Building a climate-resilient business
How ESG is front and centre of all we do
As we strive to build A Better Tomorrow™ by reducing the health impact of our business, it’s important that we keep raising the bar in terms of ESG
We have an integrated climate strategy focused on addressing the risks and opportunities of climate action and striving for carbon neutrality across our operations and wider value chain.
Climate risks are increasingly getting more complex, with potential impacts on crop yields, disruption to distribution networks and the livelihoods of communities, and reduced access to drinking water – a fundamental human right. While some impacts of climate change will be common everywhere, it is essential we understand and manage localised risks.
An integrated climate strategy
Taking an active approach to tackling climate change isn’t new at BAT. We’ve been focusing on addressing our environmental impacts and preparing our business for the risks ahead for over 20 years. And we set our first long-term targets to reduce carbon emissions in 2007. Yet with the planet in the grip of a climate emergency, we are making a step change in our ambition and accelerating the pace of progress.
In 2020, we set a bold ambition: to be a carbon neutral business by 2030. This is supported by a range of operational targets, including aiming for 100% of electricity in our operations to be from renewable sources by 2030. In 2021, we increased the proportion of our total energy coming from renewable sources – which now stands at 28.6%. This includes 64% of total electricity purchased at operations sites from renewable sources. Together, these measures led to a 42.7% reduction in 2021 (from our 2017 baseline) of CO2e emissions from our operations sites.
We also recognise the importance of looking beyond the operations we directly control – especially considering that supply chain carbon emissions represent around 90% of the Group’s total carbon footprint. So, in 2021, we pushed ourselves further with an even more ambitious target: to be carbon neutral across our value chain by 2050.
We understand too the importance of providing consistent and reliable climate-related information to investors and other stakeholders. We have aligned our 2021 full-year reporting with the recommendations and recommended disclosures of the Task Force on Climate-related Financial Disclosures (TCFD). A summary of our response to each of the TCFD recommendations and recommended disclosures is set out in our 2021 Annual Report. Our reporting against other frameworks, including the Sustainable Accounting Standards Board (SASB) framework, can be found in our 2021 ESG Report.
To deliver our stretching targets, we have an integrated climate strategy covering both our own business operations and our wider value chain, as shown in the graphic below.
Our climate strategy
Race to Zero
Limiting the rise in average global temperature to 1.5°C above pre-industrial levels requires major and widespread action – and companies have an important role to play.
In 2021, we joined the UN-backed Race to Zero global campaign1. This is the largest ever alliance committed to halving global emissions by 2030 and achieving net zero carbon emissions by 2050.
As part of this, we committed to realigning our previous carbon neutral targets with the 1.5°C trajectory aiming for net-zero value chain emissions by no later than 2050. Our existing carbon neutral targets were approved by the Science Based Targets initiative (SBTi), aligned to a 2°C pathway. So, as part of signing Race to Zero, these are being realigned to the 1.5°C pathway for approval by the SBTi to accommodate net-zero criteria and definitions.
We will achieve this by accelerating the implementation of our integrated climate strategy, with a key focus on:
Decarbonising our products
We recognise the importance of linking our sustainability ambitions to our products and bringing our consumers on our journey to carbon neutrality. We are building brands with purpose and sustainability at their core.
We have a Group-wide Circular Economy strategy and have conducted life cycle assessments (LCAs) across our product categories. These assessments have already enabled us to identify key areas to focus on to reduce our Scope 3 carbon emissions, including optimising design and moving to sea freight with lower emissions where possible.
We have put our Circular Economy Strategy into practice by switching to recyclable packaging which both reduces waste and helps to save emissions. For example, our Velo modern oral product cans with the recycling symbol are now widely recyclable in all markets where they are sold. It is estimated that this will save over 1,200 tonnes CO2 emissions in 2022* See the video below to see Velo’s approach to reducing its environmental impacts.
In 2021, we were proud to announce that our Vuse product was the first global carbon neutral vape brand1. Vuse’s carbon neutrality has been delivered with carbon offsets through reforestation projects. This includes a project in Uruguay to plant trees across 21,298 ha, where intensive cattle grazing has eroded soil and degraded land. As well as removing carbon dioxide and delivering better soil quality and biodiversity, the project will also result in increased availability and quality of employment opportunities. Vuse’s carbon neutrality has been independently validated by Vertis based on product Life Cycle Assessment data provided by an independent third party.
This is part of Vuse’s overall sustainability programme which will also continue to reduce Vuse’s carbon emissions. For example, Vuse is transitioning from air to sea freight, aiming to reach 80% of all shipments by sea by 2022.
We are also working to reduce the carbon footprint of our cigarettes and packaging. For example. we are testing paper filters in pilot studies in Germany and Austria. Externally conducted life cycle analysis indicates that the carbon footprint associated with the paper filter is approximately 35% lower than that of a standard cellulose acetate filter.
Decarbonising our business operations
We are utilising multiple opportunities to decarbonise our business from on-site renewable energy generation and purchasing renewable electricity, to transitioning to a green fleet.
For example, we increased renewable energy sourcing in nine countries, including the US and Brazil. There was also increased use of biodiesel in Brazil and installation of solar panels in seven sites while two more significantly expanded solar energy generation. In 2021, four factories in Brazil, Chile, Switzerland and the US passed independent carbon neutral certification for emissions that occurred in 2020. And our new innovation hub in Italy will be constructed with the objective of being carbon neutral.
We have also implemented a shadow internal carbon price to enable sites to consider the carbon-intensity implications of investment and purchasing decisions around utilities and fleet. This includes capital expenditure for on-site generation projects and route-to-market strategies.
Decarbonising our supply chain
We are working with our suppliers and contracted farmers to reduce emissions associated with the good and services we purchase.
We support over 75,000 contracted farmers globally, helping them to reduce emissions through innovative technologies and ‘climate-smart’ farming practices throughout the growing cycle. For example, we are introducing farmers to innovative, fuel-efficient curing technologies that can enable at least a 30% reduction in fuel use. By the end of 2020, these were introduced to farmers in four countries.
We are also focused on eliminating the use of non-renewable and fossil fuels in curing, with particular focus on eliminating coal. For example, our strategic supplier in Zimbabwe is working to shift their farmers from reliance on coal wood over a three-year period.
Find out more in our climate-smart farming case study.
Beyond our tobacco supply chain we continue to actively work with our largest suppliers to reduce carbon emissions associated with the materials that we purchase. In 2021, we launched our A Better Tomorrow™, Together programme to accelerate the ESG agenda with our suppliers. Part of this has been to develop action plans with our top suppliers to reduce carbon emissions. The suppliers involved represent approximately 67% of emissions from our direct product materials. In addition to this in 2021 we have made it mandatory in our Procurement process to assess the value of our suppliers’ ESG contributions, and include this as part of our supplier selection criteria.
Stopping deforestation is another key priority area. By 2025, we are aiming for net zero deforestation of managed forests across our tobacco and paper and pulp based supply chains3 and net positive impact on forests in our tobacco supply chain4.
Find out more in biodiversity and afforestation.
Driving innovation and collaboration
Our corporate venture arm, Btomorrow Ventures enables BAT to engage with disruptors to build a sustainable flow of innovation supporting our ESG ambitions. We are working with disruptive entrepreneurs and start-ups to build a sustainable flow of innovation to support our ESG ambitions, including climate action. Examples of some of the technologies and solutions we are currently exploring with start-ups, include:
- Smart crop irrigation technology, using real-time sensors, to precisely monitor soil moisture and irrigation demand ;
- Innovative solution to processing factory waste and cigarette butts from the streets to extract the cellulose acetate;
- An innovative social franchising model that partners with entrepreneurial women to help them start or improve the quality of their own, community-based childcare micro-businesses; and
- Solar-powered batteries for e-rickshaws in Bangladesh to enable greener energy and help drivers avoid debt due to the longer battery lifetime.
By working together with our suppliers, contracted farmers and business partners, we can help develop solutions to bring about lasting change and accelerate progress to net zero and A Better Tomorrow™ for all.
We support industry wide collaboration on climate change. For example, it is one of the focus areas within the Sustainable Tobacco Programme. We have also been collaborating the International Chamber of Commerce to help drive climate action.
- Via the Science Based Targets Business Ambition for 1.5C Campaign
- Based on ePod, ePen, eTank mini, Alto devices and consumables internal sales forecast (calculated March 2021) for 12 months starting from April 2021. Vuse’s carbon neutrality has been independently validated by Vertis based on product Life Cycle Assessment data provided by an independent third party.
- The scope of our supply chain for this commitment is our tobacco leaf and paper and pulp-based products supply chains. Our tobacco leaf supply chain covers BAT contracted farmers and farmers contracted to our strategic third-party suppliers, representing more than 80% of our total leaf purchases in 2020, as reported via our THRIVE assessments. For our paper- and pulp-based product supply chain, this means working with suppliers that can demonstrate that the material is sourced sustainably, with certification from the Forest Stewardship Council (FSC) or the Programme for the Endorsement of Forest Certification (PEFC).
- Our tobacco leaf supply chain covers BAT contracted farmers and farmers contracted to our strategic third-party suppliers, representing more than 80% of our total leaf purchases in 2020, as reported via our THRIVE assessments.
* Based on product Life Cycle Assessment (LCA) data provided by an independent third party in relation to estimated sales of VELO in Europe and North Africa in 2022. The LCA compared the CO2e figures for the new single polymer packaging with the original mixed polymer packaging. For corporate material only