directors report and accounts 2006 - Our strategy in action: Responsibility

 
 

 Our strategy in action: Responsibility

Responsibility is a key element of our business strategy but how do we measure or assess our performance? We look to external benchmarking to provide us with an objective view on how we are doing and use the Dow Jones Sustainability Indexes (DJSI) as our primary Business Measure. With regard to our environmental impacts, we have the data and have been reporting on the trends for several years. We have included some of these measures below in a section on the key topic of climate change. In harm reduction, we can report some encouraging signs of increasing engagement around an area which is central to our business strategy.

Dow Jones Sustainability Indexes
In 2006, we were, for the fifth year running, the only tobacco company included in the DJSI. Launched in 1999, the DJSI are global indices tracking the performance of the leading companies worldwide. The indices are based on a detailed assessment of companies’ economic, environmental and social performance, and on how well they integrate sustainability strategies into their business. 

Externally, these benchmarks are used by asset managers to make investment decisions and by other stakeholders looking at sustainable businesses. Internally, participation in the indices gives us an objective third party perspective on how we are managing the business and allows us to benchmark our performance against the best in the sector and the sector averages.

The tobacco sector group is based upon an assessment of 10 tobacco companies, although the names of all the companies are not publicly disclosed. In 2006, our overall score remained equal to last year’s at 79 per cent against a sector average that increased significantly to 66 per cent. We achieved the top score in 13 out of 19 categories, improved our score in 16 and scored better than the sector average in 18. We shall continue to submit ourselves for consideration, with the aim of maintaining our position in the indices. However, because inclusion is determined by a third party, we have chosen not to regard inclusion itself as a Business Measure. Chart 4 shows how we report our performance in the DJSI. Our annual target is to record a higher score than the sector average in a minimum of 15 out of 19 categories. See chart See chart 4

Dow Jones Sustainability Indexes 

EmissionsWaste to landfillRecyclingWater use

Climate change

We consider it to be part of our responsibility to measure, monitor and reduce our energy use and greenhouse gas (GHG) emissions and report on our global performance in accordance with Global Reporting Initiative (GRI) guidelines, publicly on an annual basis.

We view reductions in emissions as being the top priority, followed by mitigation. Where no further reduction or mitigation is possible, we will look to offsetting.

Reduction – our performance on reducing emissions
We have reduced both the absolute amount and intensity (per unit production) of our CO2 emissions in recent years. This has been achieved by energy conservation initiatives, investment in energy efficient technologies, use of renewable fuels and through consolidation of our manufacturing footprint. We also work to reduce waste sent to landfill and increase the amount of waste recycled.

Emissions
CO2 is a GHG, a major contributor to climate change.

In 2000, the Group committed to reducing CO2 emissions by 5.2 per cent by 2008, in line with the Kyoto protocol. This was achieved by 2004. We have set progressively more stretching targets each year since 2004. In 2006, the target was 0.78 tonnes CO2 per million cigarettes equivalent and we achieved 0.79 tonnes, a reduction of 5 per cent over 2005. Over the last five years, our emissions have reduced by 43 per cent. See chart fig5

Click here to view the Emissions data 

Waste to landfill
Waste sent to landfill creates methane, which is 21 times more potent as a GHG than CO2.

By reducing the amount of total waste generated and increasing recycling rates, we have reduced waste sent to landfill by 59 per cent since 2001. See chart See chart 6

Click here to view the Waste to landfill data 

Recycling
Increasing recycling rates reduces the amount of waste that is sent to landfill. Our 2006 global recycling rate was 81.2 per cent.

Through proactively seeking new partners and destinations for recycling, we have increased our recycling rates over the last five years. There are now 10 companies within the Group achieving 95 per cent recycling rates. See chart See chart 7

Click here to view the Recycling data 

Working with our Supply Chain
Suppliers are increasingly seen as a critically important stakeholder group and there are growing expectations that businesses should use their influence to encourage good standards of corporate responsibility in their supply chains. We accept this responsibility and work not only to set high standards for our suppliers but to support them in achieving continuous improvement.

We see this as particularly important for a very large business such as ours, with a primary supply chain that includes some 250,000 farmers who grow tobacco leaf and other international suppliers from whom we buy other raw materials such as packaging and paper.

Our major supply chain programmes include our Business Enabler Survey Tool (BEST), which sets out in detail the standards we expect of the suppliers from whom we buy raw materials other than leaf. BEST assesses suppliers across 102 performance criteria, covering, for example, suppliers’ business ethics; environment, occupational health and safety management; employee rights and the supplier’s ability to trace the sources of raw materials, including sourcing wood from sustainably managed forestry.

Social Responsibility in Tobacco Production (SRTP) is a significant programme that aims to ensure that we only purchase tobacco leaf from responsible and sustainable sources, by working to address the social and environmental issues associated with tobacco leaf growing and processing.

We have also encouraged other manufacturers to adopt a similar approach, an initiative that is gaining considerable support. Our supplier review methodology has been adopted by a number of tobacco manufacturers, while others have adopted similar programmes of their own.

In terms of reducing GHG emissions, we are working with leaf and material suppliers, through both the SRTP and BEST programmes, to achieve further improvement and we will be establishing minimum environmental performance criteria for suppliers during 2007.

Mitigation activities – The British American Tobacco Biodiversity Partnership
We are also working with our Non-Governmental Organisation partners (Earthwatch Institute (Europe), Fauna & Flora International, the Royal Botanic Gardens, Kew and the Tropical Biology Association) within the Biodiversity Partnership to avoid, minimise and mitigate our impacts on biodiversity and minimise the use of ecosystem services, such as soil, water and wood.

We have categorised our projects in accordance with definitions from the Intergovernmental Panel on Climate Change (IPCC), splitting the contribution to the Climate Change agenda into the following:

  • Understanding impacts, adaptation and vulnerability
  • Mitigation

Of the current 43 projects within the partnership programme portfolio, 25 address understanding impacts, adaptation and vulnerability, and 17 address the mitigation part of the IPCC definitions. 14 of the projects address both and 15 are relevant to neither aspects of climate change but are relevant to biodiversity conservation.

Water use
In many areas where we operate, climatic variations may cause water to become a scarce resource. In 2006, we have reduced our water use by 7 per cent and over the last five years it has come down by 41 per cent. See chart See chart 8

Click here to view the Water use data 

Offsetting
We do not use the information below to formally offset our CO2 emissions, as many of the trees that we sponsor are not owned by us.

However, since the 1970s, Group companies have promoted forestry programmes to ensure a source of wood fuel for tobacco growers. The Edinburgh Centre for Carbon Management has helped the Group to quantify the CO2 take-up and storage by these forests since 1998. At the end of 2005, the carbon storage associated with the programmes in Brazil, Kenya, Pakistan and Uganda was estimated at 400,000 tonnes of carbon, equivalent to 1.46 million tonnes of CO2. This compared to the 0.85 million tonnes of CO2 emitted from Group companies’ operations in 2005. This study will be updated in 2007.

During 2007, we will investigate potential ways to offset our emissions, although our first priority will always be to reduce them as far as possible.

 Harm reduction
We believe that harm reduction, which is a key element of our business strategy, ought to be able to find common ground with the goals of public health policy.

We agree that risky products such as tobacco should be regulated. Currently, tobacco regulation broadly focuses on three areas: preventing people from starting to smoke, encouraging quitting and protecting people around smokers.

However, we strongly believe that these prevention, cessation and protection efforts are missing an important ‘fourth dimension’, namely, harm reduction, for the millions of adults globally who will continue to be tobacco consumers.

The World Health Organisation predicts that, even with increasingly strict regulation, there will be as many or more smokers globally in 10 years’ time as there are today, as falling tobacco consumption is offset by a strongly rising world adult population.

In public policy, harm reduction is an established concept.  It recognises that positive health outcomes can be achieved in ways other than through disincentives, punitive measures or the prohibition of certain lifestyle choices.

Smoking poses real and serious health risks, but nicotine, at the levels smokers take, does not. If smokers could take nicotine from pleasurable tobacco products with far lower risks than smoking, we believe that tobacco related harm to health would reduce far faster than current public health efforts can achieve alone.

We believe we can contribute to reducing the harm of tobacco use through innovative products, while also supporting the long term sustainability of our business.

What we are doing
Encouraged by public health stakeholders, we have extended some major cigarette brands to Swedish-style snus, a smokeless tobacco product mainly sold in Sweden and recognised by health experts, such as the UK’s Royal College of Physicians, to be much less harmful than smoking. We are marketing snus in Sweden, have started sales in Norway and, building on our experience in South Africa, have begun a pilot in Japan. We plan to extend these initiatives elsewhere in due course.

We are planning to lobby for an amendment to the EU ban on snus sales in the EU except for Sweden. We believe there is no rational justification for continuing to bar smokers from choosing a less hazardous alternative to cigarettes.

We are also developing a scientific framework for evaluating the relative risks of different tobacco products, both combustible and non-combustible. Currently, there is no accepted approach to measuring tobacco consumers’ exposure to the toxicants believed relevant to tobacco related disease. This is vital to enable development of lower risk tobacco products. However, we cannot develop a framework alone. To ensure that the work and supporting research are robust, we are expanding our engagement with external scientists.

 Research and development
Our research and development activities are focused on developing new products and new processes, as well as maintaining and improving the quality of existing products. Research is also carried out on risk characterisation, building a framework to assess the relative risk of novel and conventional products and a better understanding of how consumers use them. Risk reduction, such as developing technologies that have the potential to lower exposure to toxicants in smoke, is also a central part of the research and development programme. Research is also undertaken into aspects of the science and behavioural science related to smoking and we continue to provide funding for independent studies.