british american tobacco p.l.c. sustainability report 2011 - Sustainability at British American Tobacco Australia

 
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Sustainability Report 2011

In 2011, British American Tobacco Australia’s main focus has been the Government’s Tobacco Plain Packaging and Trade Marks Amendment Bills, which were passed by the Senate in November. Under the new legislation, from December 2012, all cigarettes will be required to be sold in standard olive brown packaging, with graphic health warnings taking up 75 per cent of the pack and no brand colours or logos.

PlainPack.comThe company launched a high-profile campaign in early 2011 to raise its concerns about plain packaging, particularly around the very serious unintended consequences it could have.

The likely consequences of plain packaging legislation are not well understood. The company is concerned that the Government has rushed through this legislation without conducting more robust research. During an October 2010 Senate hearing, it was highlighted that the effect plain packaging would have on smoking rates has not been quantified.

To contribute evidence to the debate, the Group commissioned Deloitte to examine the intended and unintended impacts of tobacco packaging regulation. As Australia is likely to be the first country to introduce plain or unbranded packaging, Deloitte could not assess existing plain packaging legislation. Instead, the research focused on other types of tobacco packaging regulation that have reduced the space on the pack available for our brands, for example by increasing the size of health warnings.

Deloitte’s report1 revealed that increasing the size of health warnings on packs and introducing graphic warnings had not directly reduced tobacco consumption. It therefore called into question whether plain packaging would reduce smoking rates. The report also recognised that plain packaging could lead to a number of unintended consequences, such as an increase in the black market in tobacco. It is estimated that more than one in 10 cigarettes smoked in Australia already comes from the black market, costing an estimated A$1.1 billion (£708 million) a year in lost tax income.

The legislation also risks breaching intellectual property rights and the rights of a brand owner to use its packaging to distinguish its products from those of its competitors.

British American Tobacco Australia’s campaign included a dedicated website, www.plainpack.com Opens in new window, television and radio interviews, billboards, press conferences and advertisements in the national press. Three of the company’s employees, including the Managing Director, also used Twitter to provide real-time updates on their response as the legislative developments took place.

The Alliance of Australian Retailers also pledged its opposition to the legislation. It represents many owners of small businesses – convenience stores, newsagents, service stations and milk bars – who employ thousands of people. Their campaign had the transparent financial support of tobacco companies.

Two Parliamentary inquiries were held, to which British American Tobacco Australia contributed. At the House of Representatives’ Health and Ageing Committee Inquiry into Plain Packaging in August 2011, the company’s Managing Director and Head of Corporate & Regulatory Affairs answered questions from the Committee. Near the end of the campaign, an independent poll by one of Australia’s largest newspapers saw public opinion move from the majority supporting plain packaging to a majority opposed.

Despite the campaign’s effectiveness, the legislation was still passed. Like all brand owners, we believe we are entitled to use our packs to distinguish our products from those of our competitors. By restricting brands, governments risk breaching intellectual property rights and, in most cases, international trade agreements. British American Tobacco Australia always said it wanted to avoid going to court over plain packaging regulation. But the company has been left with little alternative: as a legal company selling a legal product it has a duty to defend its intellectual property on behalf of its shareholders. So we, and other tobacco companies in Australia, are challenging the constitutional validity of the removal of trade marks and other intellectual property without compensation.

We hope that the campaign demonstrated to other governments that plain packaging legislation is problematic and that we will fight for our entitlement to use our packs to distinguish our products from those of our competitors.

Reducing environmental impacts

In September 2000, British American Tobacco Australia was the first tobacco company to join the Australian Packaging Covenant (APC). Signatories to this voluntary initiative develop plans to reduce the environmental impacts of their packaging and their wider operations. Since 2000, the company has:

  • Increased its packaging waste recycling rates to 80 per cent;
     
  • Increased purchases of products with recycled content: 84 per cent of office paper now contains recycled material; and
     
  • Improved waste and recycling systems.

British American Tobacco Australia’s APC Action Plan for 2011–2015 focuses on three areas: sustainable design, recycling and product stewardship. It includes commitments to:

  • Report on average water and energy consumption per unit of production annually to the APC;
     
  • Introduce further best practice waste and recycling initiatives;
     
  • Identify opportunities to source more products with recycled content; and
     
  • Include requirements for packaging take-back and/or reuse or recycling of used packaging in certain procurement contracts.

It will be challenging to implement some of these actions given the introduction of plain packaging in late 2012. While all the specific requirements for plain packaging are not yet clear, British American Tobacco Australia remains committed to working with its suppliers, customers and employees to deliver the most sustainable packaging options for its products.

Corporate social investment

In 2009, a corporate social investment (CSI) strategy for the Australasia area, including Australia, New Zealand and the South Pacific Islands, was developed. This recognised that the company relies on a healthy, educated workforce, strong societies and stable economies and that supporting these is therefore good for long-term business success. The strategy had a particular focus on the developing markets of the South Pacific, where whole sectors of society struggle to access basic services.

While this remains a priority, in 2011 the strategy was extended to also cover initiatives in the areas of civic life, sustainable agriculture, environmental protection and empowerment.

It continues to support the transfer of insights from British American Tobacco companies in developed countries, such as Australia and New Zealand, to our companies in the area’s developing markets, and to encourage partnerships with community organisations.

Employee engagement

British American Tobacco Australia is facing a period of great change, including preparing for the challenge of implementing plain packaging, as well as separate office relocations for all its corporate, call centre and IT employees at the same time as the transition of most of its manufacturing to offshore locations. In this context, to retain talented employees and drive strong business performance, it is essential that the company supports its employees well.

To prepare employees for these changes, the company has introduced an initiative called the Engaging Conversation Series. This programme is designed to build employee engagement and drive excellence in people management.

It involves a series of master classes on people management and employee engagement, covering topics including reward and recognition, performance reviews and career development.

The initiative also includes a series of events to motivate employees. These include presentations from external guest speakers who have handled change well in their lives.


1 ‘Tobacco Packaging Regulation: An international assessment of the intended and unintended impacts’ by Deloitte, May 2011.

RELATED INFORMATION

STAKEHOLDER VIEWPOINT

Plain packaging is simply wrong and bad public policy. Once brands are removed and all packaging is made to look the same, it is easy to imagine how much simpler it will be to counterfeit a pack of cigarettes. It will reduce brand owners’ ability to take action against counterfeiting and will increase the burden on already overstretched public agencies as they try to keep illicit products away from consumers.

The International Chamber of Commerce's 'Business Action to Stop Counterfeiting and Piracy' group, October 2011

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