Accelerating A Better
Tomorrow
Combined Performance
and ESG Summary 2021

Scroll to our 2021 Overview

Chief Executive’s Review

A pivotal year on our journey to build A Better Tomorrow™
2021 was a pivotal year in BAT’s transformation. Our commitment to change, while delivering value to stakeholders, can be seen in the progress that has been made on our strategic priorities.

Chairman's Introduction

Accelerating A Better Tomorrow™
BAT has been on its sustainability journey for more than 20 years. Sustainability and ESG are a core part of our long-term business strategy and are ingrained in our identity as a responsible, purpose-led business.

Finance and Transformation Director's Overview

In this pivotal year, we have grown New Categories revenue, invested in the future of the business and deleveraged. This has allowed us to continue to reward shareholders with higher dividends and announce a £2 billion share repurchase programme. We believe we are well placed to maximise our future potential.

Our Purpose

To reduce the health impact of our business by offering a greater choice of enjoyable and less risky products

We are clear that combustible cigarettes pose serious health risks. The only way to avoid these risks is not to start or to quit. However, we encourage those who would otherwise continue to smoke to switch completely to scientifically-substantiated, reduced-risk alternatives.*†

In order to deliver this, BAT is transforming into a truly consumer-centric multi-category consumer products business, with a mission to stimulate the senses of new adult generations.

* Based on the weight of evidence and assuming a complete switch from cigarette smoking. These products are not risk free and are addictive.

Our products as sold in the U.S., including Vuse, Velo, Grizzly, Kodiak, and Camel Snus, are subject to FDA regulation and no reduced-risk claims will be made as to these products without agency clearance.



20years of
Sustainability Reporting

2021 was a pivotal year, marking our 20th year in the Dow Jones Sustainability Indices and 20 years since we produced our first Social Report. We’ve learned a lot along the way. Now we are building on these strong foundations to accelerate progress towards a sustainable future and create A Better Tomorrow™ for all our stakeholders.

  • Sustainability
  • Ambitions for the future
Scroll to view timeline
2000
eclt

Co-founded the Eliminating Child Labour in Tobacco Growing (ECLT) Foundation and developed our first policy to address child labour

2001

International Marketing Standards developed

Established the BAT Biodiversity Partnership

Stakeholder dialogue programme initiated

2002
eclt

First tobacco company listed in the Dow Jones Sustainability Indices

First Social Report published for 2001

2003

Employment Principles established

2004

Reviewed our global policies in dialogue with stakeholders

timeline1

Our first oral tobacco product launched

2005

Developed our first Sustainability Agenda using a best practice materiality assessment

Set our first long-term 2030/2050 carbon reduction targets

2007

Our first vapour product launched in the UK

2013
timeline1
Thrive

Thrive farmer livelihoods programme developed

2014
2016

Our first tobacco heating product launched

timeline2
2017
compass logo

Enhanced global ethics programme, ‘Delivery with Integrity’, introduced

2019
compass logo

CO2e targets approved by the Science-Based Targets Initiative

2021
DJ

Listed in the Dow Jones Sustainability Indices for the 20th consecutive year

Signed up to the UN-backed Race to Zero global campaign

Accelerating

Our A Better TomorrowTM ambitions in numbers

120 years

BAT celebrates 120th anniversary

2022
£5 billion

in New Category revenues

100%

of plastic packaging capable of being reusable, recyclable or compostable and unnecessary single-use plastic removed

Zero

child labour ambition for our tobacco supply chain

2025
Carbon-neutral operations

(Scope 1 and 2)

50 million

non-combustible product consumers

2030
Net Zero value chain

In October 2021, we signed up to the UN-backed Race to Zero global campaign, committing to set science-based targets aiming for net zero value chain emissions 2050

2050


* Based on the weight of evidence and assuming a complete switch from cigarette smoking. These products are not risk free and are addictive.
Our products as sold in the U.S., including Vuse, Velo, Grizzly, Kodiak, and Camel Snus, are subject to Food and Drug Administration (FDA) regulation and no reduced risk claims will be made as to these products without FDA clearance.

Short-Term Deliverables to Fuel A Better Tomorrow™

Our purpose is to build A Better Tomorrow™ by reducing the health impact of our business through offering a greater choice of enjoyable and less risky products*† for our consumers. To accelerate this, we must become a stronger, simpler and faster organisation, which will be achieved through the delivery of three short-term priorities.

deliverables 1
Simplify the Business

Our ongoing simplification programme, Project Quantum, is expected to realise £1.5 billion of savings through simplification and efficiencies by 2022.

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Ensure a Step Change in New Categories Performances

Over the years, consumer moments that used to be satisfied by cigarettes have been replaced by other products.

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Drive Value From Combustibles

Our ambition is to increasingly transition our revenues from cigarettes to New Categories over time.

Read More


* Based on the weight of evidence and assuming a complete switch from cigarette smoking. These products are not risk free and are addictive.
Our products as sold in the U.S., including Vuse, Velo, Grizzly, Kodiak, and Camel Snus, are subject to FDA regulation and no reduced-risk claims will be made as to these products without agency clearance.

Our Consumer-Centric Multi-Category Portfolio

BAT is a leading consumer-centric, multi-category consumer goods business dedicated to stimulating the senses of adult consumers worldwide. Our portfolio reflects our commitment to meeting the evolving and varied needs of today’s adult consumer who seeks sensorial enjoyment for different moods and moments.

Strategic portfolio
Our Reduced-Risk Portfolio (Non-Combustibles)*†

Handheld, battery-powered devices that heat a liquid (called an e-liquid, usually containing nicotine) and creates a vapour to be inhaled.


30

markets where our vapour products are currently available


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Brands

THPs do not burn tobacco, so no smoke (which is a key source of toxicants) is produced. Research indicates that by heating tobacco rather than burning it, THPs have the potential to be reduced-risk compared to smoking.


25

markets where our THPs are currently available


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Brands

This is our most recent innovation across oral products – offering consumers a satisfying experience with a range of different flavours. Two formulations are available: one containing lower levels of tobacco, and one that contains nicotine but no tobacco.


23

markets where our modern oral products are currently available


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Brands

Traditional Oral products contain tobacco, but there is no burning. There is strong epidemiological evidence, from countries such as Sweden, that switching completely to snus can reduce risk compared to smoking.



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Brands

Combustibles

The Group sold 637 billion cigarette sticks and 18 billion OTP (stick equivalents) in 2021. The Group operates in over 175 markets, with 42 fully integrated cigarette manufacturing facilities in 40 markets.



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Brands

* Based on the weight of evidence and assuming a complete switch from cigarette smoking. These products are not risk free and are addictive.
Our products as sold in the U.S., including Vuse, Velo, Grizzly, Kodiak, and Camel Snus, are subject to FDA regulation and no reduced-risk claims will be made as to these products without agency clearance

Our Global Business

BAT is a leading consumer goods business: global, consumer-centric, multi-category, with sustainability at our core. We operate in more than 175 markets and our business is divided into four complementary regions, with a balanced presence in both emerging markets and developed markets.

zoom Show global activity
Revenue by region

Hover over graph to reveal

£25.7bn

Total revenue

Revenue by product category

Hover over graph to reveal

£25.7bn

Total revenue

Our employees

Hover over graph to reveal

52,050

employees

Our Nine-Step Business Model

Our global business understands our diverse consumers, develops products to satisfy their preferences and ultimately distributes them across over 175 markets.


Seven key enablers support us in turning powerful insights into products that provide enjoyment to our consumers, while engagement helps our key stakeholders benefit from our sustainable growth.

Seeing Over the Horizon

As one of the most long-standing and established consumer goods businesses in the world, we have a unique view of the consumer across our product categories, which is increasingly driven by powerful data and analytics. These insights ensure that the development and responsible marketing of our products is fit to satisfy consumer needs.


Driven by our unique and data-driven consumer insight platform (PRISM), we focus on product categories and consumer segments across our global business that have the best potential for long-term sustainable growth.

Accelerating Tobacco Harm Reduction

World-class science is needed to substantiate the quality, safety and reduced-risk potential of our New Category products. This is crucial for building consumer trust and encouraging adult smokers to completely switch to less risky alternatives*†. We have an extensive scientific research programme in a broad spectrum of scientific fields, including molecular biology, toxicology and chemistry. We are transparent about our science and publish details of our research programmes on our dedicated website, www.bat-science.com, and the results of our studies in peer-reviewed journals.

Staying Ahead of the Curve

As consumer preferences and technology rapidly evolve, we rely on our growing global network of digital hubs, innovation hubs, world class R&D laboratories, external partnerships and our corporate venturing initiative, Btomorrow Ventures, to stay ahead of the curve. Driving sustainable growth is at the core of our innovation. We make significant investments in research and development to deliver innovations that satisfy or anticipate consumer preferences and generate growth for the business. Led by our strength in developing consumer insights, each innovation helps us on our journey to build A Better Tomorrow™ by reducing the health impact of our business.

Sourcing Materials Responsibly

The majority of our tobacco is sourced by our own BAT leaf operations through direct contracts with over 75,000 farmers. The remainder is from third-party suppliers that, in turn, contract with an estimated 264,000 farmers. The vast majority of tobacco farms in our supply chain are smallholder family farms.

Beyond tobacco, we source product materials like paper and filters for cigarettes and, for our New Category products, we have a growing supply chain in consumer electronics and e-liquids. We also have a vast number of suppliers of indirect goods and services that are not related to our products, such as for IT and facilities management.

Utilising our Global Manufacturing Footprint

We manufacture high-quality products in facilities all over the world. We also ensure that these products and the tobacco leaf we purchase are in the right place at the right time. Our New Category products are manufactured in a mix of our own and third-party factories. We work to ensure that our costs are globally competitive and that we use our resources as effectively as possible.

Moving our Products Seamlessly Everywhere

By applying modern technologies, including AI and machine learning, we ensure our products are where they are needed when they are needed.

Our products are sold around the world and we distribute them effectively and efficiently using a variety of distribution models suited to local circumstances and conditions. These distribution models include retailers, supplied through our direct distribution capability or exclusive distributors, and our Direct-to-Consumer business – which has been accelerated through the deployment of owned e-commerce sites.

Marketing our Products Responsibly

Tobacco and nicotine products should be marketed responsibly to adult-only consumers and not designed to appeal to youth.

Through a globally responsible approach to marketing, we help to raise standards and prevent underage access, while growing our market share and encouraging adult consumers to choose our products over our competitors.

Our International Marketing Principles (IMP) govern our marketing across all product categories. They include strict requirements to be responsible, accurate and targeted at adult consumers only. Our IMP are applied even when they are stricter than local laws.

Offering Consumer Choice

We have a powerful brand portfolio that we are proud of. Our global brands are well positioned, with leading-edge insights, science and innovation behind our product pipeline.

We offer adult consumers a range of products, including combustible products, vapour, modern oral and THPs, in markets around the world. Our range of high-quality products covers all segments, from value-for-money to premium.

09
Insights
A better tomorrow for...

Our consumers are at the core of everything we do and our success is underpinned by addressing their preferences, offering them a choice of enjoyable, innovative and less risky products*†.

Measured by
25

countries where tobacco heating products are available

30

countries where vapour products are available

23

countries where modern oral products are available

Suppliers

Across the BAT Group, we work with thousands of different suppliers worldwide. Our suppliers are valued business partners and we believe, by working together, we can raise standards, drive sustainable practices, create shared value and build A Better TomorrowTM for all.

Customers

Our customers include retailers, distributors and wholesalers who are essential for driving growth and embedding responsible marketing practices

The greatest contribution we can make to society is by reducing the health impact of our business. We will do this by encouraging those smokers who would otherwise continue to smoke to switch completely to scientifically-substantiated, reduced-risk alternatives*†. Achieving this sustainably, working to reduce our impact on the environment, is central to delivering A Better Tomorrow™.

Measured by
18.3m

consumers of non-combustible products

75%

of plastic packaging that is reusable, recyclable or compostable

42.7%

reduction in Scope 1 & 2 emissions from our 2017 baseline

We employ 52,000+ people worldwide. Attracting and retaining an increasingly diverse workforce and providing a welcoming, inclusive working environment are key drivers in BAT’s transformation journey to build A Better Tomorrow™. Our focus is on providing a dynamic, inspiring and purposeful place to work.

Measured by

accredited as Global Top Employer by the Top Employers Institute

79%

Engagement Index score in our Your Voice employee survey

0.20

Lost Workday Case Incident Rate (LWCIR) vs 0.22 in 2020

39%

proportion of women in management roles grew to 39%

We are committed to delivering sustainable and superior returns to our shareholders and investors. It is essential that we maintain the support of our shareholders and investors to enable access to capital. This allows us to implement our strategy and achieve our business objectives.

Measured by
3.5%

revenue growth over the medium term;

high-single digit adjusted EPS growth at constant rates of exchange, over the medium term;

65%

dividend payout ratio; and

2-3x

deleveraging the balance sheet to within our 2-3x adjusted net debt/adjusted EBITDA range.



* Based on the weight of evidence and assuming a complete switch from cigarette smoking. These products are not risk free and are addictive.
Our products as sold in the U.S., including Vuse, Velo, Grizzly, Kodiak, and Camel Snus, are subject to Food and Drug Administration (FDA) regulation and no reduced risk claims will be made as to these products without FDA clearance.

Simplifying the Business and Accelerating the Enterprise of the Future

BAT is moving towards the Enterprise of the Future – a global, consumer-centric, multi-category company, with sustainability at its core. We are redefining ourselves, not by the products we sell, but the consumer needs that we meet.

We are creating brands with purpose, and are reshaping our product portfolio, building a multi-category portfolio of non-combustible products backed by science, and expanding “beyond nicotine”. We are driven by digital transformation, technology and innovation, and by our people, living our ethos.

Quest is accelerating our transformation towards the Enterprise of the Future: it is delivering the capabilities required to build our multi-category platform business, enhance our future sustainability and deliver our digital transformation. It is underpinned by five accelerators.



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Quest
Deliver
Quantum

Quantum is generating the resources to be reinvested in our New Categories by optimising our organisational design; leveraging our shared services; embedding productivity discipline; and delivering Revenue Growth Management (RGM) and Marketing Spend Effectiveness (MSE) initiatives.

Unleash
Innovation

Unleash Innovation is delivering a step change in critical capabilities, enabling BAT to further build and successfully execute consumer focused and remarkable innovation. Utilising Quantum productivity savings, we are fuelling an ambitious portfolio transformation towards a multi-category product company.

Empowered
Organisation

Developing our people, teams and culture is at the heart of Quest. The Empowered Organisation programme is building an engaged, agile and high-performing organisation with capabilities to deliver our Enterprise of the Future.

Shaping
Sustainability

Shaping Sustainability is accelerating our corporate journey towards a sustainable enterprise, fulfilling our A Better Tomorrow™ purpose. Developing world-class science to support our new portfolio and embedding industry leading ESG ambitions is at the heart of this programme.

Technology &
Digital

Technology & Digital underpins all Quest initiatives to accelerate our transformation towards a top quartile, digitally-enabled consumer packaged goods (CPG) business. Our digital transformation is focusing on digital marketing; agile organisation; value from data & analytics and intelligent automation at scale.

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