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

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Sustainability Report 2011

Fighting the illegal cigarette trade

The illegal cigarette trade in Malaysia is, according to the 2009 Global Tobacco Report by Goldman Sachs, the largest in the world by market share.

With a vast 172 per cent rise in excise tax between 2004 and 2010 leading to Malaysia having the third highest cigarette prices in Asia, the demand for cheaper, illegal cigarettes has increased. The country’s long coasts, isolated jetties and extensive borders make it relatively easy for cigarettes to be smuggled in from neighbouring countries.

The illegal cigarette trade not only affects British American Tobacco Malaysia’s revenues, it has negative consequences for society. The state loses out on tax income, cigarettes are easily accessible to children and criminal gangs profit.

The company cannot hope to tackle a problem of this scale alone. It is therefore collaborating with the Government, industry groups and enforcement bodies to develop joint solutions, share intelligence and enhance enforcement capabilities.

In 2011, British American Tobacco Malaysia took the crucial step of re-evaluating its efforts and addressing the issue with a fresh approach. As a result, the local business (through the Confederation of Malaysian Tobacco Manufacturers) worked with and supported the media to highlight the illegal cigarette trade and its consequences. It also outlined a comprehensive approach and strategy to the Government on addressing the issue.

Following this, the Malaysian Government made its biggest acknowledgement of the seriousness of illicit trade to date by not raising the excise tax on cigarettes for the first time in history during the tabling of the 2012 National Budget. The Prime Minister further attributed this move to the fact that the illicit cigarette trade rate of nearly 40 per cent of the market was a concern for the Government.

The illegal cigarettes problem, however, is not an issue that can be solved overnight. It will require sustainable and continuous efforts from both the industry and the Government.

Sustainability at British American Tobacco MalaysiaEnvironment, health and safety initiatives

In 2011, British American Tobacco Malaysia implemented various initiatives to improve environmental performance in its operations.

A second rainwater harvesting tank was installed at its manufacturing site to collect water for wetting tobacco dust waste and cleaning. It is expected to provide the site with 100,000 litres each year, reducing demand on local water supplies. A third tank is planned for 2012.

The energy efficiency of the factory’s boilers was enhanced in 2011, with the installation of a third economiser unit to recover waste heat. This is expected to cut energy consumption by 18.9 per cent. The system used to filter the site’s emissions to air was also upgraded in 2011, using a new tundra peat as an organic bio-filter. In addition, the treatment capacity of waste water from the factory premises was increased by 20 per cent through an expansion of the Effluent Treatment Plant.

To improve safety and fuel efficiency among the company’s drivers, a defensive driving programme was developed in 2010. Since then, a total of 356 employees have attended 13 sessions covering safe driving, vehicle handling in emergency situations, vehicle maintenance and tips on saving fuel.

Sadly, however, there was one vehicle-related fatality of a contractor in 2011. We greatly regret this loss of life and hope that the defensive driving programme and other safety initiatives will help prevent a recurrence.

Employee volunteering

British American Tobacco Malaysia’s charitable foundation organises employee volunteering days. In the past, these have been in employees’ own time during the weekends. In 2011, however, this was changed to encourage a higher level of participation. The company sees employee volunteering as valuable not only for the community, but also for building stronger relationships between employees and teams.

Three volunteering days were organised during the working week in 2011. Volunteering activities on these three days included planting saplings and seeds at a home for the elderly, and a waterfall and beach clean-up. In addition to this, volunteer events were also held during Malaysian festive celebrations.

External allegations

The Malaysian Trades Union Congress made a complaint against British American Tobacco Malaysia, alleging anti-union activity in 2007. The complaint was analysed by the UK National Contact Point for the Organisation for Economic Cooperation and Development’s (OECD’s) Guidelines for Multinational Enterprises and their final ruling was published in 2011.

The main allegations of the Trades Union Congress were that the company had restructured the business in such a way that the trade union became unsustainable and that insufficient employee consultation took place. British American Tobacco Malaysia explained that the restructuring was necessary to comply with a local law that requires managers and employees to belong to different unions.

In its final ruling, which can be found on Opens in new window, the UK National Contact Point stated its decision not to investigate the restructuring, as to do so could result in a ruling that conflicted with local law. We maintain that British American Tobacco complied with the law and with our employment principles: wherever we operate, we respect workers’ fundamental rights to freedom of association and collective bargaining. The final ruling also recommended that British American Tobacco strengthen its consultation processes, which has now been done.




In 2011, according to research conducted by Neilson, illegal cigarettes represented 36.3% of the market in Malaysia.

The Malaysian Government is estimated to lose up to MYR2 billion (£402 million) in unpaid taxes each year as a result of the illegal tobacco trade.

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