Delivering value through excellence in ESG
A key strength of our approach to sustainability is a robust process to identify and understand our most material ESG priorities. Our comprehensive approach to evolving our Sustainability Agenda ensures we keep pace with emerging priorities and stakeholder expectations.
BAT has conducted Materiality Assessments^ since 2007 and, in 2022, we undertook our first Double Materiality Assessment (DMA) through an external consultancy. This has provided greater insight, focus and granularity on the sustainability / ESG matters which are significant in terms of:
- BAT's impact on society and the environment; and
- Potential risks and opportunities which could have an impact on BAT's financial value
Impact Assessment: Prioritisation of BAT's impact on society and the environment
In order to prioritise the different ‘outward'’ impacts of BAT, the findings of the risk assessment were combined with the learnings from the stakeholder engagement, alongside the results of benchmarking against other companies across a range of sectors. This included assessing BAT's actual and potential negative impacts on people and their human rights, the environment and the economy; through the topics of the ESRS.
We analysed potential risks and opportunities which could have a significant impact on BAT's financial value. These pose potential 'inward impacts'. For each issue and overall topic identified, several questions were used to establish whether they met our financial materiality criteria:
- Could it affect assets / liabilities recognised in financial reporting today, or be recognised because of future events?
- Could it affect Enterprise Value?
- Could it influence the possibility to continue to use or obtain resources needed for our business, as well as the quality and pricing of those resources?
- Could it affect our ability to rely on relationships needed in our business processes?
Having undertaken our detailed assessments, we determined the relative importance of issues and overall topics according to their 'outward' and 'inward' importance.
The findings from this exercise produced the following results, in comparison to our previous materiality assessments:
- Harm Reduction
- Circular Economy;
- Climate Change;
- Biodiversity & Ecosystems;
- Ethics & Integrity;
- People, Diversity & Culture
The conclusions of the DMA reflect the challenges that society, the global economy and our industry face today. In line with our previous assessments and long-standing sustainability strategy, the top priority continues to be Harm Reduction; aligned with BAT's ongoing transformation into a multi category consumer goods company selling reduced risk products*†. Climate Change and Circular Economy are also 'Tier 1' topics for BAT, in line with the increasing concern about their impact on and importance for society and the environment. Furthermore, “Climate and Circularity” is now recognised as a Principal Risk to the Group.
Double Materiality Matrix
- Responsible Marketing and Transparent Communications
- People, Diversity and Culture
- Biodiversity and Ecosystems
- Ethics and Integrity
- Human Rights
- Sustainability Governance
- Farmer Livelihoods
Our Double Materiality Assessment identified 11 key topics – each comprising several subtopics – as being material in terms of a) BAT’s impact on society and the environment, and b) the financial materiality of ESG impacts on BAT. To see our Double Materiality Matrix, and topics and sub-topics see p47-48 of our Combined Annual and ESG Report.
^ Although financial materiality has been considered in the development of our Double Materiality Assessment ("DMA"), our DMA and any related conclusions as to the materiality of sustainability or ESG matters do not imply that all topics discussed therein are financially material to our business taken as a whole, and such topics may not significantly alter the total mix of information available about our securities.
* Based on the weight of evidence and assuming a complete switch from cigarette smoking. These products are not risk free and are addictive.
† Our Vapour product Vuse (including Alto, Solo, Ciro and Vibe), and certain products, including Velo, Grizzly, Kodiak, and Camel Snus, which are sold in the U.S., are subject to FDA regulation and no reduced-risk claims will be made as to these products without agency clearance.