moving Consumer Goods (FMCG) supplier considered the best locally in serving the same retailers.

Quality of our service is covered across key areas including:

  • Trade marketing support;
  • Product distribution;
  • Products; 
  • Overall quality; and
  • Customer engagement.

The most recent results for 2010 rate British American Tobacco as the best company overall in 16 of 31 markets surveyed. We were also identified as the best overall company on trade marketing support in 17 of 31 markets surveyed. Full results can be viewed at www.bat.com Opens in new window.

In addition to the global survey, our companies are also encouraged to adopt consumer feedback mechanisms such as call centres, websites and mail response suited to the local environment.

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 or 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, please see the marketplace section of this Report and PR7.

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

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

Until now, our companies’ adherence to IMS has been monitored through self-assessments and as part of internal company audits. We have now introduced additional IMS-specific on-site audits in selected markets. In 2011, 21 incidents of non-adherence were identified. These included the size and position of health warnings on promotional items; insufficient age verification during promotional activities; and the use of video in a non-age-verified environment. We believe these to be isolated incidents and actions have been taken to address them, but they highlight the need to continually reinforce the Standards and monitor our companies’ adherence closely.

The business we took control of in Indonesia in 2010 has not yet implemented our IMS. We’re engaging with other tobacco companies and the Indonesian Government on implementing stricter regulations to ensure a level playing field and hope to reach an industry consensus. You can read more about this in the marketplace section.

For 2011, our companies reported the following matters:

  • In Brazil, Souza Cruz continues to defend 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. In another case, brought by the health authority, Souza Cruz is alleged to have breached advertising laws through its promotion of a music festival. Both cases are pending resolution.
     
  • Souza Cruz successfully defended a claim brought by a consumer alleging misleading advertising practices and breach of advertising law in relation to a promotional campaign. A further claim, in which a consumer has complained that he was unable to purchase cigarettes without paying also to receive an MP3 player offered as part of a product tie-in, remains pending resolution.
     
  • Souza Cruz is also defending an infraction notice issued by the prosecution authorities in relation to its sponsorship of an international music festival. The authority’s decision is pending.
     
  • In Colombia, our company continues to contest a fine of COP5,000,000 (£1,688) imposed by the trade and industry authority for allegedly supplying consumers with incorrect information in relation to the duration of a promotion.
     
  • In France, our company’s appeal in a case relating to whether illustrations included on cigarette packs are prohibited advertisements was successful, but two other Group companies (the manufacturer and the brand owner) received a fine of €150,000 (£130,141) each and were required to pay damages of €2,000 (£1,735).
     
  • Our company in France also continues to defend three cases brought against it by an anti-tobacco organisation for alleged breach of advertising laws, one arising from the distribution of free biodegradable ashtrays, and two involving advertisements for Dunhill cigars published in a specialist cigar magazine. In all three cases, the claims were rejected at first instance, but are under appeal. In a third case, a claim by the organisation against our company for breach of advertising laws arising from an advertisement displayed at a temporary tobacco shop at a fair was upheld on appeal and a fine of €10,000 (£8,676) was imposed.
     
  • Three further cases in France have been brought on the instance of anti-tobacco organisations for alleged breach of advertising laws. In one, involving a poster campaign against the counterfeiting of tobacco products and reference to the campaign on our company’s website, resolution is pending. In another, based on a sticker prices campaign in respect of a brand price repositioning, a fine of €10,000 (£8,676) was imposed. In a third, involving pack inserts and messaging on limited edition packs, the case was dismissed but remains under appeal.
     
  • Our company in Germany continued to defend two cases brought against it by German consumer organisations for alleged breach of advertising laws. One claim arose from an article published in a magazine featuring snus. At trial, the court made a finding against the company in respect of the use of trademarks in the feature, although no fine or penalty was imposed. The second case, involving an advertisement on a university campus, was dismissed. A further claim was brought against our company in Germany by an individual who claimed to have received email advertising in violation of the law. The claim was dismissed at first instance and an appeal is pending.
     
  • Our subsidiary in Guatemala is contesting a fine of US$40,000 (£24,942) imposed by the Ministry of Health in respect of an advertisement alleged to be non-compliant with local advertising legislation.
     
  • In Hungary, a significant number of actions were brought by the relevant authorities against our company for breach of advertising regulations. The majority of these cases are ongoing or resulted in no fine against the company. In a number of cases, the courts found in our company’s favour, including in a significant Supreme Court ruling on the legality of point-of-sale advertising materials.
     
  • Our company in Mexico continued to defend four injunction orders from the health authority arising from advertisements featured in adult magazines. Its defence is based on a lack of clarity over the definition of ‘adult magazine’. Two of the orders have been resolved in our company’s favour and the remaining two are pending resolution.
     
  • In Peru, an anti-tobacco organisation brought a case against our subsidiary and a competitor company, claiming that advertising in retail outlets was illegal on the basis that it was visible to minors. The case was dismissed by the relevant authority.
     
  • An anti-tobacco organisation in South Africa lodged a complaint with the Advertising Standards Authority regarding our company’s anti-illicit trade campaign, accusing it, among other things, of stealth advertising. The Authority ruled against the company on one issue, where it was not able to provide sufficient evidence between the trade in illegal cigarettes and organised crime. The ruling was upheld on appeal. Our company was ordered to remove the billboards, but no fine was imposed.
     
  • In Switzerland, a claim against our subsidiary by a competitor company for breach of the unfair competition legislation, based on an allegation that a price promotion lasted longer than permitted under the law, was settled by mutual agreement. Our company in Switzerland also reports that it defended three claims by competitor companies based on allegations that promotional activity was in violation of the industry’s Marketing Code. In two of these cases, our company was required to pay fines of CHF12,000 (£8,443) and CHF9,000 (£6,332) respectively. The remaining case was decided in our company’s favour and the claim was rejected.
     
  • Our company in Turkey is defending an appeal following the dismissal of a fine imposed by the advertising authority for alleged promotion of the company and its brands on the company website. It is also challenging fines of TRY286,000 (£106,181) and TRY57,232 (£21,248) imposed by the authority in relation to the use of the corporate logo on company vehicles, and contesting a written warning and fines of TRY280,000 (£103,954) and TRY308,194 (£114,421) issued by the authority in three cases in which the provision of information to consumers on request is alleged to have constituted advertising.
PR8 Total number of substantiated complaints regarding breaches of customer privacy and losses of customer data

In 2011, 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

Our company in Turkey is contesting a written warning issued by the tobacco regulatory authority for the alleged sale of product without the required sales certificates.

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