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Environmental and supply chain management

Driving improvement

We’re a global company, which means we have a global footprint. Reducing the environmental impacts of what we do is a key priority, and something that involves every single person who works for us.

We have had a comprehensive Environmental, Health and Safety (EHS) management system for many years. We monitor and reduce our direct environmental impacts by making our operations more efficient. We also seek to address our indirect impacts by choosing suppliers with strong environmental credentials and encouraging our existing suppliers to improve their environmental performance.

The environment

We expect the effects of climate change to be felt more strongly in the coming years. Resulting changes to the environment could make it harder for us to source tobacco and make and distribute our products, as well as affecting the communities and landscapes in which we operate. The success of our business now and in the future also depends on biodiversity as it provides resources like clean water, healthy soils and timber.

We recognise that good environmental management is not only the right thing to do, but also makes sound business sense given how much we depend on natural resources for our products. Securing access to these resources, as well as being prepared for future changes, is key to ensuring the sustainability of our business.

Our approach

We work to address both our immediate environmental impacts and the likely environmental pressures on the business in the future. This involves risk assessments, performance management and making our operations more efficient.

Environmental problems cannot be solved by one company acting alone. They also need flexibility – what works in one part of the world might not in another. So we also aim to work more with local communities and in collaboration with other international organisations.

Our supply chain management

We rely on a complex but critical supply chain and we need it to be fit for the future. That’s why we’re using our influence to improve sustainability from crop, all the way to the consumer. The nature of our industry means that our supply chain has two distinct supplier categories: tobacco leaf agricultural and non-agricultural goods and services.

For both areas, sustainability is integrated into our supply chain management strategies through our comprehensive supplier programmes and risk assessments, which include environmental criteria, as well as other social issues, such as human rights and labour practices, and governance issues, such as suppliers’ policies, procedures and management systems.

Tobacco leaf agricultural suppliers

Tobacco leaf is the most essential part of our cigarettes, so ensuring we have a secure and sustainable agricultural supply chain for the long term is absolutely crucial to the success of our business.

Please see Sustainable agriculture and farmer livelihoods for detailed information on how we manage our tobacco leaf supply chain.

Non-agricultural suppliers

In addition to tobacco leaf, the other direct materials we buy to make our products, such as paper and filters and the components that go into our Next Generation Products, represent our highest value strategic supply chain.

In 2016, we had over 6,000 direct materials suppliers, managed by our global, regional and local Procurement teams. In addition, we have some 60,000 indirect suppliers worldwide of other goods and services, such as machinery, IT and consultancy.

We have a defined approach to identifying strategic suppliers, based on a range of factors including critical product components, supplier partnerships (such as for developing product innovations), and suppliers which represent a high volume or spend. Over 90% of our Direct Procurement spend is on strategic direct materials suppliers, 

We use our integrated supply chain due diligence (SCDD) process to assess supplier’s inherent risks, using a series of independent indices developed by Verisk Maplecroft, a highly respected risk analytics consultancy. We then prioritise those suppliers identified as being exposed to the highest risks for either a self-assessment or on-site audit, conducted by our independent audit firm, Intertek.

The Intertek audit includes criteria covering forced labour, child labour, wages and hours, health and safety, environment and management systems.

In addition to audits triggered by the SCDD process, all of our strategic direct materials suppliers, as part of our existing supplier assessment programme, have to undergo the same audit, also conducted by Intertek, in order to be appointed as a new supplier to BAT. They are then re-audited every three to four years.

Should any areas of concern be identified, we agree a corrective action plan with the supplier that includes clear timescales for improvements to be made. In the event of serious and/or persistent non-compliance, or where suppliers fail to demonstrate a willingness to improve performance, we reserve the right to terminate the business relationship.

The SCDD process currently covers all direct suppliers and strategic indirect suppliers worldwide, representing approximately 70% of total Group Procurement spend. Our target is to complete the phased roll-out of SCDD to all non-agricultural suppliers worldwide, covering 90% of total Group Procurement spend, by the end of 2018.

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